- The US oil giant has launched multiple efforts to collect international arbitration awards against the Caribbean nation.
By Ricardo Vaz
CARACAS, (venezuelanalysis.com) – The World Bank’s state-corporate arbitration tribunal has dismissed Venezuela’s challenge against a US $8.5 billion arbitration award granted to ConocoPhillips.
On Friday, the International Centre for Settlement of Investment Disputes (ICSID) issued a 356-page ruling rejecting Caracas’ request to annul the award. Venezuela was also ordered to reimburse the company’s $6.46 million in legal fees and $1.35 million in other court costs.
“Venezuela’s applications to annul the award are dismissed,” the document read. The case does not allow for further appeals.
In 2019, ConocoPhillips secured a favorable ruling and multi-billion compensation for the nationalization of its Venezuela-based assets.
The Nicolás Maduro government’s appeal argued that the tribunal was improperly constituted, exceeded its powers and misapplied the compensation mechanism. It likewise objected to the exclusion of evidence.
The three-person tribunal board rejected the claims and stated that the excluded evidence would not have affected its assessment of damages.
Venezuela’s counsel, George Kahale III of Curtis Mallet-Prevost Colt & Mosle LLP, labeled the ICSID’s decision as evidence that “the necessary checks and balances of a mature legal system” are lacking. Caracas’ legal team had previously brought up an alleged lack of impartiality from the ad hoc committee overseeing the ConocoPhillips case, but saw the claim ruled out as well.
In contrast, the US oil giant welcomed the latest ruling as “upholding the principle that governments cannot unlawfully expropriate private investments without paying compensation.”
In 2007, the Hugo Chávez government took control of the offshore oil field Corocoro and heavy crude upgraders Hamaca and Petrozuata. ConocoPhillips was one of the corporations that did not accept Venezuela’s reformed oil legislation which imposed increased state control over the industry.
The Texas-headquartered corporation pursued international arbitration to challenge the loss of its assets. Though Venezuela abandoned the ICSID convention in 2012, it remained liable for priorly launched cases. The tribunal reached a verdict in 2019 following years of litigation.
The original $8.7 billion award was later lowered to $8.5 billion and has a 5.5 percent yearly interest rate which has seen the total debt balloon past $11 billion.
ConocoPhillips likewise secured a separate $2 billion award from the International Chamber of Commerce (ICC) in 2018 as compensation for its nationalized projects and investments. The Maduro government began paying the debt in installments before US sanctions barred the country from performing international financial transactions.
The oil corporation has launched multiple efforts to collect on its arbitration awards. Both claims were included in an ongoing court-mandated auction of Venezuela’s US-based refiner CITGO to pay creditors. Delaware Judge Leonard Stark recently ordered a restart of the bidding process in the wake of controversy over the amount and sale terms from a winning offer by vulture fund Elliott Management.
ConocoPhillips’ ICC award is second on a list of claims that the auction will satisfy on a “first come, first served” basis. It managed to tag its ICSID award onto the Delaware proceedings in December 2023 following a favorable “alter ego” ruling.
The company had been allowed to enforce the award, despite the ongoing appeals process, by a Washington DC court in late 2021. ConocoPhillips won a default ruling after lawyers representing the Juan Guaidó-led self-proclaimed “interim government” failed to appear in court for over a year. Washington’s recognition of the parallel administration saw Venezuela’s hardline opposition assume control of US-based assets and legal cases.
Guaidó and associates drew further accusations of conflicts of interest and malpractice, including an alleged off-court settlement concerning the ICC award brought up during the Delaware process. The agreement was denied and struck from court documents with no explanation.
In May 2024, ConocoPhillips received a favourable legal ruling in Trinidad and Tobago that could see the enterprise attempt to seize Venezuelan proceeds from joint natural gas projects.
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