ICSID Overturns Venezuelan Damages
The World Bank’s International Center for Settlement of Investment Disputes (ICSID) overturned on March 9 a prior ruling that ordered Venezuela to pay $1.4 billion in damages to the multinational oil giant ExxonMobil, according to Reuters. Venezuela and ExxonMobil’s decade-old dispute began after the late President Hugo Chávez moved to nationalize almost all of Venezuela’s oil sector in 2007, expropriating two of Exxon’s major projects in Cerro Negro and La Ceiba.
The OPEC member state’s actions against Exxon were part of a wave of nationalizations that encompassed the oil, electricity, telecoms, metal, and agricultural sectors during Chávez’ 1999 to 2013 rule.
Additionally, Venezuela faces more than 20 international arbitration cases, including a legal battle with mining firm Rusoro worth $1.2 billion and another with Crystallex worth $1.4 billion.
Exxon originally demanded compensation of up to $10 billion, but the original ICSID panel ruled in 2014 that Venezuela would only have to pay $1.6 billion, reported The Washington Post. However, according to BBC Mundo, the most recent panel concluded that the previously established compensation is so deficient in reasoning and allocation that it provides grounds for annulment.
“We were confident all along that our position was correct and are very pleased that the annulment committee agreed,” Venezuela’s lawyer George Kahale said.
However, a statement published on ICSID’s website states that only “portions” of the overall compensation were overturned.
The decision annulling most of the $1.6 billion is a benefit to the cash-strapped government, as it struggles to meet foreign debt obligations amid a floundering economy with widespread shortages of food and medicine.
Earlier this month, the country’s central bank released bleak new figures, including data indicating that foreign reserves fell to $10.5 billion.
Ernesto Villegas, the Venezuelan Minister of Popular Power for Communication and Information, lauded the “just decision” of the ICSID panel. “Venezuela expresses its commitment to abide by and fully comply with this decision, which represents an incontrovertible judicial triumph in defense of the sovereign and inalienable rights of our country over our energy resources,” he said.
“Under ICSID rules, Exxon now has the right to request the resubmission of the dispute to another new tribunal to look at the original award in the case,” international lawyer Russ Dallen told the Latin American Herald Tribune.
"I would imagine that ExxonMobil cannot be happy with this outcome after ten years of litigation and the loss of its investment and will resubmit its defense of the award for a second opinion,” he said.
Exxon has yet to confirm any details of the changes to the payout. A spokesman for the oil company assured, “ExxonMobil will continue to evaluate its legal rights and determine next steps.”