Exxon-Venezuela: Venezuela says decision imminent

Really? The Exxon-Venezuela arbitration case has already had its hearing, and a decision is expected by year-end? I did not know that.

ExxonMobil and ConocoPhillips, the majority partners in the Cerro Negro and Petrozuata projects, respectively, have failed to reach a financial agreement with PDVSA regarding the required sale of their ownership interests. As a result, an ExxonMobil affiliate filed a request for arbitration with the International Centre for Settlement of Investment Disputes, or ICSID, because of its having been unable to successfully negotiate the terms of, or agree on the value of, the assets in the Cerro Negro project being transferred to the Republic. Prior to the enactment of the law-decree, ExxonMobil had a 41.7% interest in the Cerro Negro project. On January 25, 2008 the ExxonMobil affiliate commenced an additional arbitration under the rules of the International Chamber of Commerce.

On December 27, 2007 and January 8, 2008 the ExxonMobil affiliate obtained from the U.S. District Court for the Southern District of New York an attachment order totaling U.S.$315 million against accounts of a PDVSA affiliate and on January 25, 2008 the ExxonMobil affiliate obtained a freezing injunction from the High Court of Justice in London preventing the removal or non-ordinary course disposition of up to U.S.$12.0 billion in assets of PDVSA and its affiliates in the United Kingdom and the non-ordinary course disposition of up to that amount of assets elsewhere in the world. On March 18, 2008, the High Court of Justice in London lifted the U.S.$12.0 billion freeze order. A court in the Netherlands has issued an order relating to the freezing of certain PDVSA assets in the Netherlands and in the Netherlands Antilles. On June 10, 2010, the ICSID tribunal ruled on the first phase of the case, which focused solely on jurisdictional issues and not on the merits of the claims nor the damages. According to the decision, the ICSID tribunal has jurisdiction only over disputes that occurred after February 2006. in October 2010, ExxonMobil reduced the amount it was seeking through international arbitration from U.S.$12.0 billion to U.S.$7.0 billion plus interest. The hearing on all issues in the arbitration concluded on September 24, 2010. It is expected that a decision will be rendered in 2011.

15 thoughts on “Exxon-Venezuela: Venezuela says decision imminent

  1. Plasmaj

    Nice catch. I wonder if the writers of the prospectus are confused. I know most people expect a decision in the ICC arbitration by year-end, but most think that ICSID won’t be until next year. If that is decided in 2011, it would cause a bit of a shock

    1. sapitosetty Post author

      Wait, you mean someone might have filed a slightly inaccurate statement with the US Securities and Exchange Commission? But that’s impossible!

      Actually, yes, that would make much more sense. The last update on the icsid website says “September 15, 2011: The Claimants file a reply on the merits.”

      Onward.

  2. Dr. Faustus

    The notice says September 24rth, 2010….2010? Or do they mean September 24rth 2011, ….a Saturday? They closed it on a Saturday? A court case? Very confusing.

    Finally, what’s the definition of “imminent?” Before Christmas?

    1. sapitosetty Post author

      Must be 2010. Anyway, “imminent” is a term of art in US law. It means, “eventual, and probable, but not certain.” I mean imminent like this guy was an “imminent” threat. A month, maybe two, no biggee…

  3. Plasmaj

    Also, from exxon’s 2010 annual report:
    “the icsid arbitration proceeding is continuing and a hearing on the merits is currently scheduled for the first quarter of 2012”

  4. Dr. Faustus

    Er, sorry, but let me disagree with you here….

    As per this, “The hearing on all issues in the arbitration concluded on September 24, 2010.” you will note that in September of 2010 the Exxon case was still ongoing. Check the ICSID files on it. There were many motions filed by PDVSA”s New York law firm,…this year. Furthermore, the document that you refer to was written on September 30th, with many mentions of events/actions taking place in September of this year. Note the reference to the confiscation of all gold producing assets in Venezuela, which took place in September of this year. No, I think this may be a misprint, and the year was meant to be 2011,….and,….and,….the case is in fact closed with a final decision to be made in Paris at an upcoming date in October or Nevember. You’ve got two octogenarian judges on the panel, and a ‘relatively’ young Swiss woman, 58 or so. At whichever date they set in the near future, a decision will be rendered.

    1. Plasmaj

      Let me counter-disagree. The date is correct. But the forum is wrong. Again, according to exxon’s annual report, the hearing on the merits of the icc case concluded in september 2010 . We will see a decision on that case in 2011, but not the icsid case

      1. Dr. Faustus

        Let me counter-counter disagree. Sorry,….just having fun here. I’m pretty sure that the “case closed” statement refers to the ICSID case, not the ICC case. Furthermore, the date makes sense. On September 15th Exxon filed what I think is their final statements on the matter. Nine (9) days later the judges determined that the case should finally be decided. Don’t forget there were continuous statements by Chavez and Ramirez during the month of September on the offering of “1 billion” dollars to settle the case. It was not a friendly gesture. It was an in-your-face offer, with contempt thrown in. The judges may have determined that enough-was-enough. It just makes sense. Could be wrong however. We’ll see. But I am completely convinced that the usage of 2010 was a misprint. It simply could not have been an accurate timeline.

        1. plasmaj

          ok, we’re just going to have to agree to disagree. You think it is ICSID that will be decided in the next few months. I think it is the ICC case. Sep 2010 is correct if it is the ICC case. Both are against Exxon (though ICSID is against the sovereign and ICC is against PDVSA). I guess it really does not matter which one. I think once the first case is decided, the other will be settled as part of the final agreement with ExxonMobil. We can next start debating the amount :)

  5. Dr. Faustus

    Some further thoughts here….

    It is my belief that this court decision will mark a seminal moment in Venezuelan modern history. The ramifications are huge, staggering. It will mark a point in time when Venezuela has purposely withdrawn from the western world and embraced a bizarre, quasi-socialist economic future. The English language will be heard less and less throughout Venezuela, to be replaced by Russian, Chinese, Persian and Arabic. It will shock a lot of Venezuelans. They are being walked to the abyss by silly politicians who claim to know better. Big stuff coming….

  6. Dr. Faustus

    One final point….

    Notice this sentence from the report, just before the final statement highlighted…”On June 10, 2010, the ICSID tribunal ruled on the first phase of the case.” Then our disputed sentence, “The hearing on all issues in the arbitration concluded on September 24, 2010.”

    How can the ICSID court go from ruling on just the “first phase” of the case in June of 2010 to the fact that the ” “arbitration concluded on September 24, 2010” in just three (3) freaking months? That doesn’t make sense at all. It was a misprint.

  7. sapitosetty Post author

    Yeah, you folks are right. I assumed it was the ICC case, and that they had left out the segue — sorry I didn’t make that clear. But I didn’t know about the Exxon filing saying the decision would likely come in 1q2012. Not so imminent, maybe.

  8. Dr. Faustus

    Not so fast….

    The Exxon filing, with their 1q2012 statement, was contained in their annual report which probably came out before March 31, 2011. They probably could not have foreseen a quick closure of the case on September 24rth. Yes, the decision could still take place in January or February of next year. These things tend to drag on and on. But, my guess would be that it is more likely to take place before the end of November, or the date in which all three judges penciled into their calendars an upcoming meeting in Paris. This decision could be much closer than most people realize, thus making use of the term ‘imiminent’ very plausible. You may have gotten it right the first time.

    1. sapitosetty Post author

      Hey, no fair. One person in this conversation already has the answers. Exsqueeze me? A baking powder? Can you tell us more about that hearing?

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