Cemex 2009 Annual Report Download - page 79

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C) Other contingencies for legal procedures
Finally, there are certain legal proceedings in which a negative resolution for CEMEX may represent, among others, the revocation of operating licenses
or the assessment of fines, whereby CEMEX may experience a decrease of future revenues, an increase in operating costs or a loss. Nevertheless, as
of the date of these financial statements, in some cases, it is not possible to quantify the impact. As of December 31, 2009, the most significant other
contingencies were the following:
•฀ Pursuant฀to฀amendments฀to฀the฀Mexican฀income฀tax฀law฀effective฀on฀January฀1,฀2005,฀Mexican฀companies฀with฀investments฀in฀entities฀incorporated฀in฀
foreign countries whose income tax liability is less than 75% of the income tax that would be payable in Mexico, are required to pay taxes in Mexico
on indirect revenues, such as dividends, royalties, interest, capital gains and rental fees obtained by such foreign entities, provided, however, that
such revenues are not derived from entrepreneurial activities in such countries. CEMEX challenged the constitutionality of the amendments before the
Mexican federal courts. In September 2008, the Supreme Court of Justice ruled the amendments were constitutional for tax years 2005 to 2007. Since
the Supreme Court’s decision does not pertain to the amount of taxes due or other tax obligations, CEMEX will self-assess any taxes due through the
submission of amended tax returns. As of December 31, 2009, based on preliminary estimates, CEMEX believed that the amount will not be material,
but no assurance can be given that the Mexican tax authorities will agree with CEMEX’s self-assessment of the taxes due for past periods.
•฀ In฀October฀2009,฀CEMEX,฀Inc.,฀one฀of฀CEMEX’s฀subsidiaries฀in฀the฀United฀States,฀and฀other฀cement฀and฀concrete฀suppliers฀were฀named฀as฀defendants฀
in several purported class action lawsuits by a group of construction and building materials companies alleging price-fixing in Florida. According to the
lawsuit, the defendants are alleged to have conspired to raise the price of cement and hinder competition in Florida. CEMEX believes that the lawsuits
are without merit and intends to defend them vigorously.
•฀ In฀July฀2008,฀CEMEX฀agreed฀to฀sell฀its฀operations฀in฀Austria฀and฀Hungary฀to฀Strabag,฀one฀of฀the฀leading฀suppliers฀of฀building฀materials฀in฀Europe.฀In฀
February 2009, the Hungarian Competition Council approved the sale on the condition that Strabag sell one specific ready-mix concrete plant within the
next year. In April 2009, the Austrian Cartel Court (“ACC”) approved the sale subject to the condition that Strabag sell to a third party several ready-mix
plants, including the “Nordbahnhof” plant in Vienna. As of the date of approval, the plant had already been dismantled, and therefore the condition
could not be met. Contrary to CEMEX’s recommendation that a supplementary application should be made to the ACC, Strabag filed several appeals
against the resolution of the ACC. On July 1, 2009, Strabag notified CEMEX of its purported rescission of the SPA, arguing that the regulatory approvals
were not obtained before June 30, 2009. On the same day, CEMEX notified Strabag that CEMEX considered Strabag’s purported rescission invalid. In
the face of Strabag’s continued refusal to cooperate in making a supplementary application to the ACC, CEMEX rescinded the SPA in September 2009.
In October 2009, CEMEX filed a claim against Strabag before the International Arbitration Court of the International Chamber of Commerce, requesting
a declaration that Strabag’s rescission of the SPA was invalid and claiming the payment of damages caused to CEMEX as a result of such breach of
the SPA by Strabag for €150 (US$215 or $2,814). In December 2009, Strabag filed its answer requesting the tribunal to dismiss the claim and also
filed a counterclaim for the payment of damages and applied for security for costs related to the arbitration proceedings, for an aggregate amount of
approximately €2 (US$3 or $39). CEMEX believes Strabag’s counterclaim and request for security to be unfounded. The arbitration tribunal is in the
process of being constituted.
•฀ Between฀November฀4th฀and฀6th฀in฀2008,฀ofcers฀from฀the฀European฀Commission฀(“EC”),฀assisted฀by฀local฀ofcials,฀conducted฀unannounced฀inspections฀
at CEMEX‘s offices in the United Kingdom and Germany. The EC conducted inspections at the premises of other companies in the cement and related
products industry in several European Community member states. The EC alleges that CEMEX may have participated in anticompetitive agreements
and/or abusive conduct, in breach of articles of the EC and/or the European Economic Area (“EEA”). The allegations extend to several markets
worldwide, particularly within the EEA. If those allegations are substantiated, CEMEX’s subsidiaries which operate in the area of the EC may be subject
to significant penalties. CEMEX will continue to cooperate with the EC officials in connection with this investigation.
•฀ The฀ government฀ of฀ Venezuela฀ has฀ claimed฀ that฀ three฀ cement฀ transportation฀ vessels,฀ transferred฀ before฀ the฀ expropriation฀ of฀ CEMEX฀ Venezuelan฀
operations, continue to be the property of the former CEMEX Venezuela. The government of Venezuela successfully petitioned a Panamanian court,
the country where the vessels are flagged, to enforce an interim measure issued by a Venezuelan court barring further transfer or disposition of the
vessels. However, on December 28, 2009, the Supreme Court of Panama overruled the Panamanian court’s ruling. CEMEX believes that the government
of Venezuela’s position that the vessels continue to be the property of the former CEMEX Venezuela is without merit. CEMEX will continue to resist
efforts by the government of Venezuela to assert ownership rights over the vessels.
•฀ In฀2002,฀CEMEX฀Construction฀Materials฀Florida,฀LLC,฀one฀of฀CEMEX’s฀subsidiaries฀in฀the฀United฀States,฀was฀granted฀one฀federal฀quarry฀permit฀that฀
covered the SCL and FEC quarries, and was the beneficiary of another federal quarrying permit for the Lake Belt area in South Florida, which covered
the Kendall Krome quarry. The FEC quarry is one CEMEX’s largest aggregates quarries in that region. In response to litigation brought by environmental
groups concerning the manner in which the federal quarry permits were granted, in January 2009, a judge from the U.S. District Court for the Southern
District of Florida ordered the withdrawal of the federal quarry permits of CEMEX’s SCL, FEC and Kendall Krome quarries. The judge ruled that there
were deficiencies in the procedures and analysis undertaken by the relevant governmental agencies involved with the issuance of the permits. If
CEMEX is not able to obtain new permits in the Lake Belt area, it would need to source aggregates from other locations in Florida or import aggregates.
This would likely affect profits from CEMEX’s operations in that region.
•฀ In฀April฀2006,฀the฀cities฀of฀Kaštela฀and฀Solin฀in฀Croatia฀published฀their฀respective฀development฀master฀plans,฀adversely฀impacting฀the฀mining฀concession฀
granted to a CEMEX’s subsidiary in Croatia by the Croatian government in September 2005. In May 2006, CEMEX filed an appeal before one constitutional
court฀seeking฀a฀declaration฀by฀the฀court฀of฀its฀rights฀and฀seeking฀prohibition฀of฀the฀implementation฀of฀the฀master฀plans.฀The฀municipal฀courts฀in฀Kaštela฀
and Solin had previously rejected the appeals presented by CEMEX. These resolutions were appealed. These cases are currently under review by the
Constitutional Court in Croatia, and it is expected that these proceedings will continue for several years before resolution. During the proceedings, the
Administrative Court in Croatia ruled in favor of CEMEX, validating the legality of the mining concession granted by the government of Croatia. This
decision฀was฀nal.฀However,฀CEMEX฀expects฀a฀resolution฀from฀the฀Constitutional฀Court฀to฀determine฀if฀the฀cities฀of฀Kaštela฀and฀Solin,฀within฀the฀scope฀
of their master plans, can unilaterally change the borders of exploited fields. Currently, it is difficult to determine the impact on CEMEX as a result of
the฀Kaštela฀and฀Solin฀proceedings.