PDVSA says it wins another one: OPIC Karimun

OPIC was a partner with ConocoPhillips in the Gulf of Paria Corocoro project to produce oil and gas. In the big wave of nationalizations of Faja del Orinoco projects in 2007, ConocoPhillips ended up leaving Venezuela without an agreement with PDVSA. OPIC also ended up giving up its minority stakes to PDVSA. Like Conoco, OPIC went to international arbitration. But in this case, it appears PDVSA is saying that OPIC as a Panama corporation wasn’t protected by any bilateral investment treaty. PDVSA also says that it’s the fifth straight win for Venezuela in international arbitration, which could be a bit of an exaggeration but it certainly does seem that companies are waiting a long time for little money.

Also noting that according to this page, there is also an ICC arbitration in process with OPIC, so this may not be the end of the story. And we have to wait to see the decision itself and know if PDVSA really won it all. Will be interesting.

(Update: The annoyingly dependable Venezuelan-British attorney and legal consultant Carlos Bellorín tweets, “It’s true.”)

Full statement from PDVSA, in Spanish, below the jump.

Nueva victoria ante tribunales internacionales

CIADI falla a favor de Venezuela en caso Opic

El laudo fue dictado este 28 de mayo de 2013, y se constituye en el quinto triunfo para Venezuela por la misma causa ante un tribunal internacional. Opic Karimun Corporation desarrollaba actividades en el Golfo de Paria, bajo la figura de Convenio de Asociación a Riesgo y Ganancias Compartidas

Caracas, 28 de Mayo de 2013.- Una vez más la República Bolivariana de Venezuela triunfa en un caso interpuesto ante el Centro Internacional para el Arreglo de Diferencias Relativas a Inversiones (Ciadi). En este caso la empresa demandante fue Opic Karimun Corporation, quien no pudo lograr un acuerdo con el Estado venezolano en relación con la compensación por la afectación de los convenios en los que venían trabajando.

Los demandantes se apegaron al artículo 22 de la Ley sobre Promoción y Protección de Inversiones del 03 de octubre de 1999, que establece que las controversias surgidas entre un inversionista internacional, cuyo país de origen posea con el Estado venezolano un Tratado Bilateral de Inversión, pueden ser sometidas al arbitraje internacional. En este caso no existía ninguno que le amparara, razón por la cual los jueces dieron el fallo a favor de Venezuela.

El laudo fue dictado este 28 de mayo de 2013, y se constituye en el quinto triunfo para el país por la misma causa ante un tribunal internacional. Anteriormente, el Gobierno Bolivariano obtuvo la victoria en los casos interpuestos por ExxonMobil, Cemex, Brandes Investment Partners y Tidewater Inc, quienes también se fundamentaron en el mencionado artículo.

Opic Karimun Corporation es una sociedad constituida bajo las Leyes de Panamá, que desarrollaba actividades en dos bloques del Golfo de Paria, bajo la figura de Convenio de Asociación a Riesgo y Ganancias Compartidas.

De acuerdo con la Política de Plena Soberanía Petrolera, el 26 de febrero de 2007, el Gobierno Bolivariano de Venezuela dictó el decreto N° 5.200 con rango, valor y fuerza de Ley de Migración a Empresas Mixtas de Convenios de Asociación de la Faja Petrolífera del Orinoco; así como de los Convenios de Asociación a Riesgo y Ganancias Compartidas existentes en el Golfo de Paria.

Culminado el proceso de migración a empresas mixtas, que se desarrolló de acuerdo con un cronograma establecido previamente, se concretó de manera exitosa la nacionalización de las operaciones petroleras en el país.

11 thoughts on “PDVSA says it wins another one: OPIC Karimun

  1. Tom ODonnell

    Interesting, Setty.

    I was at a workshop on “Venezuela and Global Oil” at Cambridge’s Wolfson College in January where these arbitration cases were discussed in some detail. The workshop is governed by the “Chatam House Rule” so one cannot say who said what, only what was said. In any case, a very convincing case was shown from numerous documents that have already been publicly introduced/filed in cases in the Netherlands and elsewhere that Exxon et al have had very weak cases. Both the rhetoric of Exxon and of Chavez is very hyperbolic and off the mark of legal reality.

    One big issues seems to be that the companies formed by the foreign oil firms to do business in Venezuela in some cases only later reformed their companies under the Dutch bi-lateral treaties. Hence, the justices are very skeptical as to the legitimacy of their claims, as this looks like jurisdiction hunting.

    Also, there seem to have been clauses in contracts pretty much delineating how compensation would go in such cases. And again, Exxon (especially) and others are inflammatory and disingenuous in their public statements to the same degree Chavez was when he made his constant statements about nationalizing and “taking” the companies without regard to the niceties of contracts and pre-notification (which statements actually don’t help the legal cases at all as they can be introduced … but they are not actually how the taking was accomplished)..

  2. Julian Paramo

    So… I would be glad if you can help me with this one. If Venezuela continue winning all the cases, even many in the stage of jurisdiction, How the Revolution will continue saying that the International Arbitration System is completly bias against States? (Interesting developments in the creation of an ALBA Arbtiration Mechanism, with coming meeting in Caracas) Is there any press release from the Vzlan Gov. saying that they were completly scammed in an Award so far? As I remember they said they won in every case! Am I right? Some regrets in Conoco ICC with the side letter, and probably in Tidewaters ICSID (a two months treaty shopping operation with a non-foreseable expropriation. uhm) but so far Venezuela has acted with voluntary compliance of the two ICC awards (Exxon and ConocoPhillips), in compliance with international law. Any thoughts? P.S. Glad to find you here Tom! I also found the Cambridge workshop very useful.

    1. Tom ODonnell

      (Greetings Julian. Yes, I am a fan of Steven’s intrepid investigative reporting here as well)

      Indeed … if Pdvsa is winning all the cases, why risk a new system!? And, what is more, the contracts that ended up working in favor of present-day Pdvsa’s are actually from Pdvsa’s Apetura days.

      A key aspect of Mommer’s theory (e.g., his book) is that neo-liberal BITs in the 1990;s were fundamentally altering the international system of governance of oil, turning it back in favor of the IOCs again as a reaction to the swing in favor of NOC’s and states after OPEC’s nationalizations. And now he sees the ‘new resource nationalism’ of Chavez et al as another swing back in favor of NOCs and national states. It actually sounds quite reasonable, in general terms; but then the details are often not so black and white..

      For example, in calculating Exxon’s(?) compensation, the operative contract had never anticipated the much higher price of oil nowadays, and hence the value of the JV ever being what it became in the last decade. So Exxon’s compensation sounds minimal today.

  3. Carlos

    1.- Agree with Julian. Venezuela raised the issue of jurisdiction and article 22 of the Foreign Investment Law ( sort of ‘open consent to arbitrate’) for the first time in Jan 2009 in the ExxonMobil case jurisdiction challenge (decision issued in 2010). Venezuela has used (sucessfully) this argument in several other cases. I think Venezuela has now a positive balance when it come to international investment arbitration.

    2.- Although the case we are commenting now has more to do with seeking jurisdiction through Article 22 of the Foreign Investment Law, Re ‘Forum shopping’, this is a valid practice under both international law and Venezuelan law. Venezuela has recognised that this is a ‘lawful and legitimate’ practice through a TSJ Constitutional Chamber decision of 2008. So, briefly, the issue is not the practice per se but the the way and timing when seeking BIT protection;

    3.- Tom Re the last Para of your last email: What operative agreement are you referring to? I think you mean Cerro Negro’s Association Agreement, right?

  4. sapitosetty Post author

    Dear Universe, thank you for such interesting, smart and informative readers. Anyone who thinks a website like this doesn’t pay doesn’t have conversations like this in the comment sections. Thanks, fellows.

  5. Tom ODonnell

    Hi Carlos,
    I’d have to look back – but, yes, i think that is it. I am recalling above the description I heard at the conference of how the calculation was done. (Since I don’t regularly follow the legal framework in detail, I end up with a more impressionistic memory of it all.) The people at Ogelforum listserv had also discussed this in detail, as I recall. See: http://www.ogel.org/ogelforum.asp

  6. Carlos

    Hi Tom,

    1.- ExxonMobil never entered into an Operative Agreement (as Service Agreements were known in Venezuela) with PDVSA during the ‘Apertura’. ExxonMobil did enter into an Association Agreement (Cerro Negro) and into a Risk-Sharing Agreement or PSA (La Ceiba)

    2.- I suppose that the calculation method and rationale explained during the conference (among many other things) were the one used in the ExxonMobil vs. PDVSA et al ‘commercial arbitration’ award. Much of this calculation (at least the base of it) had to do with a very well crafted economic balance and stabilisation clause included in EM ‘Apertura’ contracts

    3.- Thanks for recommending OGEL. I served as OGEL’s Editor Assistant some years ago

  7. Carlos

    Hi again Tom,

    A correction from my previous post:

    1.- ExxonMobil did enter into an Operative Agreement during the ‘Apertura’ for the block Quiamare-La Ceiba located in the Anzoategui State. However, it sold its 25% stake to Repsol before the re-negotiation started in 2007. So, this case is not being disputed.

    2.- Despite the coincidence in the name, the La Ceiba contract was different contract (a Risk-Service or PSA) located in the Trujillo State. This contract and the AA Cerro Negro contract expropiation are the ‘investments’ in dispute.

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