Air Canada v. Venezuela

(a) The Commission for the Administration of Foreign Currency or Comisión de Administración de Divisas ("CADIVI");

(b) The National Institute for Civil Aviation, later renamed National Institute for Civil Aeronautics ("INAC");

(c) The Venezuelan Airlines Association or Asociación de Líneas Aéreas de Venezuela ("ALAV");

(d) The International Air Transport Association ("IATA"); and

(e) Banco Mercantil, an exchange agency ("Banco Mercantil").

On 13 January 2017, the ICSID Secretary-General approved access to the Additional Facility pursuant to Article 4 of the Rules Governing the Additional Facility for the Administration of Proceedings by the Secretariat of ICSID ("AF Rules") and registered the Request for Arbitration pursuant to Articles 4 and 5 of the Arbitration (Additional Facility) Rules ("AF Arbitration Rules").

On 26 September 2017, ICSID notified the Parties of the constitution of the Tribunal and the commencement of the proceedings pursuant to Article 13 of the AF Arbitration Rules. The Tribunal is composed of Prof. Pierre Tercier (Swiss), President, appointed by the Chairman of the Administrative Council in accordance with Article 10 of the AF Arbitration Rules; Mr. Charles Poncet (Swiss), appointed by Claimant; and Ms. Deva Villanua (Spanish), appointed by Respondent.

On 14 December 2017, further to the Parties’ agreement to extend the 60-day deadline provided for in Article 21 of the AF Arbitration Rules, the Tribunal held a First Session with the Parties by telephone conference.

55. In relation to Claimant's Redfern Schedule:

a. Respondent shall confirm or clarify Claimant's understanding in relation to Claimant's Request No. 3 by 20 September 2018. Claimant shall reply, if needed, by 28 September 2018. The Tribunal shall decide, if necessary, by 5 October 2018(Claimant's Redfern Schedule, page 9, Request No. 3).

b. The Parties shall enter into a confidentiality agreement in relation to confidential documents responding to Claimant's Requests Nos 6, 14, 16, 23, 24, 25 and 26 by 20 September 2018(Claimant's Redfern Schedule, page 13, Request No. 6; pages 36-38, Requests Nos 23 to 25).

[...]

56. In relation to Respondent's Redfern Schedule:

a. Claimant shall, in relation to Respondent's Requests Nos 4 and 6, submit a privilege log in relation to documents that may be protected by legal privilege in line with the principles of Article 9(2)(b) and 9(3) of the IBA Rules by 20 September 2018. Respondent shall provide its comments to such log by 28 September 2018. The Tribunal shall decide by 5 October 2018(Respondent's Redfern Schedule, page 12, Request No. 4 and page 16, Request No. 6).

b. Claimant shall provide a list describing documents responsive to Respondent's Requests Nos 17, 18, 20, 21 and 22 that were already disclosed or shared with Respondent by 20 September 2018. Respondent shall reply, if needed, by 28 September 2018. The Tribunal shall decide, if necessary, by 5 October 2018(Respondent's Redfern Schedule, pages 33 to 35, Requests Nos 17 and 18; pages 37 to 39, Requests Nos 20 to 22).

c. Claimant shall respond to Respondent's explanations in relation to Respondent's Requests Nos 36 and 37 by 20 September 2018. Respondent shall reply, if needed, by 28 September 2018. The Tribunal shall decide, if necessary, by 5 October 2018(Respondent's Redfern Schedule, pages 55 to 57, Requests Nos 36 and 37).

[...]

57. For these reasons, the Tribunal orders the following:

[...]

4. The Parties shall take the necessary steps to comply with the Tribunal's directions set forth in paragraphs 55 and 56 above.

51. For these reasons, the Tribunal orders the following:

[...]

2. Concerning the dispute resolution provision of the draft Confidentiality Agreement, the Tribunal invites the Parties to confer and agree on a text along Claimant’s proposal.

[...]

9. Respondent shall respond to Claimant’s objection on the alleged deficient production of documents by Respondent by 5 November 2018. The Tribunal will decide by 12 November 2018.

"that the Tribunal invites Venezuela to enter into the Confidentiality Agreement in the form attached hereto as Annex 2 by no later than November 16, 2018 and to order Venezuela to produce responsive documents that same date to avoid any further delay. In the alternative, and should Venezuela refuse to enter into the Confidentiality Agreement, Air Canada respectfully asks that the Tribunal enters into a confidentiality order in the same or similar terms to the ones contained in the Confidentiality Agreement. "

"that the Arbitral Tribunal (i) deny Air Canada's request of 12 November 2018 and (ii) declare that the Republic's proposed terms, as reflected in the Confidentiality Agreement in the form attached hereto as Annex 1 are reasonable and in accordance with the Arbitral Tribunal's directions set forth in P.O. No. 4."

Respondent also noted that it intended to contact Claimant concerning Respondent’s concern on the latter’s document production.

1. The Parties shall endeavour and enter into a Confidentiality Agreement in the terms proposed in para. 14 above, by 23 November 2018. Failing an agreement between the Parties, the Tribunal shall issue an order to this effect.

In paragraph 14 of PO No. 5, the Tribunal stated the following:

Accordingly, the Tribunal considers that, in line with its considerations of neutrality set out in PO No. 4, and in view of the Parties' positions, the appropriate dispute resolution provision of the Confidentiality Agreement should comprise the following elements:

- During the pendency of the present proceedings, any dispute concerning the Confidentiality Agreement shall be resolved by the present Tribunal;

- Following the end of the present proceedings, any dispute concerning the Confidentiality Agreement shall be resolved as follows:

• Arbitration under the Rules of Arbitration of the International Chamber of Commerce;

• Sole arbitrator;

• French law;

• English and Spanish language of the arbitration;

• English and Spanish fluency of the sole arbitrator;

• Documents in the arbitration may be submitted in their original language.

For Respondent, neither of the Tribunal’s considerations in PO No. 5 took into account that the jurisdiction that would be created were to cover a potential liability claim against Air Canada for breach of contract under French law - clearly not a procedural matter. This was a distinct consent to the one allegedly given by the Republic under the BIT. The Republic would not be granting it freely were it to follow the Tribunal’s order.

Further, the Tribunal’s proposed procedural order was inadequate because it still left unanswered the question of the appropriate forum for the Republic’s potential action for a breach of confidentiality, and its confidential information was without protection upon termination of the arbitration.

"enter into enter into a Confidentiality Agreement by 3 December 2018 concerning only the timeframe following the termination of the present arbitration. The Confidentiality Agreement shall comprise the agreed text of the draft Confidentiality Agreement, including the dispute resolution provision providing for an ICC arbitration."

In his letter, Mr. Hernández noted that the judicial representation of the Republic, including in arbitration proceedings, was vested exclusively on him, as Procurador Especial de la República. Consequently, any notice or communication from ICSID to the Republic had to be addressed to him and not to any other individual claiming to act on behalf of the Republic. In addition, ICSID should not consider valid any instruction or communication submitted as of 5 February 2019 by any other person that claims to act on behalf of the Republic.

Claimant reiterated its objection to "an indefinite stay or suspension of the arbitration"" but suggested nonetheless that the Tribunal should extend the date by which Respondent would file its Rejoinder by six months and that new Hearing dates be fixed for the first quarter of 2020. Claimant suggested this course of action for the following reasons: (a) it was no longer clear who was empowered to represent Venezuela in this arbitration and Venezuela should be ordered to clarify this issue immediately through further submissions from Mr. Hernández and the De Jesús law firm; (b) Claimant would be prejudiced if the Hearing is maintained in the face of further delays from Venezuela and procedural surprises and uncertainty; and (c) the proposed six-month extension of the deadline for filing the Rejoinder would give Venezuela ample time to submit a competent legal opinion and retain a replacement expert if necessary.

(a) to extend the filing of the Rejoinder by six months, i.e., 4 October 2019, and postpone the Hearing until the first quarter of 2020, respectively. The suspension of the Procedural Calendar would be subject to the procedure on the question of Respondent’s representation; and

(b) to address the question of Respondent’s representation as a preliminary matter via the filing of two rounds of submissions and, if necessary, a hearing on the matter, following which it would render its decision.

Mr. Muñoz Pedroza, referred to the letter from Mr. Hernández to ICSID of 27 March 2019, and noted that arbitral tribunals did not have any authority or jurisdiction to question or decide on the functions or authority of the President or Attorney General. He contested the authority relied on by Mr. Hernández to present himself as Procurador Especial de la República. He concluded that the representation of the Republic’s interest before arbitral tribunals fell within the authority of the Republic’s Attorney General.

Mr. Muñoz Pedroza announced that he would issue instructions to the attorneys representing the Republic to request the dismissal in limine litis of the incident raised by the letter from Mr. Hernández for lack of jurisdiction or competence.

In reply to the Tribunal’s instructions of 23 April 2019, Claimant noted that no hearing was necessary but that a telephone or video hearing might suffice if the Tribunal believed that a hearing would be useful. Respondent also confirmed that no hearing was necessary. Mr. Hernández did not express any request in relation thereto.

Respondent further argued that Dr. Flores was prevented from attending the Hearing due to unilateral and illegitimate U.S. sanctions and that the situation was beyond the control of Dr. Flores and the Republic. These "extraordinary circumstances" made his expert report of 3 August 2018 admissible.

Moreover, Dr. Flores’s "legitimate impossibility" to participate in the Hearing generated an imbalance between the Parties that required an adjustment of the rule of sequestration. Mr. Rosen should not be authorized to attend the Hearing prior to giving evidence and would be sequestered until he testified.

Claimant further argued that Dr. Flores’s expert report should be excluded or given no weight by the Tribunal. Specifically, Respondent had ample opportunity to support its case with an opinion from an expert who is not subject to such sanctions and could appear to defend his or her own report but had failed to do so.

In addition, Claimant’s quantum expert should not be sequestered or prevented from attending any other portions of the Hearing before he testifies. Sequestering Claimant’s expert would infringe on Claimant’s rights of defense.

[...]

The Tribunal decides that the equal allocation of time as originally agreed between the Parties shall be maintained. The fact that a witness or an expert will not attend the Hearing should not affect this repartition.

In any event, the time allocated will be applied with a good faith standard and will remain flexible generally and if technical delays and/or interruptions materially reduce a Party's allocated time.

[...]

The Tribunal decides that, in light of the exceptional circumstances, the expert report of Dr. Flores is admissible. However, it also notes that Respondent could have avoided the present procedural incident had it chosen an expert unaffected by the US sanctions. Therefore, when deciding on the evidentiary weight accorded to Dr. Flores' report, the Tribunal will take into consideration that Dr. Flores will not ratify its content, nor will it be subject to Claimant's cross-examination.

[...]

The Tribunal decides that, in order to avoid any imbalance between the Parties in their presentations and examinations, Mr. Rosen shall be sequestrated both during the opening statements and the witness examinations.

On Day 1, the Parties delivered their Opening Statements ("C-Opening" for Claimant and "R-Opening" for Respondent).

On Day 2, the examinations of Claimant’s witnesses, Mr. Alfredo Sebastián Babún Sabat and Mr. Alex Pittman, and Respondent’s witnesses, Mr. Yhonatan Rafael Blanco and Ms. Anira Dinorys Padrón Barito took place. As it had been agreed, the examinations of Mr. Blanco and Ms. Padrón took place via videoconference.

On Day 3, the examination of Claimant’s expert, Mr. Howard Rosen, took place. Further, the Tribunal and the Parties discussed certain procedural matters, in particular, the next steps of the proceedings.

1. In Procedural Order No. 9, the Tribunal noted that "[t]he Parties may not submit any new legal or factual exhibits (subject to Article 41(2)...)."

2. Article 41(2) of the Arbitration (Additional Facility) Rules provide that "[t]he Tribunal may, if it deems it necessary at any stage of the proceeding, call upon the parties to produce documents, witnesses and experts".

3. Claimant's request to file the three additional legal authorities for use in its Post- Hearing Brief is very belated. This is particularly so as Respondent's position on the lex specialis derogat a generali maxim has been pleaded in depth from the outset of the present case.

4. Nevertheless, because of the connection with the Tribunal's question in Procedural Order No. 9, the Tribunal decides to admit the three additional legal authorities.

5. To ensure equal treatment and no prejudice caused to Respondent, Respondent may, if it so requests, submit new legal authorities in response to Claimant's three additional legal authorities together with a short comment.

1. Paragraphs 100-153 of Claimant's Post-Hearing Brief are admissible.

2. Respondent shall have an opportunity to respond to paragraphs 100-153 of Claimant's Post-Hearing Brief as set out in the present Procedural Order (see para. 41).

3. Respondent shall have an opportunity to file a short comment with legal authorities as set out in the present Procedural Order (see para. 41). The possibility for a short reply from Claimant is reserved (see para. 30).

4. The Parties shall have an opportunity to file simultaneously Reply Post-Hearing Briefs by 11 September 2020 and in the manner explained in the present Procedural Order (see para. 41).

On 12 August 2021, the Tribunal declared the proceedings closed pursuant to Article 44 of the AF Arbitration Rules.

Claimant commenced the present arbitration against Respondent pursuant to the Agreement between the Government of Canada and the Government of the Republic of Venezuela for the Promotion and Protection of Investments ("BIT" or "Canada-Venezuela BIT"), signed on 1 July 1996 and in force since 28 January 1998, and the AF Rules.⁴⁰

Article XII of the BIT provides as follows:

1. Any dispute between one Contracting Party and an investor of the other Contracting Party, relating to a claim by the investor that a measure taken or not taken by the former Contracting Party is in breach of this Agreement, and that the investor or an enterprise owned or controlled directly or indirectly by the investor has incurred loss or damage by reason of, or arising out of, that breach, shall to the extent possible, be settled amicably between them.

2. If a dispute has not been settled amicably within a period of six months from the date on which it was initiated, it may be submitted by the investor to arbitration in accordance with paragraph (4). For the purposes of this paragraph; a dispute is considered to be initiated when the investor of one Contracting Party has delivered notice in writing to the other Contracting Party alleging that a measure taken or not taken by the latter Contracting Party is in breach of this Agreement, and that the investor or an enterprise owned or controlled directly or indirectly by the investor has incurred loss or damage by reason of, or arising out of, that breach.

3. An investor may submit a dispute as referred to in paragraph (1) to arbitration in accordance with paragraph (4) only if:

(a) the investor has consented in writing thereto;

(b) the investor has waived its right to initiate or continue any other proceedings in relation to the measure that is alleged to be in breach of this Agreement before the courts or tribunals of the Contracting Party concerned or in a dispute settlement procedure of any kind;

(c) if the matter involves taxation, the conditions specified in paragraph 14 of this Article have been fulfilled; and

(d) not more than three years have elapsed from the date on which the investor first acquired, or should have first acquired, knowledge of the alleged breach and knowledge that the investor has incurred loss or damage.

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 parties 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).

5. Each Contracting Party hereby gives its unconditional consent to the submission of a dispute to international arbitration in accordance with the provisions of this Article.

6. (a) The consent given under paragraph (5), together with either the consent given under paragraph (3), or the consents given under paragraph (12), shall satisfy the requirements for:

(i) written consent of the parties to a dispute for purposes of Chapter II (Jurisdiction of the Centre) of the ICSID Convention and for purposes of the Additional Facility Rules; and

(ii) an "agreement in Writing" for purposes of Article II of the United Nations Convention for the Recognition and Enforcement of Foreign Arbitral Awards, done at New York. June 10, 1958 ("New York Convention").

(b) The venue for any arbitration under this Article shall be such so as to ensure enforceability under the New York Convention, and claims submitted to arbitration shall be considered to arise out of a commercial relationship or transaction for the purposes of Article 1 of that Convention.

7. A tribunal established under this Article shall decide the issues in dispute in accordance with this Agreement and applicable rules of international law. An interpretation of this Agreement to which both Contracting Parties have agreed shall be binding upon the tribunal.

A tribunal may order an interim measure of protection to preserve the rights of a disputing party, or to ensure that the tribunal's jurisdiction is made fully effective, including an order to preserve evidence in the possession or control of a disputing party or to protect the tribunal's jurisdiction. A tribunal may not order attachment or enjoin the application of the measure alleged to constitute a breach of this Agreement. For purposes of this paragraph. An order includes a recommendation.

A tribunal may award, separately or in combination, only:

(a) monetary damages and any applicable interest;

(b) restitution of property, in which case the award shall provide that the disputing Contracting Party may pay monetary damages and any applicable interest in lieu of restitution.

A tribunal may also award costs in accordance with the applicable arbitration rules.

Where an investor brings a claim under this Article regarding loss or damage suffered by an enterprise the investor directly or indirectly owns or controls any award shall be made to the affected enterprise.

10. An award of arbitration shall be final and binding. Each Contracting Party shall provide for the enforcement of an award in its territory.

11. Nothing in this Article shall deprive a Contracting Party of its right to seek compliance by the other Contracting Party with its obligations under this Agreement, including through use of the procedures set forth in Articles XIII and XIV.

12. (a) Where an investor brings a claim under this Article regarding loss or damage suffered by an enterprise the investor directly or indirectly owns or controls, the following provisions shall apply:

(i) both the investor and the enterprise shall be required to give the consent referred to in subparagraph (3)(a);

(ii) both the investor and the enterprise must give the waiver referred to in subparagraph (3)(b); and

(iii) the investor may not make a claim if more than three years have elapsed from the date on which the enterprise first acquired, or should have first acquired, knowledge of the alleged breach and knowledge that it has incurred loss or damage.

(b) Notwithstanding subparagraph 12(a), where a disputing Contracting Party has deprived a disputing investor of control of an enterprise, the following shall not be required of the enterprise:

(i) the consent referred to in subparagraph (3)(a); and

(ii) the waiver referred to in subparagraph (3)(b).

13. Where an investor submits a claim to arbitration and the disputing Contracting Party alleges as a defense that the measure in question is

(a) a reasonable measure for prudential reasons of the kind referred to in Article X, or

(b) a measure to limit or prevent transfers by a financial institution under paragraph 6 of Article VIII, the tribunal, at the request of such Contracting Party, shall request both Contracting Parties to submit a joint report in writing as to whether the defence is a valid one in that particular case. The Contracting Parties shall consult through their financial services authorities on the matter.

The tribunal may proceed to decide the matter if it does not receive, within 70 days of its referral, either

(a) the joint report requested, or written notification that the matter has been submitted to arbitration between the Contracting Parties under Article XIV.

If the joint report or, as the case may be, the decision of the arbitral tribunal under Article XIV finds that the defence is valid, the tribunal shall be bound by this finding.

Tribunals for disputes on prudential issues and other financial matters shall have the necessary expertise relevant to the specific financial service in dispute.

14. Subject to Article XI, a claim by an investor that:

(a) a taxation measure of a Contracting Party is in breach of an investment agreement between the central government authorities of that Contracting Party and the investor, or

(b) a taxation measure of a Contracting Party constitutes an expropriation under of Article VII, may be subjected to arbitration under this Article unless the Contracting Parties, through the competent taxation authorities designated by each, determine jointly, within six months of being notified of the claim by the investor, that the measure in question, as the case may be, is not in breach of the investment agreement or does not constitute an expropriation.

(emphasis as in the original)

1. If any dispute arises between the Contracting Parties relating to the interpretation or application of this Agreement, the Contracting Parties shall endeavor to settle it by negotiations.

2. Such negotiations shall commence as soon as practicable but in any event not later than forty-five (45) days from the date of receipt of the request for negotiations, unless otherwise agreed by the Contracting Parties.

3. Failure to reach a satisfactory settlement within a further one hundred and eighty (180) days shall constitute grounds for the application of Article VII of this Agreement, unless otherwise agreed by the Contracting Parties.

1. The aeronautical authorities of each Contracting Party shall have the right to withhold the authorizations referred to in Article V of this Agreement with respect to an airline designated by the other Contracting Party, to revoke or suspend such authorizations or impose conditions, temporarily or permanently:

a) in the event of failure by such airline to qualify before the aeronautical authorities of that Contracting Party under the laws and regulations normally and reasonably applied by these authorities in conformity with the Convention;

b) in the event of failure by such airline to comply with the las and regulations of that Contracting Party;

c) in the event that they are not satisfied that substantial ownership and effective control of the airline are vested in the Contracting Party designating the airline or its nationals; and

d) in case the airline otherwise fails to operate in accordance with the conditions prescribed under this Agreement.

2. Unless immediate action is essential to prevent infringement of the las and regulations referred to above, the rights enumerated in paragraph 1 of this Article shall be exercised only after consultations with the aeronautical authorities of the other Contracting Party in conformity with Article XVI of this Agreement.

Respondent submits that, in the alternative, this Tribunal does not have jurisdiction as Claimant failed to meet the waiver and statutory period requirements of the BIT. In the further alternative, Respondent argues that Claimant failed to meet the requirements for the existence of an investor and an investment under the BIT. The Tribunal will discuss these objections further on (see infra paras 148 et seq.).

- On 12 January 2018, the Tribunal issued PO No. 1, including the Procedural Calendar (see supra para. 39).

- On 10 July 2018, the Tribunal issued PO No. 2, denying Respondent’s Application for Bifurcation (see supra para. 45) because the objections to jurisdiction were intertwined with the merits of the case, and even if it were otherwise, it would not be more efficient in terms of time and cost to deal with those objections separately.

- On 13 September 2018, the Tribunal issued PO No. 3 on the Parties’ requests for production of documents (see supra para. 51).

- On 29 October 2018, the Tribunal issued PO No. 4 on matters relating to document production, including the execution of a Confidentiality Agreement (see supra para. 59).

- On 20 November 2011, the Tribunal issued PO No. 5 on further matters relating to the production of documents (see supra para. 66).

- On 29 November 2018, the Tribunal issued PO No. 6 on the confidentiality conditions that should apply to the production of documents (see supra para. 68).

- On 28 May 2019, the Tribunal issued PO No. 7 on the issue of Respondent’s legal representation in this case (see supra para. 89).

In reaching that decision, the Tribunal had to determine "whether it may continue the present proceedings with Respondent's interests being represented by Respondent's Counsel on record, who at least until 4 February 2019, were indisputably the valid representatives of Venezuela". It held that the dispute between the Parties over the representation of Respondent concerned a political and constitutional issue that was beyond the authority and jurisdiction of the Tribunal. Nonetheless, the Tribunal had the authority to decide whether or not it could proceed in the case with Respondent’s representative on record. The Tribunal found that it could do so in order to preserve the integrity of the arbitration and the interests of all Parties.

- On 24 February 2020, the Tribunal issued PO No. 8 on the organization of the Hearing and Dr Flores’ absence from that Hearing (see supra para. 105).

In particular, the Tribunal ruled that Dr Flores’ expert report would remain admissible, but that in deciding the evidentiary weight to be accorded to it, it would take into account the fact that Dr Flores would not corroborate its content or be subject to cross-examination by Claimant. The Tribunal specifically noted that Respondent could have avoided the present procedural incident by choosing an expert who was not affected by the U.S. sanctions.

Further, the Tribunal ruled that the equal allocation of time originally agreed upon by the Parties would be upheld and applied in good faith and with flexibility.

In addition, it ruled that Claimant’s quantum expert be sequestered to avoid an imbalance between the Parties in their presentations and examinations.

- Between 10 and 12 March 2020, a hearing was held at the World Bank’s premises in Paris (see supra para. 111).

- On 3 April 2020, the Tribunal issued PO No. 9 regarding the Post-Hearing Briefs, including questions posed by the Tribunal to the Parties (see supra para. 114).

- On 7 July 2020, the Tribunal issued PO No. 10 on certain issues relating to the Parties’ Post-Hearing Briefs (see supra para. 125).

[Claim. 1] a declaration that the dispute is within the jurisdiction of the tribunal;

[Claim. 2] a declaration that Venezuela has breached its obligations under the BIT and international law with respect to Air Canada's investments;

[Claim. 3] an order that Venezuela pay compensation to Air Canada for all damages suffered, plus pre-award compound interest up to February 29, 2020, in the amount of US$ 213,140,023 or, alternatively, in the amount of US$ 72,118,369;

[Claim. 4] an order that Venezuela additionally pay Air Canada pre-award compound interest calculated from March 1, 2020 until the date of the Tribunal's award using Venezuela's cost of borrowing or, alternatively, Air Canada's cost of debt;

[Claim. 5] an order that Venezuela additionally pay all of Air Canada's costs of this proceeding, including (but not limited to) Air Canada's attorney's fees, experts, and all costs associated with the tribunal and the conduct of the proceeding;

[Claim. 6] an order that Venezuela additionally pay Air Canada post-award compound interest calculated using Venezuela's cost of borrowing or, alternatively, Air Canada's cost of debt until the date of Venezuela's final satisfaction of the award; and

[Claim. 7] any other relief the Tribunal deems fit and proper.

[Resp. 1] Declare that the dispute is not within the jurisdiction of the Arbitral Tribunal and is, in any event, not admissible;⁴⁶

[Resp. 2] Dismiss Air Canada's claims of liability under Articles II, VII and VIII of the Agreement between the Government of Canada and the Government of the Republic of Venezuela for the Promotion and Protection of Investments;⁴⁷

[Resp. 3] Dismiss Air Canada's claim for compensation, as well as its claim for interest, or alternatively, reduce any amounts ordered as compensation on account of Air Canada's contributory fault, its unwise conduct or its improper actions;⁴⁸

[Resp. 4] Order Air Canada to pay all costs incurred by the Republic in connection with this arbitration, including all of the Arbitral Tribunal's and ICSID's fees and expenses, and all legal fees and expenses incurred by the Republic (including but not limited to lawyer's fees and expenses);

[Resp. 5] Order Air Canada to pay interest as the Arbitral Tribunal may consider appropriate on the amounts owed to the Republic as from the date of the award on costs and complete payment; and

[Resp. 6] Order any additional measure it may deem appropriate.

- First, it will set out the law applicable to the present dispute (Section II).

- Second, it will rule on Respondent’s jurisdictional and admissibility objections (Section III).

- Third, to the extent that it finds it has jurisdiction over the present dispute, it will rule on Claimant’s claims on the merits, i.e., the alleged violations of the BIT (Section IV).

- Fourth, and to the extent it finds that Respondent breached the BIT, it will decide on issues relating to quantum (Section V).

- Firth, and in any event, the Tribunal will decide on the issue of costs of the arbitration (Section VI).

The relevant provisions in relation to the applicable law in the present case are Article 54(1) of the AF Arbitration Rules and Article XII(7) of the BIT.

The Tribunal shall apply the rules of law designated by the parties as applicable to the substance of the dispute. Failing such designation by the parties, the Tribunal shall apply (a) the law determined by the conflict of laws rules which it considers applicable and (b) such rules of international law as the Tribunal considers applicable.

A tribunal established under this Article shall decide the issues in dispute in accordance with this Agreement and applicable rules of international law. An interpretation of this Agreement to which both Contracting Parties have agreed shall be binding upon the tribunal. (emphasis as in original)⁵¹

The Parties agree, and the Tribunal confirms, that in accordance with the foregoing provisions, the BIT itself and international law govern this dispute.⁵² However, the Parties appear to differ as to the application of Venezuelan law by this Tribunal. Specifically:

- Claimant points to the fact that the Vienna Convention on the Law of Treaties ("VCLT") provides that "treaties are governed by international law" and must be interpreted in light of "any relevant rules of international law". This makes international law supreme over domestic law in the area of state responsibility. This is also confirmed by the International Law Commission's Draft Articles on Responsibility of States for Internationally Wrongful Acts ("ILC Articles"). These rules, together with the BIT’s governing law provision, which does not mention domestic law, confirm that Venezuelan law may not be used by the Tribunal to determine the outcome of this dispute.⁵³

- Respondent submits that that the Tribunal must indeed consider Venezuelan law when assessing Claimant’s claims, Respondent’s defenses and the conduct of both Parties, particularly with respect to civil aviation, labor law, exchange control, and administrative procedures, all matters governed by rules of Venezuelan law.⁵⁴ In the present case, the "territorial nexus" is undeniable, as the BIT requires that the investment be made "in the territory of Venezuela".⁵⁵ Moreover, Claimant was operating in an environment regulated by Venezuelan law, namely civil aviation. In conducting its business in the Republic, Claimant was also subject to Venezuelan labor regulations.⁵⁶ The same is true of Claimant’s AAD requests, in the sense that they are also subject to Venezuelan law. Only by considering these provisions of Venezuelan law will the Tribunal be able to determine the proper scope and content of Claimant’s alleged "right to U.S. dollars". This is consistent with the position taken by numerous arbitral tribunals.⁵⁷

- "the dispute is not within the jurisdiction of the Arbitral Tribunal because the dispute is governed by and must be resolved as per the terms of the ATA";

- "the dispute is not within the jurisdiction of the Arbitral Tribunal or is inadmissible because: i. Claimant has not complied with the waiver requirement of Article XII(3)(b) of the BIT, and/or ii. Claimant has referred the dispute to arbitration after the expiry of the three year statutory period of Article XII(3)(d) of the BIT";

- "the dispute is not within the jurisdiction of the Arbitral Tribunal because Claimant does not meet the ratione materiae and/or ratione personae requirements of Article I of the BIT".⁶¹

- First, whether the ATA exclusively governs the present dispute (see infra Section 2).

- Second, and if necessary, whether an arbitration agreement has been reached under the BIT (see infra Sections 3 and 4); and/or

- Third, and if necessary, whether Air Canada qualifies as a protected investor that has made a protected investment within the meaning of the BIT (see infra Section 5).

- It is evident that the ATA and the BIT are international bilateral treaties entered into between the same parties, i.e., Venezuela and Canada.⁷⁸ Respondent does not agree with Claimant that in order for the lex specialis principle to apply, parties to the conflicting norms must be the same.⁷⁹

- The subject matter of a treaty is defined by its general scope. It does not depend on the typology of the specific substantive provisions but on the situations regulated by such provisions. The ATA, which regulates the activity of and offers protection to "aviation industry investors", overlaps with the BIT that, in essence regulates and offers protection to investors in general, including, prima facie, those of the aviation industry.⁸⁰ In any event, the lex specialis applies even in the absence of a conflict between the subject matter of the ATA and the BIT.⁸¹

Claimant submits that the ATA cannot and does not deprive the Tribunal of its jurisdiction under Article XII of the BIT.⁸⁸

First, the BIT is the lex specialis applicable to the dispute and governs therefore jurisdictional issues.⁸⁹ The Tribunal’s jurisdiction is to be determined solely by reference to the criteria set forth in the BIT, which Claimant has satisfied.⁹⁰ Claimant has not asserted any claim under the ATA. Instead, it relies on the ATA primarily to provide factual context and background for its claims under the BIT. Article XII(7) of the BIT positively requires this Tribunal to "decide issues in dispute in accordance with [the BIT] and applicable rules of international law". These international rules necessarily include the ATA.⁹¹

Second, if Canada and Venezuela had wanted to exclude investments by designated airlines under the previously signed ATA or aviation generally from the scope of the BIT’s protections, including its investor-state dispute resolution provisions, then they could have done so, just as they expressly excluded investments in "cultural industries" from protection. Indeed, Canada and Venezuela were clearly mindful of the aviation sector when they entered into the BIT, because they specifically excluded third-party bilateral agreements relating to aviation from the scope of certain protections contained in Article II(3) and Article III(1) and (2) of the BIT.⁹²

- First, it will set out the principle of lex specialis (Section (ii)).

- Second, it will analyze whether the principle of lex specialis applies by examining the "competing" treaties, i.e., the ATA and the BIT (Section (iii)).

- Third, it will examine whether the ATA supersedes the BIT in the present case, in the event that the lex specialis principle is applicable, or otherwise (Section (iv)).

- Finally, it will conclude (Section (v)).

According to the Report of the Study Group of the ILC on the "Fragmentation of international law: Difficulties arising from the diversification and expansion of international law" - an authority relied upon by Respondent¹⁰² - the lex specialis maxim in international law functions as follows:

- As Respondent submits, the maxim, that "suggests that if a matter is being regulated by a general standard as well as a more specific rule, then the latter should take precedence over the former", is both a "maxim of legal interpretation of a conflict and a technique for the resolution of normative conflicts".¹⁰³

- As such, the Report clarifies that "[t]he relationship between the general standard and the specific rule may, however be conceived in two ways": (i) where the specific rule should read and understood within the confines or against the background of the general standard, typically as an elaboration, updating or a technical specification of the latter";¹⁰⁴ (ii) "where two legal provisions that are both valid and applicable, are in no express hierarchical relationship, and provide incompatible direction on how to deal with the same set of facts. In such a case, lex specialis appears as conflict-solution technique." In both cases, primacy falls on the "special" provision.¹⁰⁵

- The Report adds, however, that "the maxim does not admit of automatic application". In this context, there are the following two sets of difficulties: "First, it is often hard to distinguish what is "general" and what is "particular" and paying attention to the substantive coverage of a provision or to the number of legal subjects to whom it is directed one may arrive at different conclusions. An example would be provided by a relationship between a territorially limited general regime and a universal treaty on some specific subject. Second, the principle also has an unclear relationship to other maxims of interpretation or conflict-solution techniques such as, for instance, the principle lex posterior derogate legi priori (later law overrides prior law) and may be offset by normative hierarchies or informal views about "relevance" or importance."¹⁰⁶ (emphasis added)

- Indeed, "lex specialis is usually discussed as one factor among others in treaty interpretation (articles 31-33 VCLT) or in dealing with the question of successive treaties (article 30 VCLT, especially in relation to the principle of lex posteriori)"¹⁰⁷ It may operate "(a) within a single instrument; (b) between two different instruments; (c) between a treaty and a non-treaty standard and (d) between two non-treaty standards".¹⁰⁸ "Inasmuch as "general law" does not have the status of jus cogens, treaties generally enjoy priority over custom and particular treaties over general treaties".¹⁰⁹

- Further, "[a] rule is never "general" or "special" in the abstract but in relation to some other rule" and "[a] rule may be general or special in regard to its subject-matter (fact description) or in regard to the number of actors whose behavior is regulated by it."¹¹⁰ (emphasis added)

- With respect to specificity in relation to the "subject-matter", "lex specialis can only apply where both the specific and general provisions concerned deal with the same substantive matter". This is in line with Article 55 of the ILC Articles.¹¹¹ However, "the criterion of the "same subject-matter" as a condition for applying a conflict rule is too unspecific to be useful" and "[d]ifferent situations may be characterized differently depending on what regulatory purpose one has in mind".¹¹²

- In this regard, the Report refers to the ILC's explanation in its commentary on the drafting of Article 55 which states that "[f]or the lex specialis principle to apply it is not enough that the same subject matter is dealt with by two provisions; there must be some actual inconsistency between them, or else a discernible intention that one provision is to exclude the other".¹¹³ (emphasis added)

Similarly, in its Post-Hearing Brief, Claimant develops the argument that it is clear from the text of the BIT itself that Canada and Venezuela had a common intention to apply the BIT and in particular Article XII of the BIT, to investors in the aviation sector.¹¹⁹ Respondent challenges the correctness of this argument.¹²⁰ The Tribunal reiterates its above considerations on its approach (see paras 169-171 and 184) and emphasizes that an interpretation of the instrument on which it is based, including the intention of the relevant signatory parties, when its jurisdiction is challenged is an exercise it must undertake in any case, including on its own motion, in order to comply with its mandate.

With regard to the ATA, the Tribunal observes the following:

- Its purpose is set forth in its preamble, which states that the Contracting Parties "[d]esir[ed] to conclude an agreement supplementary to the [Convention on International Civil Aviation, i.e., the Chicago Convention] for the purpose of establishing commercial air services".¹²¹ Further, Article II on the "Applicability of the Chicago Convention" states that the ATA "shall be subject to the provisions of the Chicago Convention to the extent that these provisions are applicable to international air services’".¹²² At this point, it is important to note that the Chicago Convention is a multilateral treaty concluded for the purpose of agreeing "on certain principles and arrangements in order that international civil aviation may be developed in a safe and orderly manner and that international air transport services may be established on the basis of equality of opportunity and operated soundly and economically".¹²³ In the context of its purpose, the ATA grants each Contracting Party "the right to designate an airline or airlines to operate the agreed services on the specified routes".¹²⁴

- In the context of the substantive rights of designated airlines, Article XXI provides that "[e]ach designated airline shall have the right to engage in the sale of air transportation in the territory of the other Contracting Party" and "the right to convert and remit to its country on demand earnings obtained in the normal course of its operations [...] at the foreign exchange market rates for current rates prevailing at the time of the transfer [...] in accordance with national legislation […] under legislative and regulatory conditions no less favourable than those applied to any other foreign airline operating international air services to and from the territory of the other Contracting party".¹²⁵

- In the context of procedural rights in general, Article XVIII, set out above (see para. 133), provides for settlement by negotiation in the event of disputes "between the Contracting Parties relating to the interpretation or application" of the ATA.¹²⁶ If no satisfactory settlement is reached within 180 days, and unless the Contracting Parties agree otherwise, Article VII applies.¹²⁷ Article VII, also set out above (see para. 134), provides for the possibility for the aeronautical authorities of the Contracting Parties to refuse operating licenses in respect of certain airlines if those airlines fail to comply with certain laws or regulations or "operate in accordance with the conditions prescribed under the" ATA.¹²⁸ In addition, according to Article XXIII, any Contracting Party may "give notice in writing through diplomatic channels to the other Contracting Party of its decision to terminate" the ATA.¹²⁹

- Its purpose is to develop and establish commercial air services in a bilateral context, subject to and in addition to the Chicago Convention. Air Canada, as the designated airline for Canada, plays an indispensable role in the establishment of such services. As such, the ATA, like the Chicago Convention, provides certain rights and obligations for the designated airlines. Thus, the ATA governs the conduct of three actors, namely the Contracting States and the respective designated airline through the assurance of the Contracting States.

- In the event of a dispute between Canada and Venezuela over the interpretation and application of the ATA, such dispute can be referred to negotiations. In the event that no satisfactory agreement is reached between Canada and Venezuela, the appropriate aeronautical authority may revoke the designated airline’s authorization if it fails to comply with the relevant laws or the ATA. Negotiation is thus only provided as a State-centric remedy¹³⁰ and apparently only when the designated airline is in the wrong. The designated airline certainly has no right to bring a claim, or no right to do so without the proxy of its State. Even if such a claim were made and successful, the ATA does not provide for any monetary compensation to the designated airline itself.

- Its purpose is set out in its first and second preambles. According to its first preamble, the BIT "establishes the framework for cooperation in the cultural, economic and technological fields between them".¹³¹ According to its second preamble, the BIT "recognizes that the promotion and the protection of investments of investors of one Contracting Party in the territory of the other Contracting Party will be conductive to the stimulation of business initiative and to the development of economic cooperation between them".¹³²

- The BIT provides, inter alia, the following relevant substantive protections: Article II(2) provides for "fair and equitable treatment" of investments or returns of investors.¹³³ Article III prohibits the expropriation of investors’ investments or returns unless certain conditions are met.¹³⁴ Article VIII protects the investor’s "unrestricted transfer of investments and returns", "without delay in the convertible currency in which the capital was originally invested or in any other convertible currency agreed by the investor and the Contracting Party concerned" and "[u]nless otherwise agreed by the investor", "at the rate of exchange applicable on the date of the transfer". This protection is subject, inter alia, to "the equitable, non-discriminatory and good faith application" of certain laws of the Contracting Party.¹³⁵

- The BIT also provides for the following procedural safeguards: In the context of a dispute between an investor and a Host Contracting Party "relating to a claim by the investor that a measure taken or not taken by the [...] Contracting Party is in breach of [the BIT]", Article XII already outlined above (see para. 132) provides for the possibility of investor-state arbitration. In deciding the dispute, the investor-state tribunal "shall decide the issues in dispute in accordance with this Agreement and applicable rules of international law" and is bound by an interpretation of the BIT contained in an annex.¹³⁶ In the context of a dispute between the Contracting Parties over the "interpretation or application" of the BIT, Article XIV provides for amicable settlement through consultations followed by arbitration.¹³⁷

- The interpretation of the BIT, agreed to by the Parties in an Annex that forms "an integral part" of the BIT,¹³⁸ provides the following with respect to certain exceptions to the protection of the BIT: Pursuant to Article II(4) of the Annex, Article II(3) and Article III(1) and (2) of the BIT, "do not apply to treatment by a Contracting Party pursuant to any existing or future bilateral or multilateral agreement: [...] (b) relating to aviation; telecommunications transport networks and telecommunications transport services; fisheries, maritime matters, including salvage; or financial services" (emphasis added). Pursuant to Article III(8) of the Annex, Articles II, III, IV and V of the BIT and the related provisions of the Annex "do not apply to (a) procurement by a government or state enterprise [...]; (b) subsidies or grants [...]; (c) any measure denying investors [...] and their investments any rights […] provided to the aboriginal peoples of either country; or (d) any current or future foreign aid program [...]". According to Article III(9) of the Annex, "[i]nvestments in cultural industries are exempt from the provisions" of the BIT.

- Its purpose is to develop economic cooperation in general at the respective bilateral level. An important way to achieve this is through the promotion and protection of investment. In terms of content, the BIT is therefore entirely focused on the rights and obligations of the Contracting State vis-à-vis the investor of the other Contracting State. As such it primarily regulates the conduct of these two actors.

- Procedurally, the Tribunal envisages two options: first, the possibility of arbitration where there is a dispute between the investor and the host State over the investment as defined by the BIT itself; second, any dispute over the interpretation and application of the BIT, to be resolved by negotiation and then by arbitration at the inter-State level.

- Disputes relating to the cultural industries appear to be excluded from the BIT's protections. Disputes over treatment under a bilateral agreement relating to the aviation sector are excluded only to the extent set out in Article II(4) of the Annex to the BIT.

- Aviation disputes are resolved through state-to-state negotiation and there are no arbitrations involving air transportation.¹⁴⁰

- The BIT provides an optional dispute settlement clause, while the ATA provides a mandatory clause.¹⁴¹

- The ATA provides substantive protections for the designated airlines that are inconsistent with the protections for investors set forth in the BIT.¹⁴²

- The fact that Air Canada participated in the negotiations¹⁴⁷ is not relevant to its possible status as an investor bringing a private claim for pecuniary loss under a different instrument.

- The fact that the ATA had already governed the operations of airlines such as Air Canada six years prior to the signing of the BIT¹⁴⁸ has no bearing on Canada’s and Venezuela’s express intention to have investment-related disputes, including those involving their commercial airlines, settled by arbitration under the BIT.

- The official statements of the Legal Bureau of Legal Affairs of Canada in 1990¹⁴⁹ show no intention to make the ATA relevant to an investment dispute in the manner advocated by Respondent.

- Air Canada’s 10 December 2013 email referencing the Embassy of Canada in Venezuela addressing the issue of repatriation of funds under the ATA¹⁵⁰ does not negate the fact that Air Canada had or has the ability to pursue investor-state claims through the BIT. Nor does the view expressed by INAC and ALAV view in a letter to Air Canada dated 19 March 2014 on the application of the ATA.¹⁵¹

Respondent submits that paragraph 43 of the Request for Arbitration does not meet the waiver requirement of Article XII(3)(b) of the BIT and, in the alternative, that Claimant has failed to comply with its own waiver.¹⁵⁴

First, a good faith interpretation in accordance with the ordinary meaning of the language "dispute settlement procedure" of Article XII(3)(b) of the BIT in the context of dispute resolution encompasses non-adversarial mechanisms such as negotiation.¹⁵⁵ Respondent points to the negotiation references in Article XII(1) of the BIT and Article XVIII of the ATA in support of its position that negotiation is a dispute settlement procedure and was considered as such by Venezuela and Canada at the time the BIT was entered into.¹⁵⁶

The Tribunal will address this issue as follows:

- First, it will set out Article XII(3)(b) of the BIT and determine its scope (Section (ii)).

- Second, it will assess whether Claimant has complied with said provision (Section (iii)).

- Finally, it will conclude (Section (iv)).

The Parties disagree on whether Article XII(3)(b) of the BIT includes non-adversarial measures such as negotiations.¹⁷² To decide this question, the Tribunal will set out Article XII in full and then determine the scope of the provision.

1. Any dispute between one Contracting Party and an investor of the other Contracting Party, relating to a claim by the investor that a measure taken or not taken by the former Contracting Party is in breach of this Agreement, and that the investor or an enterprise owned or controlled directly or indirectly by the investor has incurred loss or damage by reason of, or arising out of, that breach, shall to the extent possible, be settled amicably between them.

2. If a dispute has not been settled amicably within a period of six months from the date on which it was initiated, it may be submitted by the investor to arbitration in accordance with paragraph (4). For the purposes of this paragraph, a dispute is considered to be initiated when the investor of one Contracting Party has delivered notice in writing to the other Contracting Party alleging that a measure taken or not taken by the latter Contracting Party is in breach of this Agreement, and that the investor or an enterprise owned or controlled directly or indirectly by the investor has incurred loss or damage by reason of, or arising out of, that breach.

3. An investor may submit a dispute as referred to in paragraph (1) to arbitration in accordance with paragraph (4) only if:

[...]

(b) the investor has waived its right to initiate or continue any other proceedings in relation to the measure that is alleged to be in breach of this Agreement before the courts or tribunals of the Contracting Party concerned or in a dispute settlement procedure of any kind;

[...] (emphasis added)

The Tribunal must interpret this provision in accordance with the rules of treaty interpretation set forth in Article 31 of the VCLT¹⁷³ and, "in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose".¹⁷⁴ For the purposes of interpretation, the "context" includes the text, the preamble of the Treaty and its Annexes, and matters referred to in Article 31(1)(a) and (b) of the VCLT. In addition, the Tribunal "must take into account together with context: (a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions"¹⁷⁵ In addition, the Tribunal may have recourse to "supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of Article 31, or to determine the meaning when the interpretation according to Article 31: (a) leaves the meaning ambiguous or obscure; or (b) leads to a result which is manifestly absurd or unreasonable".

The BIT imposes certain conditions on Respondent’s consent to arbitrate claims under the BIT. This follows from the wording of Article XII(3)(b) that the investor, in this case allegedly Air Canada, may submit its claims to arbitration "only if" it "has waived its right to initiate or continue any other proceedings in relation to the measure that is alleged to be in breach of this Agreement before the courts or tribunals of the Contracting Party concerned or in a dispute settlement procedure of any kind" (emphasis added).

The formal aspect requires that, in the same way that a claimant must satisfy the procedural and jurisdictional requirements in its Request for Arbitration, it must do so with respect to the waiver requirement, i.e., the existence of a conforming written waiver.¹⁷⁷ Accordingly, Claimant in the present case, must provide a written waiver of "its right to initiate or continue any other proceedings in relation to the measure that is alleged to be in breach of this Agreement before the courts or tribunals of the Contracting Party concerned or in a dispute settlement procedure of any kind".

- The phrase "any other proceedings in relation to the measure that is alleged to be in breach of this Agreement" includes proceedings commenced or continuing at the time of the filing of the Request for Arbitration and during the pendency of the arbitration. The temporal scope of the requirement therefore includes the period during which the alleged breach is filed and pursued.

- The purpose of the waiver provision is to protect a respondent State from having to defend itself in multiple fora with respect to the same measure and to minimize the risk of inconsistent decisions and double recovery with respect to such measure.¹⁷⁸

- While the Parties agree on the meaning of "the courts or tribunals of the Contracting Party concerned", i.e., the first part of the provision per Claimant, they disagree on the meaning of "in a dispute settlement procedure of any kind", i.e., the second part of the provision.¹⁷⁹ It is true that "negotiations" between the Parties in an attempt to reach settlement of a dispute with respect to a measure alleged to be in violation of the BIT can in principle be categorized as "dispute settlement procedures".¹⁸⁰ If anything, the subsequent term "any kind" expands the category of dispute settlement procedures. However, this category cannot include a procedure that has no third-party adjudicator or neutral, such as the "negotiation process" alleged in the present case.¹⁸¹ Further, it cannot include a procedure the result of which can be complied with by a party at its choice.¹⁸² To hold otherwise would be contrary to the purpose of the waiver provision. Further, it would mean that every time the parties to an arbitration agreement enter into good faith negotiations to resolve their dispute, the tribunal must automatically find that it lacks jurisdiction or that it loses its jurisdiction. In such a case, the parties themselves - and in particular the claimant - would do their utmost not to engage in any settlement options.

In accordance with Article XII(3)(a) of the BIT, Air Canada consented to arbitration in its notice letter of June 15, 2016, and it does so here again. In regard to Article XII(3)(b), Air Canada has not commenced any other proceedings in relation to the measures of Venezuela that are at issue in this dispute, and it expressly waivers its right to initiate any such proceedings. (emphasis added)

The Tribunal finds that Claimant has satisfied the formal requirement of the waiver provision of Article XII(3)(b) by making the foregoing statement. The statement is clear and unambiguous. The fact that Claimant did not reproduce the entire text of the provision to include its two parts and the possible procedures waived is not relevant. Claimant’s express reference to Article XII(3)(b) and its intent to waive "proceedings" is sufficient.

- Concerning the "Application of IATA for Approval and Antitrust Immunity of Certain Discussions" of 28 April 2016,¹⁸⁴ this procedure does not fall within the scope of Article XII(3)(b). This is because the application was made by a party other than Claimant and has the negotiation features that the provision excludes. In this regard, the Tribunal agrees with Claimant that the Application does not involve Claimant’s assertion of any action or claims against Venezuela before any court, tribunal, or similar forum, but instead is a request by a third party trade association to the U.S. authorities to "meet and discuss joint courses of action" rather than an impermissible dispute settlement proceeding.¹⁸⁵

- Concerning the December 2017 meeting between representatives of ALAV - of which Claimant is a member - with the Ministry of Popular Power for Foreign Trade and International Investment of Venezuela and the General Director of INAC to discuss the "repatriation of the outstanding amounts of the airlines",¹⁸⁶ this "procedure" does not fall within the scope of Article XII(3)(b). For the same reasons as with the IATA Application, and as Claimant correctly submits, this meeting of a third-party industry group does not constitute the assertion by Claimant of separate formal actions or claims against Venezuela before a court, tribunal or similar forum.¹⁸⁷

Claimant’s Request for Arbitration was therefore filed in breach of the requirement of Article XII(3)(d) of the BIT. Consequently, the precondition to Respondent’s consent embodied in the BIT is not met and the Tribunal must declare that it lacks jurisdiction to hear Claimant’s claims.

Article XII(3)(d) also requires an investor’s actual or constructive knowledge of the loss or damages it has suffered as a result of the measures not only knowledge of the measures.¹⁹⁶

- First, it will set out the requirements of Article XII(3)(d) (Section (ii)).

- Second, it will consider whether Claimant has complied with that provision (Section (iii)).

- Finally, it will conclude (Section (iv)).

The Parties disagree on the requirements of Article XII(3)(d) of the BIT.²⁰² However, both Parties agree that the concept of knowledge set forth therein is governed both by the text of the BIT itself and by international law.²⁰³ Accordingly, in order to decide, the Tribunal will set out the provision encompassing Article XII(3)(d) and interpret that provision in accordance with the rules of treaty interpretation of Article 31 of the VCLT²⁰⁴ (which form part of customary international law) and as set out above (see supra para. 222).

1. Any dispute between one Contracting Party and an investor of the other Contracting Party, relating to a claim by the investor that a measure taken or not taken by the former Contracting Party is in breach of this Agreement, [...].

2. If a dispute has not been settled amicably within a period of six months from the date on which it was initiated, it may be submitted by the investor to arbitration in accordance with paragraph (4). For the purposes of this paragraph, a dispute is considered to be initiated when the investor of one Contracting Party has delivered notice in writing to the other Contracting Party alleging that a measure taken or not taken by the latter Contracting Party is in breach of this Agreement, and that the investor or an enterprise owned or controlled directly or indirectly by the investor has incurred loss or damage by reason of, or arising out of, that breach.

3. An investor may submit a dispute as referred to in paragraph (1) to arbitration in accordance with paragraph (4) only if:

[…]

(d) not more than three years have elapsed from the date on which the investor first acquired, or should have first acquired, knowledge of the alleged breach and knowledge that the investor has incurred loss or damage.

[…] (emphasis added)

Finally, the wording of Article XII(3)(d) is clear in that it requires both "knowledge of the alleged breach and knowledge that the investor has incurred loss or damage", not one or the other (emphasis added). Thus, the Tribunal agrees with Claimant that the relevant date must involve knowledge of both the BIT breach and the resulting consequences, i.e., that a loss would or did occur. This does not require quantification of the loss itself.²¹¹

- Claimant’s Notice of Dispute states that "[b]eginning in October 2012, however, Venezuela ignored Air Canada’s properly submitted AADs, simply refusing to act on the company’s requests to exchange Bolivars for Dollars, thereby preventing from Air Canada repatriating its funds. Specifically, Venezuela has refused to adjudicate Air Canada's fifteen AADs filed from October 2012 to December 2013. Venezuela, thus, prevented Air Canada from exchanging 330 million Bolivars earned through local ticket sales into Dollars and repatriating them".²³⁰ (emphasis added by Respondent)

- Claimant’s Request for Arbitration states that "[b]eginning in 2013, however, Venezuela ignored Air Canada’s properly submitted AADs, simply refusing to act on the company’s requests to exchange Bolivars for US Dollars, thereby preventing Air Canada from converting and repatriate its earnings. Specifically, up to the present date, Venezuela has refused to process fifteen AADs submitted by Air Canada in relation to domestic ticket sales between October 2012 and December 2013".²³¹ (emphasis added by Respondent)

- Claimant’s Memorial states that "[s]tarting in late 2012 and throughout 2013, Venezuela took a series of measures that made it much harder for airlines, including Air Canada, to file their AADs. CADIVI and other Government agencies significantly increased the level of paperwork, information, and bureaucratic interaction necessary to process each AAD"²³² (emphasis added by Respondent)

- Mr. Babun’s witness statement states that "[t]hroughout 2013 [...] Air Canada, and airlines in general, became increasingly concerned about the Government's failure to grant exchange requests".²³³ (emphasis added by Respondent)

- Mr. Pittman’s witness statement states that "[b]y the end of 2012 and during 2013, CADIVI increased the level of paperwork and information necessary to process each Authorization for Currency Acquisition".²³⁴ (emphasis added by Respondent)

Based on the foregoing, the Tribunal concludes that Respondent’s objection to jurisdiction based on the time-bar provision of Article XII(3)(d) of the BIT is dismissed.