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Item 1. Legal Proceedings

2010-11-09 compared with 2010-08-11 · 80 added, 26 removed, 5 unchanged (95% of the section changed)

LEGAL PROCEEDINGS

On October 21, 2009 we filed a Request for Arbitration under the Additional Facility Rules of ICSID, against the Bolivarian Republic of Venezuela (“Respondent”).

In November 2009 our Request for Arbitration was registered by ICSID (Gold Reserve Inc.

October 21, 2009 we filed a Request for Arbitration under the Additional

Facility Rules of ICSID, against the Bolivarian Republic of Venezuela (“Respondent”).

In November 2009 our Request for Arbitration was registered by

ICSID (Gold Reserve Inc.

Bolivarian Republic of Venezuela (ICSID Case No.

ARB(AF)/09/1)).

The Company is seeking compensation in the arbitration for all of the loss and damage resulting from Venezuela’s wrongful conduct which includes the full market value of the legal rights to develop the Brisas Project.

Our current arbitration efforts consist of engaging and assisting technical, legal, and financial experts and developing and filing our initial pleadings.

The first session was held with the Tribunal on April 23, 2010 with several procedural matters agreed to, including the tentative time schedule for the Arbitration.

The filing of our initial written submission, known as the Memorial, is planned for September 2010.

The Canada-Venezuela Treaty requires as a precondition to bringing an arbitration claim under the Treaty that an investor and any enterprise the investor owns directly or indirectly that has suffered losses that form the basis of a claim by the investor to "waive[ ] its right to initiate or continue any other proceedings in relation to the measure that is alleged to be in breach of [the Treaty] before the courts or tribunals of the Contracting Party concerned or in a dispute settlement procedure of any kind."

As a result, the Company and its relevant subsidiaries waived their right to commence or continue before Venezuelan courts or tribunals with other legal or administrative challenges to the conduct that forms the basis of the ICSID claim, including the revocation of the Authorization to Affect and the denial of the extension of the Brisas Alluvial and El Pauji Concessions.

On December 15, 2008, Rusoro Mining Ltd.

(“Rusoro”) commenced an unsolicited offer to acquire all of the outstanding shares and equity units of the Company in consideration for three shares of Rusoro for each Company share or equity unit.

On December 16, 2008, the Company filed an action in the Ontario Superior Court of Justice against Rusoro and Rusoro’s financial advisor Endeavour Financial International Corporation (“Endeavour”), seeking an injunction restraining Rusoro and Endeavour from proceeding with Rusoro’s unsolicited offer, significant monetary damages, and various other items.

Endeavour was the Company’s financial advisor from 2004 until shortly after the commencement of Rusoro’s offer.

On February 10, 2009, the Ontario Superior Court of Justice granted an interlocutory injunction restraining Rusoro from proceeding with any hostile takeover bid to acquire the shares of the Company until the conclusion and disposition at trial of the action commenced by the Company.

The injunction was granted by the Court following a motion by the Company on the basis that Rusoro had access to or benefited from the use of the Company’s confidential information as a result of Rusoro’s relationship with Endeavour.

The Court also issued an interlocutory injunction restraining Endeavour from having any involvement with a hostile takeover bid for the Company.

The Court further required that Rusoro, Endeavour and their agents return to the Company both all the confidential information of the Company and also anything produced from that confidential information and pay the court costs.

Following the issuance of the interlocutory injunctions, Rusoro withdrew its unsolicited offer to acquire the outstanding shares and equity units of the Company.

On February 15, 2009, Rusoro and Endeavour both filed a motion with the Ontario Superior Court of Justice seeking permission to appeal to the Divisional Court the February 10, 2009 order that was granted against them.

The Company opposed these motions which were heard in Toronto on April 2, 2009.

On April 6, 2009 the permission to appeal was denied.

Rusoro has filed a counterclaim against the Company for, among other things, damages of Cdn $102.5 million allegedly arising from the Company’s successful motion for an interlocutory injunction.

Endeavour has filed a $0.5 million counter claim against the Company relating to the lost opportunity to earn a success fee from the successful completion of the Rusoro offer.

Costs associated with the takeover defense and litigation amounted to $2.0 million and $5.4 million in 2009 and 2008, respectively.

The Company recently added two additional defendants and amended the claim for monetary damages.

The risk factors for the quarter ended June 30, 2010 are substantially the same as those disclosed and discussed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2009.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS - None

The Company is seeking US

$1.928 billion compensation in the arbitration for all of the loss and damage

resulting from Venezuela’s wrongful conduct which includes the full

market value of the legal rights to develop the Brisas Project.

Tribunal held its first session with the parties on April 23, 2010 during which

time several procedural matters were agreed to, including the time schedule for

the Arbitration.

In compliance with that schedule, we filed our initial written

submission, known as the Memorial, on September 24, 2010.

The Respondent is

required to file its reply to Company’s Memorial by March 7, 2011.

further written submissions are scheduled to be made prior to the oral

hearings, which are scheduled to commence on December 5, 2011.

Canada-Venezuela Treaty requires as a precondition to bringing an arbitration

claim under the Treaty that an investor and any enterprise the

investor owns directly or indirectly that has suffered losses that form the

basis of a claim by the investor to "waive[ ] its right to initiate

or continue any other proceedings in relation to the measure that is alleged to

be in breach of [the Treaty] before the courts or

tribunals of the Contracting Party concerned or in a dispute settlement

procedure of any kind."

As a result, the Company and its relevant

subsidiaries waived their right to commence or continue before

Venezuelan courts or tribunals with other legal or administrative challenges to

the conduct that forms the basis of the ICSID claim, including the

revocation of the Authorization to Affect and the denial of the extension

of the Brisas Alluvial and El Pauji Concessions.

December 15, 2008, Rusoro Mining Ltd.

(“Rusoro”) commenced an unsolicited offer

to acquire all of the outstanding shares and equity units of the Company in

consideration for three shares of Rusoro for each Company share or equity unit.

On December 16, 2008, the Company filed an action in the Ontario Superior Court

of Justice against Rusoro and Rusoro’s financial advisor Endeavour Financial

International Corporation (“Endeavour”), seeking an injunction restraining

Rusoro and Endeavour from proceeding with Rusoro’s unsolicited offer,

significant monetary damages, and various other items.

Endeavour was the

Company’s financial advisor from 2004 until shortly after the commencement of

Rusoro’s offer.

February 10, 2009, the Ontario Superior Court of Justice granted an

interlocutory injunction restraining Rusoro from proceeding with any hostile

takeover bid to acquire the shares of the Company until the conclusion and

disposition at trial of the action commenced by the Company.

The injunction was

granted by the Court following a motion by the Company on the basis that Rusoro

had access to or benefited from the use of the Company’s confidential

information as a result of Rusoro’s relationship with Endeavour.

The Court also

issued an interlocutory injunction restraining Endeavour from having any

involvement with a hostile takeover bid for the Company.

The Court further

required that Rusoro, Endeavour and their agents return to the Company both all

the confidential information of the Company and also anything produced from

that confidential information and pay the court costs.

Following the issuance

of the interlocutory injunctions, Rusoro withdrew its unsolicited offer to

acquire the outstanding shares and equity units of the Company.

February 15, 2009, Rusoro and Endeavour both filed a motion with the Ontario

Superior Court of Justice seeking permission to appeal to the Divisional Court the February 10, 2009 order that was granted against them.

opposed these motions which were heard in Toronto on April 2, 2009.

2009 the permission to appeal was denied.

Rusoro has filed a counterclaim

against the Company for, among other things, damages of Cdn $102.5 million

allegedly arising from the Company’s successful motion for an interlocutory

Endeavour has filed a $0.5 million counter claim against the

Company relating to the lost opportunity to earn a success fee from the

successful completion of the Rusoro offer.

Costs associated with the takeover

defense and litigation amounted to $2.0 million and $5.4 million in 2009 and

2008, respectively.

The Company recently

added two additional defendants and amended the claim for monetary

risk factors for the quarter ended September 30, 2010 are substantially the

same as those disclosed and discussed in Item 1A of our Annual Report on

Form 10-K for the year ended December 31, 2009.

SALES OF EQUITY SECURITIES AND USE OF PROCEEDS - None

DEFAULTS UPON SENIOR SECURITIES - None

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Legal Proceedings