building a STRONGER foundation - Cemex

C) OTHER CONTINGENCIES FOR LEGAL PROCEDURES
CEMEX, S.A.B. DE C.V. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements – (Continued)
As of December 31, 2010, 2009 and 2008
(Millions of Mexican pesos)
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, 2010, 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. CEMEX has not
yet determined the amount of tax or the periods affected, but the amount could be material. If the Mexican tax authorities do not agree with
our self-assessment of the taxes due for past periods, they may assess additional amounts of taxes past due, which could be material and
may impact CEMEX’s cash flows.
On June 5, 2010, the Secretaría Distrital de Ambiente de Bogotá, the District of Bogota’s environmental secretary (or the “environmental
secretary”), ordered the suspension of the mining activities of CEMEX Colombia at El Tunjuelo quarry, located in Bogotá, Colombia, as a
temporary injunction. As part of the temporary injunction, Holcim Colombia and Fundación San Antonio (local aggregates producers), which
also have mining activities located in the same area of El Tunjuelo quarry, have also been ordered to suspend mining activities in that area. The
environmental secretary alleges that during the past 60 years CEMEX Colombia and the other companies included in the temporary injunction
have illegally changed the course of the Tunjuelo River, have used the percolating waters without any permission and have improperly used the
edge of the river for mining activities. In connection with the temporary injunction, on June 5, 2010, CEMEX Colombia received a formal
notification from the environmental secretary informing about the initiation of proceedings to impose fines based on the previously mentioned
presumed environmental violations against CEMEX Colombia. CEMEX Colombia responded to the temporary injunction by requesting that it
be revoked based on the fact that the mining activities at El Tunjuelo quarry are supported by the corresponding authorizations required by the
applicable environmental laws and that all the environmental impact statements submitted by CEMEX Colombia have been reviewed and
permanently authorized by the Ministerio del Medio Ambiente, Vivienda y Desarrollo Territorial. On June 11, 2010, the local authorities in
Bogotá, in compliance with the environmental secretary’s decision, sealed off the mine to machinery and prohibited the removal of our
aggregates inventory. Although there is not an official quantification of the possible fine, the environmental secretary has publicly declared that
the fine could be as much as 300 billion Colombian pesos (US$157 or Ps1,941). The temporary injunction does not currently compromise the
production and supply of ready-mix concrete to our clients in Colombia. CEMEX Colombia is analyzing its legal strategy to defend itself
against these proceedings. At this stage, we are not able to assess the likelihood of an adverse result or potential damages which could be borne
by CEMEX Colombia.
In October 2009, CEMEX Corp., 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 alleging price-fixing in Florida. The purported class action lawsuits are of two
distinct types: a) the first type were filed by entities purporting to have purchased cement or ready-mix concrete directly from one or more
of the defendants; and b) the second group of plaintiffs are entities purporting to have purchased cement or ready-mix concrete indirectly
from one or more of the defendants. Underlying all purported suits is the allegation that the defendants conspired to raise the price of
cement and hinder competition in Florida. On October 12, 2010, the court granted in part the defendants’ motion, dismissing from the case
all claims relating to cement and reducing the applicable time period of the plaintiffs’ claims. On October 29, 2010, the plaintiffs filed
further amended complaints pursuant to the court’s decision. On December 2, 2010, CEMEX moved to dismiss the amended complaint
filed by the indirect purchaser plaintiffs based on lack of standing. CEMEX also answered the complaint filed by the direct purchaser
plaintiffs. CEMEX continues to believe that the lawsuits are without merit and intends to defend them vigorously. At this stage, we are not
able to assess the likelihood of an adverse result or potential damages which could be borne by CEMEX Corp.
In October 2008, in connection with the nationalization of CEMEX’s assets in Venezuela (note 11A), CEMEX’s subsidiaries in Holland,
which held CEMEX’s shares in CEMEX Venezuela, submitted a complaint seeking international arbitration to the International Centre for
Settlement of Investment Disputes (“ICSID”) following the Venezuelan Government's confiscation of assets, deprivation of rights of
CEMEX Venezuela and the initiation of the expropriation of CEMEX's Venezuelan business. On July 27, 2010, the ICSID tribunal heard
arguments on the jurisdictional objections raised by the Republic of Venezuela and issued its decision in favor of jurisdiction on December
30, 2010. The proceedings are now expected to proceed to the merits phase of the arbitration. CEMEX is unable at this preliminary stage to
estimate the likely range of potential recovery or to determine what position the Republic of Venezuela will take in these proceedings, the
nature of the award that may be issued by the ICSID tribunal or the likely extent of collection of any possible monetary award issued.
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