Venezuela wins expropriation cases in US Supreme Court, Paris court of appeals & ICSID

Latin American Herald Tribune | 2 May 2017

Venezuela wins expropriation cases in US Supreme Court, Paris court of appeals & ICSID

Helmerich & Payne, Transportes Dole, Alimentos Frisa CA and Blue Bank International & Trust LTD, in addition to their respective owners — the Garcia family and the Mezerhane family — all suffered losses over expropriations by Venezuela, but a decade later have still not been compensated.

Over the past week, Venezuela won 3 international lawsuits filed by the companies Helmerich & Payne, Transportes Dole, Alimentos Frisa CA and Blue Bank International & Trust LTD, which were seeking over $1.4 billion.

"It was a good week for Venezuela but a bad week for investors who have had their property stolen by these malandros," says international lawyer Russ Dallen, who follows the cases. "In the 1960s we changed a few of the sovereign immunity rules because of the expropriations by Cuban dictator Fidel Castro. All of this week’s clear cases of theft were lost because of a jurisdictional bar, basically leaving these victims nowhere to turn for reparation. As these cases demonstrate, it is time to further update the expropriation rules."

US Supreme Court: Helmerich & Payne v Venezuela

The U.S. Supreme Court ruled Monday against American oil driller Helmerich & Payne, who had sought compensation for Venezuela’s seizure of 11 drilling rigs in 2010.

Helmerich & Payne provided drilling services for the Venezuelan government. After Venezuela failed to pay $100 million in bills, the company disassembled its rigs in 2009. In response, at the direction of Venezuela President Hugo Chavez, Venezuela’s government with armed soldiers seized the property, saying the rigs could be used by government-owned companies.

Siding with Venezuela, the justices ruled 8-0, with Justice Neil Gorsuch not participating, to throw out a 2015 decision by the U.S. Court of Appeals for the District of Columbia Circuit that allowed one of the claims made by Oklahoma-based Helmerich & Payne International Drilling Company. The Obama administration had filed a Friend of the Court brief supporting Venezuela’s position.

Writing for the court, Justice Stephen Breyer said the U.S. Court of Appeals for the District of Columbia Circuit in 2015 used the wrong standard in denying Venezuela immunity from the lawsuit.

"The Supreme Court ruled that claims of expropriation by a foreign government need to clear a high bar in order to be heard by U.S. courts," said Dallen. "The case now returns to the Federal District Court in Washington, D.C. to continue deciding the issue with this new guidance from the Supreme Court."

"For present purposes, it is important to keep in mind that the Court of Appeals did not decide on the basis of the stipulated facts that the plaintiffs’ allegations are sufficient to show their property was taken in violation of international law," Breyer wrote, remanding the case back to the District Court to determine that.

UNCITRAL: Garcia Armas & Garcia Gruber v Venezuela

Brought in their personal names, the Garcia case refers to their companies Transportes Dole CA and Alimentos Frisa CA, who sued Venezuela for $1.05 billion in compensation, arguing that their food distribution business and operations in the country had been illegally expropriated by Venezuela in violation of their rights as Spanish investors. They also claimed that exchange restrictions hindered their ability to pay foreign suppliers, that the companies’ debts increased after the expropriation in 2010, causing García Armas to face lawsuits in Venezuela and in the United States in his capacity as personal guarantor of company debts.

Although the original UNCITRAL panel that heard the case allowed jurisdiction, the French Court of Appeals that heard Venezuela’s appeal annulled parts of that jurisdiction decision.

In García Armas and García Gruber v. Venezuela (PCA Case No. 2013-3), the United Nations Commission on International Trade Law (UNCITRAL) tribunal composed of Prof. Eduardo Grebler (Brazilian), Prof. Guido Santiago Tawil (Argentinian) and Rodrigo Oreamuno (Costa Rican) had rendered a Decision on Jurisdiction on 15 December 2014 upholding jurisdiction over an investment dispute brought against Venezuela by two Spanish nationals who also held Venezuelan nationality. Arbitrator Oreamuno appended a dissenting opinion to the decision to clarify a point on the law, which, nevertheless, did not affect the outcome of the ruling.

The original UNCITRAL decision was unusual because it essentially allowed investors to sue one of their States of nationality.

The majority of the Tribunal sided with the Claimants to find that the relevant question to consider was whether the investors held Spanish nationality (a) when the expropriatory measures at issue were put into place and (b) when the Claimants submitted their request for arbitration. Both Claimants were Spanish nationals at these two critical points in time. Hence, the Tribunal asserted jurisdiction over the claim.

Oreamuno appended a dissenting opinion to the Decision on Jurisdiction, stating that the nationality of the investors should also be considered at the time when the investment is made. However, he noted that at least parts of the investment had been made after 2004, when both investors unquestionably had Spanish nationality. In his view, that fact was enough for the purposes of protection under the BIT. Therefore, he agreed with the majority that the Tribunal had jurisdiction to hear the investors’ claims.

While ICSID tribunals have mainly ruled that they are not allowed to hear claims brought against States by nationals of that State, the decision in the García Armas and García Gruber v. Venezuela UNCITRAL tribunal was not bound by that restriction, though the Paris Court of Appeal followed general international law and over-ruled the UNCITRAL tribunal’s decision on the nationality issue.

Blue Bank, Mezerhane and the Teleferico

Blue Bank International & Trust LTD, a trustee for the assets, was claiming compensation of $350 million for the expropriation of the Caracas Teleferico and Humboldt Hotel concessions, as well as the Gran Hotel Puerto la Cruz.

The ICSID panel found that Blue Bank, as the trustee, did not own the assets in the trust but merely managed them, and that therefore it had not made any investment that could be covered by the bilateral investment protection treaty between Venezuela and Barbados or the ICSID Convention, ending the dispute and condemning the applicant to pay Venezuela the costs of arbitration for $1.7 million, plus interest.