On 9 March 2017, an ICSID ad hoc Committee annulled certain quantum-related parts of the Award rendered on 9 October 2014 in an investment arbitration between five Exxon subsidiaries and the Bolivarian Republic of Venezuela under the Netherlands-Venezuela BIT.
In the original arbitration, the Tribunal decided that Venezuela’s expropriation of the Claimants’ investment was lawful under the BIT. It awarded the Exxon subsidiaries compensation of approximately USD 1.6 billion. In the annulment phase, Venezuela argued that the applicable law (comprised of Venezuelan law and a contract between the parties authorised by Venezuelan law) included a “price cap”, which limited the amount of compensation that could be awarded for the lawful expropriation of the investment in the Cerro Negro project.
The ad hoc Committee agreed with Venezuela. It decided that the Tribunal had applied customary international law, which was not the applicable law for the purposes of determining compensation for a lawful expropriation under the BIT. The ad hoc Committee concluded that the Tribunal, “in its anxiety to dismiss any thought that national law can be invoked as a defence to the breach of an international obligation, […] ended up falling into […] another version of exactly the same type of proposition, i.e. that some alternative source of international obligation can be invoked to displace particular rights and obligations established by treaty”. The Committee decided that parts of the Award that related to compensation for Venezuela’s expropriation of the Cerro Negro project had to be annulled under Article 52 of the ICSID Convention.
To view the Decision on Annulment, click here.
To view the original Award, click here.