Venezuela keeps “planning” to leave ICSID arbitration panel

They have been talking about it for years, and they keep talking. Here’s a tidbit from a PDVSA statement from last night:

El presidente de PDVSA informó la decisión del Gobierno Bolivariano de retirar a nuestro país del CIADI: “de acuerdo con las líneas del presidente Chávez, nosotros hemos decidido  salir del CIADI, hay una serie de acciones que tienen que ver con nuestra política internacional, un conjunto de 25 convenios que existen en materia de protección recíproca de inversiones con 25 países distintos y existe una posición del Gobierno venezolano de acuerdo con los mecanismos internacionales que están establecidos para notificar nuestra salida del CIADI”.

The bold part is the only thing you really need to translate: We have decided to leave ICSID. ICSID is the World Bank arbitration body where Venezuela is now facing what, 20? 21? complaints, from the 2004 complaint of Vannessa Ventures (now Infinito Gold) to the 10 cases filed last year by Gambrinus Corp. (apparently over the Fertinitro chemical plant), Hortensia Margarita Shortt (over a seized Lake Maracaibo maritime company), Tenaris SA (over a pipe factory), some Koch brothers interests (Fertinitro again), Owens Illinois (glass factories), Williams Cos. (oilfield pressurization project), Cry–lex (if you don’t know, consider yourself lucky), Longreef Investments, Nova Scotia Power, Highbury International, and on and on. There are 21 on the ICSID website, but I think they settled Cemex. So 20.

Four years ago, when Pres. Hugo Chavez first started talking about this possibility, the big deal was supposedly that if Venezuela did leave ICSID multilateral bodies, it would could trigger technical defaults on some bonds, giving quick payouts to the hedge funds and other holders, many of whom have bought at discount prices. The Financial Times went with that story, without saying who it got the info from or whether it had seen any prospectuses. The only prospecti I have don’t mention ICSID except to say that the republic may pull out of the body. So I don’t know if that old argument still holds. Anyway, if it does, hooray, another chance to bid up Venezuela bonds.

UPDATE: Yes, the old story in FT is about the IMF, not ICSID. Thank you to readers for pointing this out. I shouldn’t blog on so little sleep.

UPDATE2: Financial Times now saying “The decision to withdraw from the International Centre for Settlement of Investment Disputes (ICSID), based in Washington, means that disputes with foreign companies, including an unsettled disagreement with ExxonMobil, will be heard by Venezuelan judges.”

That doesn’t seem right at all. The specific bilateral investment treaties all have arbitration provisions, and even if ICSID is left out, there are still ways to do arbitration. For example, the Russia agreement:

It says that Russian companies can sue Venezuela, and vice versa, at the Stockholm Chamber of Commerce arbitration court.

Or here’s the ever-popular Canadian treaty:

The dispute may, by the investor concerned, be submitted to arbitration under:

(a) The International Centre for the Settlement of Investment Disputes (ICSID), established pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of other States, opened for signature at Washington 18 March, 1965 (lCSID Convention), provided that both the disputing Contracting Party and the Contracting Party of the investor are panies to the ICSID Convention;

or

(b) the Additional Facility Rules of ICSID, provided that either the disputing Contracting Party or the Contracting Party of the investor, but not both, is a party to the ICSID Convention; or

In case neither of the procedures mentioned above is available, the investor may submit the dispute to an international arbitrator or ad hoc arbitration tribunal established under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL).

And Barbados. (Do you really want me to go on???)

1. Disputes between one Contracting Party and a national or company of the other Contracting Party concerning an obligation of the former under this Agreement in relation to an investment of the him shall, at the request of the national concerned, be submitted to the International Centre for Settlement of Investment Disputes for settlement by arbitration or conciliation under the Convention on the Settlement of Investment Disputes between States and Nationals of other States, opened for signature at Washington on March 18, 1965.

2. As long as the Republic of Venezuela has not become a Contracting State of the Convention as mentioned in paragraph 1 of this Article, disputes as referred to in that paragraph shall be submitted to the International Centre for Settlement of Investment disputes under the Rules Governing the Additional Facility for the Administration of Proceedings by the Secretariat of the Centre (Additional Facility Rules). If for any reason the Additional Facility is not available the investor shall have the right to submit the dispute to arbitration under the rules of the United Nations Commission on International Trade Law (UNCITRAL).

But hey, that’s why you come here for news instead of subscribing to a newspaper.

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4 thoughts on “Venezuela keeps “planning” to leave ICSID arbitration panel

  1. plasmaj

    The talk in 2007 was about Venezuela leaving the IMF not ICSID. Leaving the IMF would be a technical default on its bonds (though bonds it issued after that time no longer contain that clause). I don’t see where the FT says that Venezuela leaving ICSID would be a technical default?

  2. sapitosetty Post author

    I count 20, but I failed basic math.

    1. Gambrinus, Corp.
    2. Hortensia Margarita Shortt
    3. Tenaris S.A. and Talta – Trading e Marketing Sociedade Unipessoal LDA
    4. OI European Group B.V.
    5. Koch Minerals Sàrl and Koch Nitrogen International Sàrl
    6. The Williams Companies, International Holdings B.V., WilPro Energy Services (El Furrial) Limited and WilPro Energy Services (Pigap II) Limited
    7. Crystallex International Corporation
    8. Longreef Investments A.V.V.
    9. Nova Scotia Power Incorporated
    10. Highbury International AVV and Ramstein Trading Inc.
    11. Flughafen Zürich A.G. and Gestión e Ingenería IDC S.A.
    12. Opic Karimun Corporation
    13. Universal Compression International Holdings, S.L.U
    14. Tidewater Inc. and others
    15. Gold Reserve Inc
    16. Holcim Limited, Holderfin B.V. and Caricement B.V.
    17. ConocoPhillips Company and others
    18.Mobil Corporation and others
    19. Vestey Group Ltd
    20. Vannessa Ventures Ltd.

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