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Decision on Respondent's Request for Reconsideration

A. PROCEDURAL HISTORY

1.
On 2 November 2007, Claimants submitted to the International Centre for Settlement of Investment Disputes (" ICSID " or the " Centre ") a Request for Arbitration against the Bolivarian Republic of Venezuela (" Venezuela " or " the Respondent ") pursuant to Article 36 of the ICSID Convention. On 13 December 2007, the Secretary-General of ICSID registered the Request for Arbitration in accordance with Article 36(3) of the ICSID Convention.
2.
The Tribunal was constituted on 23 July 2008. Its members were Judge Kenneth Keith, President, appointed by the Chairman of the ICSID Administrative Council pursuant to Article 38 of the ICSID Convention; Mr L. Yves Fortier, CC, QC, appointed by the Claimants; and Sir Ian Brownlie, CBE, QC, appointed by the Respondent. On 1 February 2010, the Tribunal was reconstituted, with Professor Georges Abi-Saab being appointed by Respondent, following Sir Ian Brownlie's passing.
3.

On 3 September 2013, the Tribunal issued a Decision on Jurisdiction and the Merits, concluding as follows:

(...) For the foregoing reasons, the Tribunal decides as follows:

a. It does not have jurisdiction under Article 22 of the Investment Law and accordingly the claims by ConocoPhillips Company are dismissed; and

b. It has jurisdiction under Article 9 of the Bilateral Investment Treaty over:

i. the claims brought by ConocoPhillips Petrozuata BV, ConocoPhilips Hamaca BV and ConocoPhillips Gulf of Paria BV in respect of (1) the increase in the income tax rate which came into effect on 1 January 2007 and (2) the expropriation or migration; and

ii. the claims brought by ConocoPhillips Petrozuata BV and ConocoPhillips Gulf of Paria BV in respect of the increase in the extraction tax in effect from 24 May 2006.

c. All claims based on a breach of Article 3 of the BIT are rejected.

d. The Respondent breached its obligation to negotiate in good faith for compensation for its taking of the ConocoPhillips assets in the three projects on the basis of market value as required by Article 6(c) of the BIT.

e. The date of valuation of the ConocoPhillips assets is the date of the Award.

f. All other claims based on a breach of Article 6(c) of the BIT are rejected.

g. All other questions, including those concerning the costs and expenses of the Tribunal and the costs of the parties' determination are reserved for future determination.

Items (a), (b)(i), (b)(ii), (c), (f) and (g) above have been decided unanimously by the Tribunal. Items (d) and (e) have been decided by majority, with Arbitrator Georges Abi-Saab, dissenting.1

4.

On 8 September 2013, counsel for Respondent submitted a letter requesting a clarification and further explanations from the Tribunal regarding certain findings in the Decision on Jurisdiction and the Merits ("the September 8 letter"). In its letter, counsel for Respondent also requested "a limited and focused hearing" to address the specific issues raised.

5.
Counsel for the Claimants replied to the September 8 letter on 10 September 2013. Claimants opposed Respondent's requests and proposed instead a briefing schedule for submissions on quantum.
6.
On September 11, 2013, Respondent submitted further comments, to which Claimants replied on 12 September 2013. Additional comments were received from Respondent on 12, 16 and 23 September 2013 and from Claimants on 23 September 2013.
7.
By letter of 1 October 2013, the Tribunal fixed a schedule for the parties to file submissions on: (i) the Tribunal's power to reconsider the Decision on Jurisdiction and the Merits of 3 September 2013; and (ii) a possible scheduling for quantum briefs. The parties duly submitted two rounds of written pleadings.

B. THE DECISION OF 10 MARCH 2014

8.

The Tribunal stated in its Decision of 10 March 2014 that so far as the matter set out in paragraph 7 is concerned "this decision is limited to answering the question whether the Tribunal has the power which the Respondent would have it exercise. The decision does not address the grounds the Respondent invokes for reconsidering the part of the Decision which it challenges and the evidence which it sees as supporting those grounds. The power must be shown to exist before it can be exercised".2

9.
It then set out the arguments of the parties based on the provisions of the ICSID Convention and the ICSID Arbitration rules as well as commentaries, matters of principle and decisions of various international courts and tribunals.
10.
Having considered those arguments, the Tribunal concluded that it did not have the power to reconsider the Decision on Jurisdiction and the Merits, with Professor Georges Abi-Saab dissenting. It was implicit in the Tribunal's Decision that the Respondent's Request was dismissed.

C. THE NEW APPLICATION FOR RECONSIDERATION

11.
Professor Georges Abi-Saab resigned on 20 February 2015 with immediate effect. On 10 August 2015 the Tribunal was reconstituted, with Professor Andreas Bucher being appointed by the Chairman of the Administrative Council.
12.

On that same day, 10 August 2015, the Respondent submitted an "Application for Reconsideration of the Tribunal's Decision of March 10, 2014 (the Majority Reconsideration Decision), which denied Respondent's Request for Reconsideration of the Tribunal's [September 3, 2013 Jurisdiction and Merits Decision]".3 The Respondent recalled that it had, immediately following that Majority Merits Decision, applied for reconsideration, pointing out

certain obvious factual, legal and logical errors the correction of any one of which would require a change in the majority's conclusions on the issue of good faith negotiations. Of particular relevance to this Application, Respondent pointed out that cables from the U.S. Embassy released after the hearing in this case in 2010, which reported on the briefings made by the chief ConocoPhillips negotiators to the U.S. Embassy in Caracas, left no doubt that the representations made by ConocoPhillips to the Tribunal regarding Respondent's supposed unwillingness to negotiate fair market value had been completely false, and that it was in fact ConocoPhillips which was seeking compensation ‘on top of the fair market value of the assets.' Since the majority had relied on Claimants' misrepresentations in reaching its conclusion on bad faith negotiation, Respondent assumed that the Tribunal would want to reconsider the Majority Merits Decision to avoid an obvious gross miscarriage of justice. That assumption was based on the premise that every tribunal has the power to correct its own decision while the case is still pending before it and should exercise that power if its decision were indeed based on patently false representations. (footnote omitted)4

13.

The Respondent sets out the conclusion of the Tribunal and quotes four paragraphs from Professor Abi-Saab's dissent.5 It concludes the substance of its submission as follows:

In making this Application, Respondent stresses that the issue for decision at this stage is a narrow one. It is not necessary for this Tribunal now to revisit the merits of the Majority Merits Decision. What is necessary is for this Tribunal to determine whether, assuming that Claimants did make material misrepresentations to the Tribunal as to Respondent's willingness to negotiate fair market value, the Tribunal did, and still does, have the power to reconsider the Majority Merits Decision. A negative answer to this question would mean that there are no circumstances under which a tribunal can reconsider its own decision in a case still pending before it, irrespective of material misrepresentations made to it and, indeed, presumably irrespective of any other egregious conduct. That is a principle that cannot be sustained under any legal system.6

It requested a hearing on the application.

14.

On 12 August 2015, the Claimants responded in these terms:

The application is frivolous and dilatory. Venezuela has not even attempted to articulate a legal basis for the admissibility of a request to reconsider a reconsideration decision - because there is none. The Tribunal’s 10 March Decision considered and rejected the same arguments that Venezuela now raises. It has res judicata effect and may not be revisited or reviewed in any way prior to the rendering of the final Award.7

The Claimants requested that the Tribunal dismiss the Respondent's application forthwith and promptly reschedule the final hearing.

15.

Later that same day, the Respondent commented by recalling its earlier letter:

...no system of justice can tolerate a rule that a tribunal cannot correct its own decision, no matter how egregious the circumstances, in a case still pending before it. Surely one cannot argue that an interim decision proven to be based upon corruption, intimidation or coercion cannot be reconsidered. The same is true for a decision shown to be based upon material misrepresentations.8

In support of its contention that res judicata did not apply here - there is no final award and the same proceeding continues - it quoted from the Sabotage Cases:

The petition, in short, avers the Commission has been misled by fraud and collusion on the part of witnesses and suppression of evidence on the part of some of them. The Commission is not functus officio. It still sits as a court. To it in that capacity are brought charges that it has been defrauded and misled by perjury, collusion, and suppression. No tribunal worthy of its name or of any respect may allow its decision to stand if such allegations are well-founded. Every tribunal has inherent power to reopen and to revise a decision induced by fraud. If it may correct its own errors and mistakes, a fortiori it may, while it still has jurisdiction of a cause, correct errors into which it has been led by fraud and collusion.9

16.
On 13 August 2015 the Claimants stated that their letter of the previous day provided a complete answer to the Respondent's points in its later letter. They "consider that further debate is neither necessary nor appropriate".10
17.
On 15 August 2015, the parties were advised that the Tribunal "is currently considering Respondent's application, including its request for a hearing, and will revert to the parties in due course. The Tribunal considers that no further submissions are needed at this point."11
18.
On 9 November 2015, the Respondent submitted a proposal to disqualify L. Yves Fortier QC as arbitrator. In terms of Rule 9(6) of the Arbitration Rules, the proceeding was suspended until 15 December 2015 when the proposal was dismissed. The Tribunal then gave the Respondent the opportunity to comment on a letter of 8 December 2015 submitted by the Senior Vice President Legal, General Counsel and Corporate Secretary of ConocoPhillips which the Respondent did on 8 January 2015. The Tribunal also gave the parties the opportunity to comment by 22 January 2016 on an article discussing the March 2014 Decision brought to its attention by Counsel for the Respondent.12 Each party provided that comment.
19.
In the light of that additional material, subsequent decisions and the earlier arguments submitted to it, the Tribunal has given further consideration to the powers it may possess in respect of the application now before it.

D. ANALYSIS

E. DECISION

38.
Accordingly, the Tribunal, by a majority, dismisses the application made by the Respondent for the reconsideration of its Decision on Respondent’s Request for Reconsideration of 10 March 2014, with Professor Andreas Bucher dissenting.

Note by Arbitrator Kenneth Keith and Arbitrator Yves Fortier

1.
We add this note as a comment on Part III of the dissenting opinion of Arbitrator Andreas Bucher.
2.
The Respondent's Application which is to be decided by the Tribunal is "for Reconsideration of the Tribunal's Decision of March 10, 2014 (the Majority Reconsideration Decision...)". The Respondent stressed that "the issue for decision at this stage is a narrow one. It is not necessary for this Tribunal now to revisit the merits of the Majority Merits Decision" (see para 13 above for the remainder of that passage). Given the limited scope of the Application before the Tribunal we cannot see that the passage of Arbitrator Bucher's dissent headed "The Tribunal's Decision" is relevant.
3.

We also need to make it clear that we do not interpret the 2013 Decision in the way Arbitrator Bucher does. Nor indeed do the Parties, as he indeed recognises (paras 17-19 of his opinion). The Tribunal ruled that the Respondent had acted unlawfully by reference to Article 6(c) of the BIT. That requires that the measures be taken against just compensation. The Tribunal said this about that provision:

The requirements [in Article 6(c)] for prompt payment and for interest recognise, in accordance with the general understanding of such standard provisions, that payment is not required at the precise moment of expropriation. But it is also commonly accepted that the Parties must engage in good faith negotiations to fix the compensation in terms of the standard set, in this case, in the BIT, if a payment satisfactory to the investor is not proposed at the outset. (para 362)

Having reviewed the evidence and the Parties' submissions, the Tribunal concluded that the Respondent had breached its obligation to negotiate in good faith for compensation for its taking of the assets on the basis of market value as required by the BIT (para 401). It included that conclusion in its Decision (para 404(d)).

With respect, Arbitrator Bucher errs when he writes in paragraph 11 of his dissenting opinion that the Claimants made no claim in their Request for Relief for a declaration that

Respondent breached its obligation to negotiate in good faith for compensation based on market value. In their Request for Relief, the Claimants asked the Tribunal for a declaration "that Venezuela has breached... Article 6 of the Treaty by unlawfully [emphasis added] expropriating..." their investments in Venezuela. This is precisely what the majority found in paragraph 404(d) of the Decision.

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