Lawyers, other representatives, expert(s), tribunal’s secretary

Award

ABBREVIATED TERMS
2009 Petrochemical Law Organic Law for the Development of Petrochemical Activities (16 June 2009) (C-8)
Arbitration Rules ICSID Rules of Procedure for Arbitration Proceedings of 2006
Barrientos WS1 Witness Statement of Victor D. Barrientos (28 February 2013)
Barrientos WS2 Second Witness Statement of Victor D. Barrientos (30 December 2013)
Bond Offering Circular Offering Circular - Bond Offering of $250,000,000 between FertiNitro Finance Inc and FertiNitro (8 April 1998) (C-115)
C-[#] Claimants’ Exhibit
CERTs Special Certificates of Tax Refunds (Certificados Especiales de Reembolso Tributario)
CLA-[#] Claimants’ Legal Authority
Cls. Mem. Claimants’ Memorial (4 June 2012)
Cls. PHB Claimants’ Post-Hearing Brief (30 January 2015)
Cls. Rej. Claimants’ Rejoinder on Jurisdiction (14 March 2014)
Cls. Reply Claimants’ Reply on the Merits and Counter-Memorial on Jurisdiction (2 September 2013)
Comisario Report FertiNitro Report from the Statutory Auditor and Consolidated Financial Statements (7 September 2006) (C-63)
EPC Contract Engineering, Procurement and Construction Contract by and between FertiNitro and Snamprogetti (8 April 1998) (C-24)
Esty ER1 Expert Report of Benjamin C. Esty (23 August 2013)
Esty ER2 Second Expert Report of Benjamin C. Esty (14 March 2014)
Expropriation Decree Decree 7,713 (10 October 2010) (Official Gazette No. 380,113 of 11 October 2010) (C-9)
Expropriation Law Expropriation Law for Public or Social Benefit (1 July 2002) (Official Gazette of the Republic No. 37,475 of 1 July 2002) (R-9, R-53, C-140)
FertiNitro Joint venture companies Fertilizantes Nitrogenados de Oriente, SA; Fertilizantes Nitrogenados de Oriente, CEC; Fertilizantes Nitrogenados de Venezuela, SRL, and Fertilizantes Nitrogenados de Venezuela, FertiNitro, CEC
First (September) Hearing Hearing on Jurisdiction, Merits, and examination of Fact Witnesses, held on 8 September 2014 and from 10 to 12 September 2014
First Advantis Report Advantis Report entitled "Valoracíon de FertiNitro" (May 2011) (R-86)
Flores ER1 Expert Report of Daniel Flores (28 February 2013)
Flores ER2 Second Expert Report of Daniel Flores (3 March 2014)
Flórez WS1 Witness Statement of Edgar A. Flórez (28 February 2013)
Giles ER1 Expert Report of Tim Giles (2 June 2012)
Giles ER2 Second Expert Report of Tim Giles (30 August 2013)
Gwaltney WS1 Witness Statement of Brent W. Gwaltney (30 May 2012)
Gwaltney WS2 Second Witness Statement of Brent W. Gwaltney (20 August 2013)
Historical Claims KOMSA’s claims regarding tax related measures and VAT credits
ICSID Convention Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (18 March 1965)
ICSID or the Centre International Centre for Settlement of Investment Disputes
JIA Joint Investors Agreement by and among Pequiven, Koch Oil SA, Snamprogetti Netherlands BV, and Polar Uno, CA (8 April 1998) (C-18)
KNI Koch Nitrogen International Sárl
KOMSA Koch Minerals Sárl
KOMSA Draft MOU KOMSA Draft Memorandum of Understanding (non-dated) (C- 92)
Municipal Decree Decree D.A.M.S.B.-042-A-2006 (14 November 2006) (C-48)
Municipal Ordinance Ordinance for Taxes on Industrial, Commercial, Service or Similar Economic Activities (29 December 2005) (C-45)
Nunez WS1 Witness Statement of Carolina Nuñez (28 February 2013)
Offtake Agreement Offtake Agreement by and among Pequiven, IPSL and Koch Oil SA as Buyers and FertiNitro as Seller (8 April 1998) (C-19).
Parra WS1 Witness Statement of Melquíades A. Parra (29 May 2012)
PDVSA Petróleos de Venezuela, S.A.
Pequiven Draft MOU Pequiven Draft Memorandum of Understanding (non-dated) (C- 93)
R-[#] Respondent’s Exhibit
Resp. C-Mem. Counter-Memorial of the Bolivarian Republic of Venezuela (Merits) (28 February 2013)
Resp. PHB Post-Hearing Brief of the Bolivarian Republic of Venezuela (30 January 2015)
Resp. Preliminary Objections Preliminary Objections of the Bolivarian Republic of Venezuela to the Jurisdiction of the Arbitral Tribunal (28 February 2013)
Resp. Rej. Rejoinder of the Bolivarian Republic of Venezuela (Merits) (3 March 2014)
Resp. Reply on Jurisdiction Reply on Jurisdictional Objections of the Bolivarian Republic of Venezuela (3 March 2014)
RfA Claimants’ Request for Arbitration (28 June 2011)
RLA-[#] Respondent’s Legal Authority
Sanders ER1 Expert Report of Richard Sanders (30 May 2012)
Sanders ER2 Second Expert Report of Richard Sanders (27 August 2013)
Science and Technology Law Organic Law on Science, Technology and Innovation (effective as of 1 January 2006) (C-43)
Second (November) Hearing Hearing on Merits and Quantum and examination of Expert Witnesses, held on 23 to 26 November 2014
Second Advantis Report Advantis Report entitled "Valoracíon de FertiNitro" (July 2011) (C-157)
Sorlie WS2 Second Witness Statement of Jim Sorlie (26 July 2013)
Third (June) Hearing Reconstitution Hearing held on 9 to 10 June 2016
Tr. Day. [#page. line(s)] (Speaker(s)) Transcripts of Hearings
Tribunal or Arbitral Tribunal Arbitral Tribunal constituted on 8 November 2011
Urea Decree Decree 5,218 (26 February 2007) (C-80)
  Joint Resolution by the Ministry of the People’s Power for Agriculture and Land, the Ministry of the People’s Power for
Urea Resolution Light Industry and Trade, and the Ministry of the People’s Power for Energy and Petroleum (Official Gazette No. 38,674) (3 May 2007) (C-82)
VAT Law Law of Partial Reform of the Law on Value Added Tax (11 August 2004) (C-55)
Villarroel WS2 Second Witness Statement of Aníbal Villarroel (30 December 2013)
LEGAL MATERIALS
AAPL v. Sri Lanka Asian Agricultural Products Limited v. Democratic Socialist Republic of Sri Lanka, ICSID Case No ARB/87/3, Award (27 June 1990) (RLA-42)
Abaclat v. Argentina Abaclat and others (formerly Giovanna A. Beccara and others) v. The Argentine Republic, ICSID Case No. ARB/07/5, Decision on Jurisdiction and Admissibility (4 August 2011) (RLA-31)
ADC Affiliate v. Hungary ADC Affiliate Limited and ADC & ADMC Management Limited v. Republic of Hungary, ICSID Case No. ARB/03/16, Award (27 September 2006) (CLA-16)
Ambiente Ufficio v. Argentina Ambiente Ufficio S.p.A. and others v. Argentine Republic, ICSID Case No. ARB/08/9 (formerly Giordano Alpi and others v. Argentine Republic), Decision on Jurisdiction and Admissibility (8 February 2013) (CLA-90)
Autopista v. Venezuela Autopista Concesionada de Venezuela, C.A. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/00/5, Award (23 September 2003) (RLA-60)
Azurix v. Argentina Azurix Corp. v. Argentine Republic, ICSID Case No. ARB/01/12, Award (14 July 2006) (CLA-43)
Bayindir v. Pakistan Bayindir Insaat Turizm Ticaret Ve Sanayi A.§. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29, Decision on Jurisdiction (14 November 2005) (CLA-11)
BG Group v. Argentina BG Group Plc. v. Republic of Argentina UNCITRAL, Final Award, (24 December 2007) (CLA-37)
Biwater v. Tanzania Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, ICSID Case No. ARB/05/22, Award (18 July 2008) (CLA-24)
Burlington v. Ecuador Burlington Resources, Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Decision on Reconsideration and Award (7 February 2017)
Caratube v. Kazakhstan Caratube International Oil Company LLP v. The Republic of Kazakhstan, ICSID Case No. ARB/08/12, Award (5 June 2012) (RLA-107)
Chevron v. Ecuador Chevron Corporation and Texaco Petroleum Corporation v. The Republic of Ecuador, UNCITRAL, Final Award (31 August 2011) (CLA-63)
Chorzów Factory Case Chorzów Factory Case (Germany v Poland), PCIJ Series A, No. 17, Decision on Merits (13 September 1928) (CLA-49)
CME v. Czech Republic CME Czech Republic B.V. v. Czech Republic, UNCITRAL, Partial Award (13 September 2001) (CLA-14)
CMS v. Argentina CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/01/8, Award (12 May 2005) (CLA-36) (CLA-130)
ConocoPhillips v. Venezuela ConocoPhillips Petrozuata B.V., ConocoPhillips Hamaca B.V. and ConocoPhillips Gulf of Paria B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/30, Decision on Jurisdiction and the Merits (3 September 2013) (CLA-155)
CSOB v. Slovak Republic Ceskoslovenská Obchodní Banka, A.S. v. Slovak Republic, ICSID Case No. ARB/97/4, Decision on Objections to Jurisdiction (24 May 1999) (RLA-5)
Daimler v. Argentina Daimler Financial Services A.G. v. Argentine Republic, ICSID Case No. ARB/05/1, Decision on Annulment (7 January 2015)
Delaume, ICSID Arbitration G. R. Delaume, ICSID and the Transnational Financial Community (1986) (CLA-96)
Deutsche Bank v. Sri Lanka Deutsche Bank AG v. The Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/09/02, Award (31 October 2012) (CLA-100)
EDF v. Romania EDF (Services) Ltd. v. Romania, ICSID Case No. ARB/05/13, Award (8 October 2009) (RLA-85)
El Paso v. Argentina El Paso Energy International Company v. The Argentine Republic, ICSID Case No. ARB/03/15, Award (31 October 2011) (CLA-52)
Electrabel v. Hungary Electrabel S.A. v. The Republic of Hungary, ICSID Case No. ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability (30 November 2012) (RLA-110)
ELSI Elettronica Sicula S.p.A. (ELSI) (United States of America v. Italy), ICJ, Judgment, (20 July 1989) (CLA-41)
EnCana v. Ecuador EnCana Corporation v. Republic of Ecuador, UNCITRAL, Award (3 February 2006) (RLA-71)
Fedax v. Venezuela Fedax N.V. v. The Republic of Venezuela, ICSID Case No. ARB/96/3, Decision on Jurisdiction (11 July 1997) (CLA-142)
Flughafen v. Venezuela Flughafen Zürich A.G. and Gestión e Ingeniería IDC S.A. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/19, Award (18 November 2014) (RLA-154)
GAMI v. Mexico GAMI Investments, Inc. v. United Mexican States, UNCITRAL, Award (15 November 2004) (RLA-64)
GEA Group v. Ukraine GEA Group Aktiengesellschaft v. Ukraine, ICSID Case No. ARB/08/16, Award (31 March 2011) (RLA-30)
Gemplus v. Mexico Gemplus S.A., SLP, S.A. and Gemplus Industrial, S.A. de C.V. v. United Mexican States, ICSID Cases Nos. ARB(AF)/04/3 and ARB(AF)/04/4, Award (16 June 2010) (CLA-54)
Glamis v. USA Glamis Gold, Ltd. v. United States of America, UNCITRAL, Award, (8 June 2009) (RLA-83)
Global Trading v. Ukraine Global Trading Res. Corp. and Globex Int'l v. Ukraine, ICSID Case No. ARB/09/11, Award (1 December 2010) (RLA-27)
Gold Reserve v. Venezuela Gold Reserve Inc. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/09/1, Award (22 September 2014) (CLA-156)
Gotanda - Compound Interest
John Yukio Gotanda, Compound Interest in International Disputes (2003) (CLA-61)
HICEE v. Slovakia HICEE B.V. v. Slovak Republic, UNCITRAL, Partial Award (23 May 2011)
Hulley v. Russia Hulley Enterprises Limited (Cyprus) v. The Russian Federation, PCA Case No. AA 226, Final Award (18 July 2014) (CLA-152)
ICSID Convention History ICSID, Convention on the Settlement of Investment Disputes between States and Nationals of Other States: Documents Concerning the Origin and the Formulation of the Convention, Volume II, Part 1 (1968) (RLA-6)
ICSID Convention: A Christoph H. Schreuer et al., The ICSID Convention: A
Commentary Commentary (2d ed. 2009) (RLA-21) (RLA-106) (CLA-3)
Inmaris v. Ukraine Inmaris Perestroika Sailing Maritime Services GmbH and others v. Ukraine, ICSID Case No. ARB/08/8, Decision on Jurisdiction (8 March 2010) (CLA-91)
Joy Mining v. Egypt Joy Mining Machinery Limited v. Arab Republic of Egypt, ICSID Case No. ARB/03/11, Award on Jurisdiction (6 August 2004) (RLA-10)
Kardassopolous v. Georgia Kardassopoulos v. Republic of Georgia, ICSID Case No. ARB/05/18 and ARB/07/15, Award (28 February 2010) (CLA-20)
Lauder v. Czech Republic Ronald S. Lauder v. Czech Republic, UNCITRAL, Final Award (3 September 2001) (CLA-45)
Lemire Award Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB/06/18, Award (28 March 2011) (RLA-89)
Lemire v. Ukraine Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB/06/18, Decision on Jurisdiction and Liability (14 January 2010) (CLA-89)
Levi v. Peru Renée Rose Levy de Levi v. The Republic of Peru, ICSID Case No. ARB/10/17, Award (26 February 2014) (CLA-150)
LG&E v. Argentina LG&E Energy Corp., LG&E Capital Corp. and LG&E International Inc. v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability (3 October 2006) (CLA-39) (RLA-123)
LIAMCO v. Libya Libyan American Oil Company (LIAMCO) v. Libyan Arab Republic, Award, 20 I.L.M. 1 (12 April 1977) (RLA-37)
Mann - British Treaties F.A. Mann, British Treaties for the Promotion and Protection of Investments, 52 British Yearbook of International Law 241 (1981) (CLA-86)
Mann - Further Studies F. A. Mann, Further Studies in International Law - Compound Interest as an Item of Damage (1990) (CLA-60)
Mann - Legal Aspect of Money F.A. Mann, The Legal Aspect of Money (4th ed, 1982)
Marboe - Calculation of Compensation Irmgard Marboe, Calculation of Compensation and Damages in International Investment Law, (2009) (CLA-137)
Methanex v. USA Methanex Corporation v. United States of America, UNCITRAL, Final Award of the Tribunal on Jurisdiction and Merits (3 August 2005)
MHS v. Malaysia Malaysian Historical Salvors Sdn Bhd v. Malaysia, ICSID Case No. ARB/05/10, Decision on Application for Annulment (16 April 2009) (RLA-23)
Mobil v. PDVSA Mobil Cerro Negro Ltd v. Petróleos de Venezuela, S.A. and PDVSA Cerro Negro, S.A., ICC Case No. 15416/JRF/CA, Final Award (23 December 2011) (EO-45)
Mytilineos v. Serbia Mytilineos Holdings SA v. State Union of Serbia & Montenegro and Republic of Serbia, UNCITRAL, Partial Award on Jurisdiction (8 September 2006) (CLA-92)
National Grid v. Argentina National Grid P. L. C. v. Argentine Republic, UNCITRAL, Award (3 November 2008) (CLA-32)
Noble Venture v. Romania Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11, Award (12 October 2005) (RLA-67).
Occidental UNCITRAL Occidental Exploration and Production Co. v. Republic of E c uador, UNCITRAL (LCIA), Case No. UN 3467, Final Award (1 July 2004) (CLA-27)
Occidental v. Ecuador Occidental Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador, ICSID Case No. ARB/06/11, Award (5 October 2012) (CLA-129)
Ooestergetel v. Slovak Republic Oostergetel v. Slovak Republic, UNCITRAL, Decision on Jurisdiction (30 April 2010) (CLA-147)
Pantechniki v. Albania Pantechniki S.A. Contractors & Engineers v. Republic of Albania, ICSID Case No. ARB/07/21, Award (30 July 2009) (CLA-97)
Paushok v. Mongolia Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz Company v. Government of Mongolia, UNCITRAL, Award on Jurisdiction and Liability (28 April 2011) (RLA-94)
Pey Casado v. Chile Víctor Pey Casado and President Allende Foundation v. Republic of Chile, ICSID Case No. ARB/98/2, Award (8 May 2008) (RLA-102)
Philip Morris Award Philip Morris Brand Sari, Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, Award (8 July 2016)
Philip Morris v. Uruguay Philip Morris Brand Sarl, Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, Decision on Jurisdiction (2 July 2013) (CLA-144)
Phoenix v. Czech Republic Phoenix Action v. Czech Republic, ICSID Case No. ARB/06/05, Award (15 April 2009) (RLA-22)
PSEG Global v. Turkey PSEG Global Inc. and Konya Ilgin Elektrik Üretim ve Ticaret Limited Sirketi v. Republic of Turkey, ICSID Case No. ARB/02/5, Award (19 January 2007) (CLA-40)
Quiborax Award Quiborax S.A. and Non Metallic Minerals S.A. v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2, Award (16 September 2015) (RLA-157)
Quiborax v. Bolivia Quiborax S.A., Non Metallic Minerals S.A. and Allan Fosk Kaplún v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2, Decision on Jurisdiction (27 September 2012) (RLA-33)
Ripinsky - Damages Sergey Ripinsky and Kevin Williams, Damages in International Investment Law (2008) (CLA-53) (CLA-134)
Romak v. Uzbekistan Romak S.A. v. Republic of Uzbekistan, PCA Case No. AA 280, Award (26 November 2009) (RLA-24)
Rosinvest v. Russia RosInvestCo UK Ltd. v. Russian Federation, SCC Arbitration V (079/2005), Final Award (12 September 2010) (CLA-9)
Saba Fakes v. Turkey Saba Fakes v. Republic of Turkey, ICSID Case No. ARB/07/20, Award (14 July 2010) (RLA-26)
Salini v. Morocco Salini Costruttori S.P.A. and Italstrade S.P.A. v. Kingdom of Morocco, ICSID Case No. ARB/00/4, Decision on Jurisdiction (16 July 2001) (RLA-7)
Saluka v. Czech Republic Saluka Investments BV (The Netherlands) v. Czech Republic, UNCITRAL, Partial Award (17 March 2006) (CLA-19)
Santa Elena v. Costa Rica Compañía del Desarrollo de Santa Elena S.A. v. Republic of Costa Rica, ICSID Case No. ARB/96/1, Award (17 February 2000) (CLA-136)
SD Myers v. Canada S.D. Myers, Inc. v. Canada, UNCITRAL, Partial Award (13 November 2000) (RLA-52)
SGS v. Paraguay SGS Société Générale de Surveillance S.A. v. Republic of Paraguay, ICSID Case No. ARB/07/29, Decision on Jurisdiction (10 February 2010) (RLA-25)
Siemens v. Argentina Siemens A.G. v. Argentine Republic, ICSID Case No. ARB/02/8, Award (6 February 2007) (CLA-15)
Sistem v. Kyrgyz Sistem Muhendislik Insaat Sanayi ve Ticaret A.S. v. Kyrgyz Republic, ICSID Case No. ARB(AF)/06/1, Award (9 September 2009)
Southern Pacific v. Egypt Southern Pacific Properties (Middle East) Limited v. Arab Republic of Egypt, ICSID Case No. ARB/84/3, Award (20 May 1992) (CLA-12)
Standard Chartered v. Tanzania Standard Chartered Bank v. The United Republic of Tanzania, ICSID Case No. ARB/10/12, Award (2 November 2012) (RLA-109)
Técnicas v. Mexico Técnicas Medioambientales Tecmed S.A. v. United Mexican States, ICSID Case No. ARB(AF)/00/2, Award (29 May 2003) (CLA-28)
The Experience of ICSID Ibrahim Shihata & Antonio Parra, The Experience of the International Centre for Settlement of Investment Disputes, 14 ICSID Rev.-F.I.LJ. 299 (1999) (RLA-4)
The First 50 Years of ICSID The First 50 Years of ICSID, Zachary Douglas, "Property Rights as the Object of an Expropriation" (2016)
The Norwegian Shipowners’ Case The Norwegian Shipowners’ Case (Norway v. USA), RIAA (13 October 1922)
Thunderbird v. Mexico International Thunderbird Gaming Corp. v. United Mexican States, UNCITRAL (NAFTA), Award (26 January 2006) (CLA-31)
Treaty Agreement between the Swiss Confederation and the Republic of Venezuela on the Reciprocal Promotion and Protection of Investments (18 November 1993) (CLA-1)
Ulysseas v. Ecuador Ulysseas, Inc. v. The Republic of Ecuador, UNCITRAL, Final Award (12 June 2012) (RLA-108)
Venezuela Holdings v. Venezuela Venezuela Holdings, B.V. and others v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/27, Award (9 October 2014) (RLA-153)
Vivendi v. Argentina Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/97/3, Award (21 November 2000)
Waste Management v. Mexico Waste Management, Inc. v. United Mexican States, ICSID Case No. ARB(AF)/00/3, Award (30 April 2004) (CLA-34)

PART I: THE ARBITRATION

(1) Introduction

1.1.
This arbitration concerns a dispute submitted to the International Centre for Settlement of Investment Disputes ("ICSID" or the "Centre") on the basis of the Agreement between the Swiss Confederation and the Government of the Republic of Venezuela on the Reciprocal Promotion and Protection of Investments dated 18 November 1993, which entered into force on 30 November 1994 (the "BIT" or "Treaty"), and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States dated 18 March 1965, which entered into force on 14 October 1966 (the "ICSID Convention").

(2) The Parties

1.2.
The First Claimant : Koch Minerals Sárl is a company incorporated under the laws of Switzerland. It was initially named Koch Oil SA, but changed its name to Koch Minerals SA on 11 April 2003 and its corporate form from S.A. to Sárl on 20 March 2009.1 For ease of reference, the First Claimant and its prior designations are here referred to collectively as "KOMSA" or "Koch".
1.3.
The Second Claimant : Koch Nitrogen International Sárl is also a company incorporated under the laws of Switzerland. For ease of reference, the Second Claimant is here referred to as "KNI".
1.4.
Both KOMSA and KNI are "nationals of another Contracting State" as defined in Article 25(2)(b) of the ICSID Convention. Switzerland signed the Convention on 22 September 1967, deposited its instrument of ratification on 15 May 1968 and the Convention entered into force for Switzerland on 14 June 1968.
1.5.
The Claimants’ Legal Representatives: The Claimants were represented in this proceeding by Mr J. Kory Parkhurst, representative of the Koch Companies Public Sector, LLC, of Wichita, Kansas, USA; and by Mr Robert Volterra, Mr Graham Coop, Mr Giorgio Mandelli, Mr Stephen Fietta (until 7 December 2015), Mr Ashique Rahman (until 7 December 2015), Ms. Zuzana Morhácová, Ms Jessica Pineda and Mr Govert Coppens of the law firm Volterra Fietta of London, United Kingdom; and Mr Mark Beckett of the law firm Cooley LLP of New York, NY, USA; and Ms Christina Hioureas of the law firm Chadbourne & Parke LLP of New York, NY, USA (until March 2016)..
1.6.
The Respondent: The Respondent is the Bolivarian Republic of Venezuela. For ease of reference, the Respondent is here called "Venezuela" or the "Respondent".
1.7.
The Respondent is a Contracting State to the ICSID Convention. It signed the Convention on 18 August 1993, deposited its instrument of ratification on 2 May 1995 and the Convention entered into force for the Respondent on 1 June 1995
1.8.
The Respondent’s Legal Representatives: The Respondent was represented in this proceeding by Dr Reinaldo Enrique Muñoz Pedrosa, Procurador General de la República (E) of the Procuraduría General de la República in Caracas, Venezuela; and Mr Christopher Ryan, Mr Thomas B. Wilner, Ms Katia Yannaca-Small (until April 2017) of the law firm Shearman & Sterling LLP of Washington D.C., USA; and Ms. Anna Tevini and Mr Guillermo Salcedo Salas from the same law firm in NYC, NY, USA and Paris, France, respectively; and Mr José Pertierra, of The Law Office of José Pertierra of Washington, D.C., USA.
1.9.
FertiNitro: The Claimants allege that in March 1998, a series of joint venture companies were formed for the purposes of implementation of their investment in Venezuela. These companies included Fertilizantes Nitrogenados de Oriente, SA; Fertilizantes Nitrogenados de Oriente, CEC; Fertilizantes Nitrogenados de Venezuela, SRL, and Fertilizantes Nitrogenados de Venezuela, FertiNitro, CEC. These joint venture companies are collectively referred to as "FertiNitro" or "the Fertinitro Companies." None of these joint venture companies are parties to this arbitration or legally represented before this Tribunal.
1.10.
Koch José Cayman Limited : Koch José Cayman Limited is company organised under the laws of the Cayman Islands, as a subsidiary of Koch ("Koch José"). KOMSA held its interest in the FertiNitro Companies through Koch José. Koch José is not a party to this arbitration, nor legally represented before this Tribunal.
1.11.
Petroquímica de Venezuela, SA: The Venezuelan company Petroquímica de Venezuela, SA (also known as "Pequiven") is a wholly-owned subsidiary of PDVSA, the Respondent’s State-owned oil company. Neither of these companies is a party to this arbitration or legally represented before this Tribunal.

(3) The Request for Arbitration

1.12.
On 28 June 2011, the Claimants filed a request for arbitration before ICSID (the "Request" or "Request for Arbitration").
1.13.
On 19 July 2011, the Secretary-General of ICSID registered the Request in accordance with Article 36(3) of the ICSID Convention and notified the Parties of the registration. In the Notice of Registration, the Secretary-General invited the Parties to proceed to constitute an Arbitral Tribunal as soon as possible in accordance with Rule 7(d) of ICSID’s Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings (the "ICSID Arbitration Rules").

(4) The Arbitration Tribunal

1.14.
On 19 August 2011, the Claimants informed the Secretariat that they maintained their proposal made in the Request that the Tribunal consist of three arbitrators, one arbitrator to be appointed by each Party and the third, who would be the president of the Tribunal, appointed by agreement of the Parties. In this letter the Claimants also appointed the Hon Marc Lalonde, a national of Canada, as arbitrator and requested that the Chairman of the Administrative Council appoint any arbitrators not appointed pursuant to ICSID Convention Article 38 and Rule 4(1) of the ICSID Arbitration Rules.
1.15.
On 23 September 2011, the Secretariat confirmed that, in the absence of any agreement between the Parties within 60 days after the registration of the Request, the Tribunal would be constituted pursuant to Article 37(2)(b) of the ICSID Convention and Rule 2(3) of the ICSID Arbitration Rules.
1.16.
On 27 September 2011, the Secretariat informed the Parties that Mr Lalonde had accepted his appointment as arbitrator.
1.17.
On 13 October 2011, the Respondent appointed Justice Florentino Feliciano, a national of the Philippines, as arbitrator.
1.18.
By letter of 18 October 2011, the Secretariat informed the Parties that Mr Feliciano had accepted his appointment as arbitrator and confirmed that, further to the Claimants’ request and in the absence of the constitution of the Tribunal within 90 days of the Request’s registration, the Chairman of the Administrative Council, under Article 38 of the ICSID Convention, would appoint the President of the Tribunal in consultation with the Parties.
1.19.
The Chairman of the ICSID Administrative Council, through ICSID’s Secretary-General, proposed three arbitrators for the Parties’ consideration by letter dated 28 October 2011.
1.20.
On 31 October 2011, the Claimants informed the Secretariat that the Parties had reached an agreement to appoint Mr V.V. Veeder, a national of the United Kingdom, as the President of the Tribunal. On 4 November 2011, Mr Veeder accepted his appointment as President of the Tribunal.
1.21.
On 8 November 2011, the Secretary-General notified the Parties that all three arbitrators had accepted their appointments and that the Tribunal was therefore constituted on that date, in accordance with ICSID Arbitration Rule 6(1). Ms Mairée Uran-Bidegain, ICSID Legal Counsel, was designated to serve as Secretary of the Tribunal.
1.22.
First Disqualification Proposal: On 24 December 2013, the Respondent filed a proposal for the disqualification of Mr Feliciano as a member of the Tribunal (the "First Disqualification Proposal"). This was the first of two separate attempts to disqualify members of the Tribunal.
1.23.
On 29 December 2013, the ICSID Secretariat notified the Parties that the proceedings were suspended pursuant to ICSID Arbitration Rule 9(6) and transmitted a schedule for the Parties to submit further observations on the First Disqualification Proposal. In that same letter, it was noted that according to Procedural Order No. 6, the Respondent’s Rejoinder was due by 30 December 2013. The Respondent was therefore invited by the Tribunal to proceed with its written submission on the previously scheduled date in order to minimise any disruption to the arbitration.
1.24.
By letter of 30 December 2013, the Respondent stated that it was not in a position to accept the invitation described above.
1.25.
The Claimants filed observations on the First Disqualification Proposal on 26 December 2013 and 15 January 2014. The Respondent filed further comments on its proposal on 8 January 2014. On 1 February 2014, Mr Feliciano furnished written explanations pursuant to ICSID Arbitration Rule 9(3). On 1, 6 and 7 February 2014, the Claimants and the Respondent filed additional comments.
1.26.
On 10 February 2014, Mr Veeder and Mr Lalonde (the "Unchallenged Arbitrators") notified the ICSID Secretariat that they were "equally divided" within the meaning of Article 58 of the ICSID Convention and ICSID Arbitration Rule 9(4), for reasons "unrelated to [the] merits or demerits" of the First Disqualification Proposal. On the same date, ICSID’s Secretary-General transmitted the Unchallenged Arbitrators’ notice to the Parties and informed them that the decision on the First Disqualification Proposal would be made by the Chairman of the Administrative Council, in accordance with Article 58 of the ICSID Convention and ICSID Arbitration Rule 9.
1.27.
On 24 February 2014, after considering the written submissions made by the Parties and the observations of Mr Feliciano, the Chairman of the Administrative Council decided to reject the Respondent’s Proposal to Disqualify Mr Feliciano. The Chairman’s written decision was transmitted to the Parties and the Tribunal. These arbitration proceedings resumed on that same day.
1.28.
Second Disqualification Proposal: On 29 March 2014, shortly before the hearing fixed to take place in Paris, the Respondent proposed the disqualification of all three Members of the Tribunal (the "Second Disqualification Proposal"). On that same date, the ICSID Secretariat notified the Parties that the arbitration proceedings were suspended pursuant to ICSID Arbitration Rule 9(6). It also transmitted a schedule for the Parties to submit further observations on the Second Disqualification Proposal.
1.29.
The Claimants submitted their observations on the Second Disqualification Proposal on 1 and 15 April 2014. The Respondent filed further comments on its Second Disqualification Proposal on 16 April 2014.
1.30.
On 8 April 2014, the Secretariat transmitted to the Parties the respective statements of Mr Veeder, Mr Lalonde and Mr Feliciano on the Second Disqualification Proposal (the "Arbitrators’ Statements").
1.31.
On 30 April 2014, after considering the Parties’ observations and the Arbitrators’ statements, the Chairman of the Administrative Council issued a Decision rejecting the Respondent’s Second Disqualification Proposal. The Chairman decided (inter alia) that:

"[A]t the heart of the Respondent’s argument is its discontent with a provisional ruling taken by the Tribunal in order to decide on a procedural question. The mechanism set forth under Article 57 of the ICSID Convention and Arbitration Rule 9 seeking to safeguard the integrity of the proceeding is not a mechanism for reconsideration of adverse rulings. Absent any objective circumstances, the mere existence of an adverse ruling in and of itself, is insufficient to prove a manifest lack of impartiality or independence, as required by Articles 14 and 57 of the ICSID Convention."2

1.32.
These arbitration proceedings resumed on that same day, namely 30 April 2014.

(5) The Arbitral Procedure

1.33.
First Meeting: On 21 December 2011, the Tribunal held its First Session with the Parties by telephone conference call. The Parties confirmed that the Members of the Tribunal had been validly appointed. It was agreed (inter alia) that the applicable ICSID Arbitration Rules would be those in effect from 10 April 2006, that the procedural languages would be English and Spanish and that the place of these arbitration proceedings would be Washington, DC, USA, with all such matters to be memorialised in a later procedural order including the Minutes of the First Session. The Parties also agreed that these arbitration proceedings would comprise a written phase and an oral phase. The Parties were unable at that time to agree on a full schedule for the jurisdictional/merits phase(s) of these proceedings.
1.34.
On 2 January 2012, the Tribunal issued its Procedural Order No. 1 requiring the Claimants to file a full memorial of their case on 2 April 2012.
1.35.
On 16 February 2012, in response to the Respondent’s written application dated 2 February 2012, the Tribunal issued its Procedural Order No. 2, suspending these arbitration proceedings for a two-month period (starting on 2 February 2012 and ending on 2 April 2012), due to the regrettable death in January 2012 of the Attorney General of Venezuela, Dr Carlos Escarrá. The Tribunal’s procedural order also provided that the Claimants’ Memorial should now be filed on 2 June 2012.
1.36.
On 18 May 2012, the Tribunal sent to the Parties its draft Procedural Order No. 3, Minutes of the First Session and Schedule of Written Pleadings and requested the Parties’ written comments on these drafts. Between 31 May 2012 and 28 June 2012, the Parties submitted written comments on the Tribunal’s draft schedule.
1.37.
On 3 July 2012, having considered the Parties’ submissions, the Tribunal issued its Procedural Order No. 3, Minutes of the First Session and Schedule of Written Pleadings, in which it fixed the procedural calendar for the arbitration.
1.38.
The Tribunal’s schedule for the written phase was subsequently amended on 15 August 2012 by agreement of the Parties, and on 22 November 2012, 18 December 2012, 29 May 2013 and 26 February 2014, pursuant to Procedural Orders of the Tribunal Nos. 4, 5, 6 and 7 respectively, upon the application of a Party or as a result of the Respondent’s two disqualification proposals (described above).
1.39.
Bifurcation. Considering the Respondent’s various applications for extensions to the deadline to submit its counter-memorial, the Tribunal further decided in Procedural Order No. 4 dated 22 November 2012, that any jurisdictional objections would be joined to the merits pursuant to ICSID Arbitration Rule 41.
1.40.
The schedule for the oral phase was originally fixed by the Tribunal in Procedural Order No. 6 of 29 May 2013 and subsequently amended by the Tribunal following a joint application by the Parties, whereby the Parties agreed to amend the original hearing dates but could not agree on new hearing dates.
1.41.
On 13 March 2014, the Tribunal decided that the Hearing would be held in Paris, France, in two separate sessions: the first hearing starting on 31 March 2014 and ending no later than 4 April 2014 (mid-day); and the second session starting on 19 May 2014 and ending no later than 23 May 2014.
1.42.
On 29 March 2014, the first part of the hearing scheduled to start in Paris on 31 March 2014 was adjourned as a consequence of the Respondent’s Second Disqualification Proposal. The final dates for the oral phase of this proceeding were re-fixed orally by the Tribunal on 19 May 2014, and further confirmed in the Tribunal’s Procedural Order No. 9 of 4 August 2014.
1.43.
The Claimants’ Submissions: As regards the written phase of the arbitration, the Claimants filed (i) their Memorial on 4 June 2012, (ii) their Reply on the Merits and CounterMemorial on Jurisdiction on 2 September 2013 and (iii) their Rejoinder on Jurisdiction on 14 March 2014.
1.44.
The Respondent’s Submissions: The Respondent filed (i) its Counter-Memorial on the Merits and its Preliminary Objections to the Jurisdiction of the Arbitral Tribunal on 28 February 2013, and (ii) its Rejoinder on the Merits and its Reply on Jurisdiction on 3 March 2014.
1.45.
The Claimants’ Testimony: The Claimants adduced signed written statements from the following factual witnesses:

■ Brent W. Gwaltney, statements dated 30 May 2012, 20 August 2013 and 23 May 2014;

■ Jim Sorlie, statements dated 29 May 2012, 26 July 2013 and 28 May 2014; and

■ Melquiades A. Parra, statements dated 29 May 2012 and 12 August 2013.

1.46.
The Claimants also adduced signed expert reports from:

■ Benjamin Esty, expert reports dated 23 August 2013 and 14 March 2014;

■ Tim Giles, export reports dated 2 June 2012 and 30 August 2013; and

■ Richard S. Sanders, expert reports dated 30 May 2012 and 27 August 2013.

1.47.
The Respondent’s Testimony: The Respondent adduced signed written statements from the following factual witnesses:

■ Anibal Villarroel, statements dated 28 February 2013 and 30 December 2013;

■ Carolina Nuñez, statements dated 28 February 2013 and 30 December 2013;

■ Edgar Flórez, statements dated 28 February 2013 and 30 December 2013;

■ Victor Barrientos, statements dated 28 February 2013 and 30 December 2013, and

■ Francisco Toro, statement dated 30 December 2013 (later withdrawn by the Respondent, as explained below).

1.48.
The Respondent also adduced signed expert reports from Daniel Flores (of Econ One) dated 28 February 2013 and 3 March 2014.
1.49.
Procedural Meetings: Further to the Tribunal’s Procedural Order No. 5, the Tribunal held a procedural conference call with the Parties on 6 March 2013 to discuss the need, scope and timing of any document production and the dates of the proposed two-week hearing.
1.50.
On 19 May 2014, upon the resumption of these arbitration proceedings (following the rejection of the Respondent’s Second Disqualification Proposal) the Tribunal held a procedural meeting with the Parties in Paris, at the offices of the World Bank ("the Paris Procedural Meeting"). Mr Veeder, Mr Lalonde and the Parties’ legal representatives attended the procedural meeting in person; and Mr Feliciano attended by video-link from the offices of the World Bank in Manila. (Mr Feliciano had recently suffered an accident and had been medically forbidden to travel to Paris). The Paris Procedural Meeting was conducted without objections from the Parties. It was recorded, with the verbatim transcript (corrected) issued to the Parties on 20 May 2014.
1.51.
In addition, the President of the Tribunal, with the Parties, and the Secretary of the Tribunal, held pre-hearing organisational meetings by telephone conference calls on 24 March 2014 and 25 August 2014.
1.52.
The First (September) Hearing: As regards the oral phase of this arbitration, the first hearing on jurisdiction and merits, including the examination of witnesses, took place at the World Bank in Paris, France on 8 September and subsequently from 10-12 September 2014 (the "First (September) Hearing").
1.53.
In addition to the Tribunal and its Secretary, the following persons were present at this First (September) Hearing:
1.54.
For the Claimants: Mr J. Kory Parkhurst, legal representative of KOMSA & KNI; Mr Robert Volterra, Mr Stephen Fietta, Mr Ashique Rahman, Mr Ernesto J. Féliz De Jesús, Ms Zuzana Morhácová, Ms Jessica Pineda, and Ms Zsófia Young, of the law firm of Volterra Fietta. Mr Mark Beckett, Ms Christina Hioureas, Mr Christian Urrutia and Mr Ariel Meyerstien, of the law firm of Chadbourne & Parke LLP. The Claimants’ witnesses and experts were also present: Mr Brent Gwaltney, Mr Melquíades A. Parra, Mr Jim Sorlie and Mr Richard Sanders. (Mr Gwaltney, Mr Parra and Mr Sorlie were examined during the First (September) Hearing).
1.55.
For the Respondent : Mr Christopher Ryan, Ms Katia Yannaca-Small, Ms Anna Tevini, Mr Peik Makela, Mr Guillermo Salcedo Salas, Mr Agustín Acosta Cárdenas, Ms Evelyn Wiese, Mr Ricardo Alarcón Sierra and Ms Victoria Cadiz (all of the law firm of Shearman & Sterling); and Mr Isaias Medina (PDVSA). The Respondent’s witnesses were also present: Mr Aníbal Villarroel, Mr Edgar Flórez (FertiNitro); Mr Víctor Barrientos (Pequiven). Messrrs Villaroel, Flores and Barrientos, were examined during the First (September) Hearing, as described below.
1.56.
Witnesses examined during the First (September) Hearing were, in alphabetical order:

■ Victor Barrientos, Day 3 (11 September 2014), at 09:03:19ff

■ Edgar Flórez, Day 4 (12 September 2014), at 10:55:18ff

■ Brent Gwaltney, Day 2 (10 September 2014), at 09:17:20ff

■ Melquíades A. Parra, Day 2 (10 September 2014), at 11:08:13ff

■ Jim Sorlie, Day 2 (10 September 2014), at 12:48:22ff

■ Anibal Villarroel, Days 3 & 4 (11 and 12 September 2014), at 14:24:06ff and 09:00:12ff.

1.57.
The Second (November) Hearing: A second hearing on the merits and quantum, including the examination of the Parties’ expert witnesses, took place at the International Dispute Resolution Centre, in London, UK, from 23 to 26 November 2014 (the "Second (November) Hearing").
1.58.
In addition to the Tribunal and its Secretary, the following were present at this Second (November) Hearing:
1.59.
For the Claimants: Mr J. Kory Parkhurst; Messrs. Jeff Brenner and Kevin Barb of KOMSA & KNI; Mr Robert Volterra, Mr Stephen Fietta, Mr Giorgio Mandelli, Mr Ashique Rahman, Ms Zuzana Morhácová, Ms Jessica Pineda, and Ms Zsófia Young, of the law firm of Volterra Fietta; Mr Mark Beckett, Ms Christina Hioureas, and Mr Christian Urrutia, of the law firm of Chadbourne & Parke LLP. The Claimants’ expert witnesses were also present: Mr Richard Sanders, Mr Tim Giles and Ms Jessica Resch. (Mr Sanders and Mr Giles were examined during the November Hearing).
1.60.
For the Respondent: Mr Thomas Wilner, Christopher Ryan, Ms Katia Yannaca-Small, Ms Anna Tevini and Ms Evelyn Wiese of the law firm of Shearman & Sterling. The Respondent’s expert witnesses were also present: Mr Daniel Flores, Mr Ettore Komi and Mr Mark Khouzam. (Mr Flores was examined during the November Hearing).
1.61.
Witnesses examined during the Second (November) Hearing were, in alphabetical order:

■ Daniel Flores, Days 2 & 3 (24 and 25 November 2014), at 12:51:02ff and 09:28:03ff

■ Tim Giles, Day 2 (24 November 2014), at 09:30:03ff

■ Richard Sanders, Day 1 (23 November 2014), at 14:09:03ff.

1.62.
Both the First (September) and Second (November) Hearings were recorded by verbatim transcript in English and Spanish, available to the Parties.3

(6) Other Procedural Matters

1.63.
The Submission of Additional Documents : By letter of 12 March 2014, the Claimants requested that the Tribunal order the Respondent to produce: (a) a witness statement and an expert report submitted by the Respondent in Gambrinus Corp. v. Bolivarian Republic of Venezuela (ICSID Case No. ARB/11/31) (the "Gambrinus Arbitration"), made by a witness and an expert who also submitted a statement and a report on behalf of the Respondent in this case, and (b) a jurisdictional decision rendered in Longreef Investments A.V.V. v. Bolivarian Republic of Venezuela (ICSID Case No. ARB/11/5). The Claimants further requested permission from the Tribunal to introduce into the evidential record ten new documents (the "Additional Documents"), which they sent to the Tribunal and the Respondent along with their request.
1.64.
On 14 March 2014, the Respondent objected to the Claimants’ request and requested in response that, if the Tribunal were to accede to the Claimants’ request, the first week of the hearing (as then scheduled) should be moved to 19 May 2014 so as to give the Respondent sufficient time to prepare a response. The Claimants opposed the Respondent’s request on 16 March 2014. The Respondent replied on 17 March 2014, reiterating its request that the first week of the scheduled hearing be postponed to May 2014, and submitting that failure to provide such further time would infringe upon the Respondent’s due process and procedural rights. The Respondent further stated that it reserved all its rights in this respect.
1.65.
On 18 March 2014, the Tribunal decided upon the Claimants’ request of 12 March 2014 (the "18 March Decision"). In this decision, the Tribunal rejected the Claimants’ application regarding the Gambrinus documentation and the Longreef decision.
1.66.
As to the Additional Documents, being the third application in the Claimant’s request, the Tribunal decided (inter alia) as follows:

"As regards the third application, given that this documentation is said by the Claimants to respond directly in rebuttal to the Respondent’s (delayed) Rejoinder of 3 March 2014, the Tribunal here orders its admission de bene esse for the purpose only of allowing the Tribunal to read the documentation in order to decide the Claimants’ application and the Respondent’s opposition (i.e. not as 'evidence'). The Tribunal also orders the Claimant’s third application (with the Respondent’s opposition) to be argued more fully during the Parties’ opening oral submissions at the outset of the first week’s hearing in Paris beginning on Monday, 31 March 2014. In the event (which should not here be assumed) that the Tribunal should then decide to admit into evidence any part of this documentation, the Parties should be ready for any consequential order, including any response from the Respondent as regards further submissions and rebuttal evidence."

1.67.
On 21 March 2014, the Claimants made a second request to the Tribunal for permission to submit six additional documents into the evidential record (the "New Documents").
1.68.
On 24 March 2014, the Tribunal, represented by its President, held a pre-hearing organisational meeting with the Parties and the Secretary of the Tribunal, by telephone conference call. The Respondent reiterated that it was participating in this call with "full reservation of its rights." The President noted (inter alia) that he could not by himself alone decide the disputed admissibility of the Claimants’ application of 21 March 2014 without his co-arbitrators and that the Tribunal expected the Respondent to comment on the Claimants’ application regarding Mr Toro on the first day of the scheduled hearing.
1.69.
On 25 March 2014, the Respondent objected to the Claimants’ 21 March 2014 application and to the 18 March Decision, arguing that it prejudiced its due process rights. The Respondent further alleged that the Tribunal’s Procedural Order No. 3 obliged the Claimants to argue the relevance of each document before submitting it to the Tribunal and that the Respondent should be accorded sufficient time to provide counter-arguments and evidence on the relevance of each disputed document. The Respondent requested again that the merits phase of the Hearing be postponed until 19 May 2014, and it further reserved all its rights with respect to the facts surrounding the Claimants’ applications and the Tribunal’s decisions. The Claimants opposed the Respondent’s request on 26 March 2014.
1.70.
The Admissibility of the Written Statement of Mr Toro : On 19 March 2014, the Claimants requested that the written statement of Mr Francisco Toro (the "Toro Statement") be struck from the evidential record, on the grounds that, inter alia, Mr Toro had passed away before his statement was submitted to the Tribunal, and he was therefore not available for crossexamination at the Hearing. The Tribunal invited the Respondent to comment on this application by 24 March 2014.
1.71.
On Thursday, 27 March 2014, the Tribunal issued Procedural Order No. 8, deciding (inter alia) the following:

"To require all pending procedural applications to be raised with the Tribunal during the Parties’ opening submissions on 31 March 2014, including [...]: (i) the submission of additional documents into the evidential record; (ii) the hearing schedule and the Claimants’ latest application for 15 minutes’ direct examination; (iii) the Respondent’s application for an adjournment of the hearing; and (iv) the admissibility of the witness statement of Mr Francisco Toro; and without the Tribunal prejudging any of these applications, the Parties shall prepare for the five-day hearing to the fullest extent, including all preparations on the provisional assumption that any or all of these applications may be refused by the Tribunal on 31 March 2014."

1.72.
On 29 March 2014, as already summarised above, the Respondent submitted its Second Disqualification Proposal, which was subsequently rejected by the Chairman of the Administrative Tribunal on 30 April 2014. As also summarised above, the effect of this Second Disqualification Proposal was to cause the abandonment of the scheduled hearing in Paris.
1.73.
The Respondent filed additional exhibits and correspondence regarding the Toro Statement on 28 May 2014, followed by the Claimants’ supplementary witness statements of Brent Gwaltney and Jim Sorlie on 29 May 2014. The Claimants also submitted correspondence regarding the Toro Statement on 9 June 2014, to which the Respondent replied on 13 June 2014, followed by the Claimants’ application on 26 July 2014.
1.74.
On 5 September 2014, the Tribunal issued its Procedural Order No. 10, whereby it decided (inter alia):

"a. To permit the Respondent to withdraw from the evidential record the proffered witness statement of Mr Toro dated 30 December 2013 (as a result of which it shall not be treated as evidence in these arbitration proceedings); and

b. To reserve its decision for the time being over any adverse inferences to be drawn from the withdrawal of the Toro Statement and the non-production by the Respondent of Mr Toro’s witness statement(s) in the Gambrinus arbitration under Procedural Order No.9."

1.75.
On 19 December 2014, the Respondent transmitted to the Secretariat the Parties agreed redactions to the Respondent’s Rejoinder and Second EconOne Expert Report that resulted from Respondent’s withdrawal of the Toro Statement from the record as indicated above. On 22 December 2014, the Claimants confirmed their agreement with the transmitted redactions, stating in that same communication that they believed further redactions were appropriate and necessary, to which the Respondent replied on 29 December 2014.
1.76.
Following the reconstitution of the Tribunal as indicated below, on 17 May 2016, the Claimants submitted an additional application to the Tribunal reiterating their request that additional redactions be applied to the Respondent’s Rejoinder and the Second EconOne Expert Report by Dr Flores. This was followed by Respondent’s response of 1 June 2016 and the Tribunal’s Procedural Order No. 11, of 8 June 2016 ruling on this matter, as explained below.
1.77.
The Advantis Reports : By letter dated 12 March 2014, the Claimants applied to the Tribunal for permission to introduce into the evidential record a valuation report by Advantis (known as the Second Advantis Report). The Claimants’ letter stated, in material part:4

"Respondent’s Advantis valuation report of FertiNitro: This document was referenced in the Claimant’s Reply [paragraph 105] and Mr Brent Gwaltney’s Second Witness Statement at paragraph 40 and is clearly relevant to the Respondent’s valuation of FertiNitro in this proceeding. In its Rejoinder [paragraph 228], the Respondent makes reference to the alleged good-faith negotiations, in the course of which it presented the document (on a non-without prejudice and confidential basis) to the Claimants. Given that it is already referenced in the Claimants’ submissions, was created for the Respondent and, therefore, is already in the Respondent’s possession, there can be no prejudicial effect in admitting the exhibit at this stage. Furthermore, such evidence of the Respondent’s previous valuations of FertiNitro should clearly be relevant to the Tribunal’s assessment of the Respondent’s purported valuation in this proceeding." (Footnote omitted)

1.78.
The Claimants’ application was disputed by the Respondent’s letter of 14 March 2014, to which the Claimants responded by letter of 16 March 2014 and to which the Respondent responded in turn by letter of 17 March 2014.
1.79.
By its instruction letter of 18 March 2014, the Tribunal decided to examine the disputed document for itself, for the time being de bene esse only. (The Tribunal there also indicated that the dispute between the Parties would be discussed further with the Parties during the forthcoming hearing, then scheduled to start on 31 March 2014; but later suspended following the Respondent’s Second Disqualification Proposal).
1.80.
Subsequently, during the Paris Procedural Meeting on 19 May 2014, the Parties agreed upon the admission of this document into the evidential record, with others.5 This Second Advantis Report was designated as C-157, comprising of three pages under the title "Special Document" with five pages of annexes, submitted in the original Spanish with an English translation. The Respondent submitted, with the Claimants’ agreement, the First Advantis Report designated as R-86, comprising of 22 pages of the report, the emails from Advantis to Pequiven and from Pequiven to the Fertinitro shareholders of 18 and 19 May 2011, respectively, transmitting the report, and five pages of annexes in the original Spanish.
1.81.
Post-Hearing and Costs Submissions : The Parties filed simultaneous post-hearing briefs on 30 January 2015. The Parties filed their submissions on costs on 13 February 2015.
1.82.
Mr Feliciano regrettably died in December 2015, at a time when the Tribunal’s deliberations had not been fully completed.

(7) The Rule 12 Resumption of the Proceedings

1.83.
By letter from the ICSID Secretariat of 16 December 2015, resulting from the death of Mr Feliciano and the vacancy on the Tribunal, these arbitration proceedings were suspended pursuant to ICSID Arbitration Rule 10(2).
1.84.
By letter dated 1 February 2016, the ICSID Secretariat notified the Parties that the vacancy created in the Tribunal resulting from the death of Mr Feliciano had been filled with the appointment of Professor Zachary Douglas QC as co-arbitrator made by the Respondent and, further, that, in accordance with ICSID Arbitration Rule 12, these proceedings resumed as from 1 February 2016 from the point it had reached at the time the vacancy occurred.
1.85.
By its Procedural Order No. 11 of 8 June 2016, the Tribunal addressed the Claimant’s application of 17 May 2016, opposed by the Respondent’s letter dated 1 June 2016, to redact certain references to Mr Toro in the Respondent’s Rejoinder and its Second EconOne expert report by Dr Flores adduced by the Respondent. The Tribunal decided to order parts of the requested redactions from the Rejoinder and the report, as there set out, subject to further order.
1.86.
Before the Third (June) Hearing, the Tribunal sent to the Parties non-exhaustive lists of issues and topics to be addressed at that Hearing. These lists are set out in Part III below.
1.87.
The Third (June) Hearing : Pursuant to ICSID Arbitration Rule 12, an oral hearing was held at the IDRC in London, United Kingdom on 9 and 10 June 2016, recorded by verbatim transcript available to the Parties. The procedure for this Reconstitution Hearing was set by the Tribunal’s letter of 29 April 2016 to the Parties.
1.88.
In addition to the Tribunal and its Secretary, the following persons were present at this Third (June) Hearing:
1.89.
For the Claimants: Mr Jeff Brenner and Mr J. Kory Parkhurst (legal representatives of KOMSA & KNI); Mr Robert Volterra, Mr Graham Coop, Mr Govert Coppens, Ms Jessica Pineda, Ms Zusana Morhácová, Ms Isabella Sif and Ms Chiara Atzeni of the law firm of Volterra Fietta; and Mr Mark Beckett of the law firm Chadbourne & Parke.
1.90.
For the Respondent : Mr Christopher Ryan, Mr Thomas Wilner, Ms Anna Tevini, Mr David Earnest, Mr Guillermo Salcedo Salas, Ms Evelyn Wiese (all of the law firm of Shearman & Sterling).
1.91.
The Third (June) Hearing was recorded by verbatim transcript in English and Spanish, available to the Parties.
1.92.
On 30 June 2016, the Parties completed their respective responses to the Claimants’ Tables 1 to 4 of agreements and disagreements between Mr Giles and Dr Flores, their expert witnesses on quantum, as requested by the Tribunal at the Third (June) Hearing.6 The Parties submitted their respective updated claims for costs by written submissions dated 8 and 12 July 2016. By several email messages dated 12 and 26 July 2016, the Parties submitted their respective tables on interest.
1.93.
By letter dated 7 July 2016, the Respondent objected to the admissibility of certain parts of the presentational slides used by the Claimants during their closing oral submissions at the Reconstituted Hearing. At the Tribunal’s request, the Claimants responded to the Respondent’s objections by letter dated 22 July 2016. The Tribunal decided to reserve its decision on the Respondent’s objection until this Award. It has decided to reject that objection, conscious also that these objected parts play no material part in the reasons for or result of this Award.
1.94.
Closing: This proceeding was closed on August 31, 2017, pursuant to ICSID Arbitration Rule 38(1).

(8) The Parties’ Claims for Relief

1.95.
The Claimants’ Requests: The Claimants claim, as finally pleaded in Section VI of their Post-Hearing Brief (as also confirmed by the Claimants’ Reply on the Merits and CounterMemorial on Jurisdiction, Paragraph 601), requested that the Tribunal render an Award:

a. Declaring that the Respondent has violated Articles 4, 6 and 11 of the Treaty;

b. Ordering that the Respondent pay to KOMSA compensation for the expropriation of its investment and historical losses in the amount of US$ 444.6 million (as at 30 January 2015, subject to adjustment as at the date of the Award);7

c. Ordering that the Respondent pay to KNI compensation for the expropriation of its investment in the amount in the amount of US$ 227.8 million (as at 30 January 2015; subject to adjustment as at the date of the Award);8

d. Declaring that the Respondent’s expropriation of the Claimants’ investments was unlawful;

e. Ordering such other damages or relief that the Tribunal deems appropriate for the unlawful character of the Respondent’s expropriation and other violations of the BIT;

f. Ordering that the Respondent pay interest on the amounts that the Tribunal awards to the Claimants (including costs and interest), at the LIBOR three-month US Dollar rate plus 2%, compounded on a quarterly basis, from the date of the award until full payment of the amount of the award by the Respondent;

g. Ordering that the Respondent pay the costs of the arbitration, including all the fees and expenses of ICSID and the Tribunal and all the legal costs and expenses incurred by the Claimants, apportioned between the Claimants in the ratio in which they are awarded compensation, with interest calculated in accordance with paragraph [f], directly above; and

h. Ordering such other and further relief as the Tribunal deems appropriate.

1.96.
In their Rejoinder on Jurisdiction,9 the Claimants requested that the Tribunal "dismiss the Respondent’s objections to jurisdiction in their entirety and that the costs for the jurisdictional proceedings be awarded to the Claimants."
1.97.
The Respondent’s Requests: The Respondent, as finally pleaded in its Rejoinder on the Merits10 and in its Post-Hearing Brief,11 claims the following relief from the Tribunal:

"(i) declaring that KNI’s interests in the Offtake Agreement do not constitute an investment within the meaning of Article 25 of the ICSID Convention and/or Article 1(2) of the Venezuela-Switzerland BIT and, thus, are not within the jurisdiction of the Arbitral Tribunal;

(ii) dismissing KNI’s claims in their entirety for lack of jurisdiction;

(iii) declaring that the Republic has not breached any of the standards of protection under the Venezuela-Switzerland BIT;

(iv) dismissing all of the Claimants’ claims;

(v) awarding the Republic all costs and fees incurred in this arbitration, including reasonable attorneys’ fees and expert fees;

(vi) granting the Republic any other relief the Arbitral Tribunal determines to be appropriate."

PART II: THE PARTIES' DISPUTE

(1) Introduction

2.1.
Inevitably, as these arbitration proceedings progressed, the issues arising from the Parties’ original dispute became more complex and significantly more numerous, extending originally from an ostensible dispute largely about quantum (in regard to KOMSA’s expropriation claim at the First Session) to a major dispute about jurisdiction, liability, compensation, interest and costs by the time of this Award.
2.2.
The Tribunal here summarises only the Parties’ respective cases as to jurisdiction, liability and quantum. Other parts of the Parties’ respective cases are addressed later in this Award.

(2) The Claimant’s Case

2.3.
Jurisdiction: In summary, as to jurisdiction, the Claimants contend that the Tribunal has jurisdiction over the merits of the Parties’ investment dispute in this arbitration. The Claimants submit that the dispute arises from several violations by the Respondent of its obligations under the Treaty and the Claimants’ corresponding rights (including the Claimants’ rights under customary international law) entitling the Claimants to full compensation for the losses that the Claimants have suffered as a direct result of the Respondent’s violations of the Treaty.
2.4.
The Claimants contend that the Claimants and the Respondent have each consented in writing to refer such an investment dispute to arbitration in accordance with the ICSID Convention, as expressed in Article 25 of the ICSID Convention and Article 9 of the Treaty. The Claimants contend that the Respondent’s written consent became effective upon the entry into force of the Treaty on 30 November 1994, duly accepted by the Claimants with their Request for Arbitration of 28 June 2011.
2.5.
The Claimants contend that the Parties’ dispute comprises an "investment dispute" between a Contracting Party and investors of another Contracting Party and falls within the scope of the Respondent’s consent under Article 25 of the ICSID Convention and Article 1(1) (defining "investors"), Article 1(2) (defining "investment") and Article 9(5) of the Treaty.12
2.7.
The Claimants contend that there is a "dispute" between the Claimants and the Respondent in respect of the Respondent’s failure to comply with its obligations under the Treaty towards the Claimants’ investments in Venezuela, including the Respondent’s expropriation of KOMSA’s interest in FertiNitro and KNI’s interest in the Offtake Agreement, together with the Respondent’s failure to provide any compensation to the Claimants.
2.8.
Accordingly, so the Claimants conclude, there is an "investment dispute" between a Contracting Party and investors of the other Contracting Party that falls within the scope of the Respondent’s consent to arbitration under the Treaty and the ICSID Convention.
2.9.
The Claimants contend that they requested consultations with the Respondent - to no avail. On 9 November 2010, Mr Steve Packebush (of KOMSA) sent a letter to Mr Saúl Ameliach (President of Pequiven), copied to His Excellency Rafael Ramírez (the Respondent’s Minister of Energy and Petroleum) to notify formally the Respondent of the investment dispute between the Claimants and the Respondent relating (as the Claimants contended) to the Respondent’s violations of the Treaty.14 The Claimants there proposed that representatives of the Claimants should meet representatives of the Respondent "to commence discussions and consult as to how Venezuela will compensate Koch for the loss of its investments in Venezuela." The Claimants contend that Pequiven failed to make any offer to the Claimants of compensation for the Respondent’s violations of the Treaty. The Claimants then instructed their legal representatives (Latham & Watkins) to submit to the Respondent a further request for consultations, by letter of 20 January 2011 to the Respondent’s President, copied to (inter alios) the Respondent’s Attorney General.15 Subsequently, according to the Claimants, meetings were held between representatives of the Claimants and the Respondent, producing no satisfactory result to either Claimant.
2.10.
Accordingly, the Claimants conclude that they did request and hold consultations with the Respondent in order to arrive at an amicable settlement of the Parties’ dispute, as required by the Treaty. The Claimants further conclude that they also waited until the expiry of the 'cooling-off' period required under Article 9(2) of the Treaty, thereupon becoming entitled to submit the Parties’ dispute to ICSID for arbitration, as they did with their Request for Arbitration of 28 June 2011 and, further, that this Tribunal has jurisdiction to decide the Parties’ dispute.
2.11.
Liability : In summary, as to liability, the Claimants contend that the Respondent violated its obligations in the Treaty causing loss and damage to each of the Claimants and their investments.
2.12.
The Claimants contend that during the 1990s, Venezuela was actively pursuing a policy of encouraging foreign investment, in particular in its hydrocarbon and petrochemicals industries. At this time, Pequiven (as the Respondent’s state-owned petrochemical company) was seeking foreign partners to participate in the development of a fertilizer plant in José in the Venezuelan state of Anzoátegui.
2.13.
In 1997, KOMSA was selected as a foreign partner with the requisite expertise to participate in the development of the proposed fertilizer plant and to market the fertilizer to be manufactured by the proposed plant. KOMSA and Pequiven proceeded to enter into a joint venture for the construction and operation of two ammonia and two granular urea plants in José (the "FertiNitro Plant") and the marketing and sale of the ammonia and urea produced at the Plant.
2.14.
In March 1998, a series of joint venture companies were formed for the purpose of implementing the project. These were the FertiNitro Companies (here collectively called "FertiNitro"). External funding for the development of the FertiNitro Plant was secured on the understanding that the offtake from the Plant would be sold to KNI, Pequiven and International Petrochemical Sales Limited (a subsidiary of Pequiven) on the terms contained in the Offtake Agreement. According to the Claimants, from the outset, the Offtake Agreement was integral to the Claimants’ investments.
2.15.
Once external funding for the development of the Plant had been secured, Pequiven, KOMSA, Snamprogetti Netherlands BV ("Snamprogetti") and Polar José Investments, Limited ("Polar") entered into a series of agreements in respect of the project. These agreements included: (i) the "Joint Investors’ Agreement" dated 8 April 1998 between Pequiven, KOMSA, Snamprogetti and Polar,16 which provided (inter alia) that FertiNitro would be 35% owned by Koch José, 35% owned by Pequiven, 20% owned by Snamprogetti and 10% owned by Polar; (ii) the "Offtake Agreement" dated 8 April 1998,17 which granted to KOMSA the right to purchase a guaranteed quantity of ammonia and urea produced by FertiNitro at a discounted price for a 20-year term (KOMSA, through Koch José, later owned 25% of the equity in FertiNitro; and KOMSA’s rights under the Offtake Agreement later vested in KNI) and (iii) the "EPC Contract" dated 8 April 1998,18 for the construction of the Plant between FertiNitro, CEC and Snamprogetti as the main contractor.
2.16.
Construction of the Plant commenced in May 1998 and was completed in December 2001 when FertiNitro granted the provisional acceptance certificate to Snamprogetti. Earlier, in May 2001, FertiNitro had commenced commercial production at the Plant. The Claimants submit that, other than certain periods of interruption (for example when PDVSA failed to provide methane gas or Pequiven failed to provide electricity to the Plant), commercial production at the Plant continued until the Respondent expropriated FertiNitro on 11 October 2010, as summarised below.
2.17.
The Claimants contend that the Respondent took unlawful measures against the Claimants’ investments in violation of the Treaty, which have caused the Claimants to suffer considerable losses. These measures culminated on 11 October 2010 in the expropriation of KOMSA’s interest in FertiNitro and the expropriation of KNI’s interest in the Offtake Agreement. The Respondent failed to provide to the Claimants any compensation for its expropriation of their investments. In brief, the Claimants list the Respondent’s unlawful measures against the Claimants’ investments, in violation of Articles 4(1), 4(2), 6, and 11(2) of the Treaty, as follows.
2.18.
New and Increased Taxes: The Respondent imposed on FertiNitro a series of new taxes and tax increases with the object and effect of diverting its profits to the Respondent. This is the first of KOMSA’s "Historical Losses".
2.19.
These new taxes eroded the profitability of FertiNitro and deprived KOMSA of the economic benefits of its investments. These taxes and tax increases were directly contrary to KOMSA’s legitimate expectations on which it relied when deciding to invest in FertiNitro. For example, in December 2005, the Respondent imposed a Narcotic and Psychotropic Substances Tax on FertiNitro that obliged FertiNitro to allocate funds to specified social programs or to provide to the Respondent 1% of FertiNitro’s annual net income. At about this time, the Respondent further enacted the Organic Law on Science, Technology and Innovation.19 It obliged FertiNitro, beginning on 1 January 2006, to allocate funds to specified scientific development programs or to provide to the Respondent 0.5% of its gross income generated in Venezuela. Further, the municipal tax applicable to FertiNitro was increased in 2006 from 1% to 2% and in 2007 to 2.4% of FertiNitro’s turnover. These measures, particularly when considered cumulatively, negatively affected the profitability of FertiNitro at the expense of KOMSA and to the benefit of the Respondent.
2.20.
VAT: The Respondent failed promptly or at all to provide to FertiNitro VAT rebates to which they were entitled. This is the second of KOMSA’s "Historical Losses".
2.21.
In May 1999, the Respondent enacted the Value Added Tax ("VAT") Law.20 This law provided for a zero rate tax for exporters and granted to such exporters the right to recover Special Tax Rebate Certificates ("CERTs") in respect of VAT paid on the purchase or import of goods and services. Under the VAT law, the taxpayer would submit a request to the tax administration of the Respondent, the "SENIAT" (abbreviated from the Spanish "Servicio Nacional Integrado de Administración Aduanera y Tributaria"); and the SENIAT would then issue a "CERT" (abbreviated from the Spanish, "Certificados Especiales de Reembolso Tributario"). The taxpayer could then use its CERTs to pay any federal revenue taxes (including income tax and VAT) or assign them to third parties for similar purposes. FertiNitro paid substantial amounts of VAT to the Respondent during the course of its operations. In respect of these payments, FertiNitro duly submitted requests to the SENIAT.
2.22.
However, from about 2005 onwards, the SENIAT unreasonably and arbitrarily delayed the issue of CERTs to FertiNitro. This delay resulted in losses to FertiNitro particularly when the CERTs were paid after considerable delay during which local inflation - increased and the Venezuelan Bolivar was devalued against hard currencies (including the US Dollar). The Respondent also failed to provide to FertiNitro a substantial amount of VAT rebates despite its obligation to do so. This arbitrary conduct by the Respondent further eroded the profitability of FertiNitro at the expense of KOMSA (and its other non-State shareholders), to the benefit of the Respondent.
2.23.
Urea Decree and Urea Resolution: The Respondent issued a Urea Decree and a subsequent Urea Resolution that obliged FertiNitro to sell urea to the Respondent (through Pequiven) at substantially below production costs and market values, as summarised below. This is the third of KOMSA’s "Historical Losses".
2.24.
On 26 February 2007, the President of the Respondent signed Decree 5,218 (the "Urea Decree").21 The Urea Decree was published in the Official Gazette No. 38,638 on 6 March 2007 and took effect on that date. Article 2 of the Urea Decree provided that:

"Manufacturers, suppliers [...] exporters of nitrogenous fertilizers [...] are required to supply these on a priority basis to the national market, in accordance with the price regulations established for their sale." Article 3 provided that the prices would be established by joint resolutions of the Ministries of Agriculture and Land, Light Industries and Trade and Energy and Petroleum.

2.25.
Pursuant to Article 3 of the Urea Decree, the Respondent’s Ministries of Agriculture, Light Industries and Trade and Energy and Petroleum issued a joint resolution (the "Urea Resolution").22 It was published in the Official Gazette No. 38,674 on 2 May 2007. The Urea Resolution provided (inter alia) that Pequiven was solely authorised to administer the delivery of urea in accordance with the Urea Decree and that Pequiven could purchase "the urea it requires to cover the needs of the Nation, from any manufacturer established in the country, at the maximum bulk sales price at the plant gate of Bs. 155,200/MT."23
2.26.
The sales prices at which FertiNitro was obliged to sell urea to Pequiven were substantially less than the costs of production of urea incurred by FertiNitro. Other than Pequiven, FertiNitro was the sole manufacturer and exporter of urea in Venezuela. Accordingly, the Urea Decree and the Urea Resolution were aimed by the Respondent directly at FertiNitro and compelled FertiNitro to divert urea to the Respondent (through Pequiven) at prices that were below production costs. The quantity of urea that the Respondent (through Pequiven) could purchase from FertiNitro at the price set in the Urea Resolution was unlimited.
2.27.
Subsequently, as required by the Urea Decree and the Urea Resolution, FertiNitro sold substantial quantities of urea to Pequiven at prices significantly below its production costs. These arbitrary and discriminatory measures by the Respondent eroded the profitability of FertiNitro at the expense of the Claimants (and the other non-State shareholders), to the benefit of the Respondent.
2.28.
Interference - FertiNitro: The Respondent (acting through Pequiven) progressively interfered in the management and operation of FertiNitro.
2.29.
KOMSA invested in FertiNitro with the legitimate expectation that its investment was a commercial venture in which KOMSA and Pequiven would be equal partners. KOMSA had a legitimate expectation that any control that Pequiven might have over FertiNitro would be balanced by KOMSA’s control over FertiNitro. KOMSA had a legitimate expectation that FertiNitro would be operated as a commercial enterprise for the generation of profits for all its shareholders.
2.30.
From around 2006, the Respondent, acting through Pequiven, proceeded to interfere in the management and operation of FertiNitro and ultimately assumed control over FertiNitro. The Respondent’s strategy culminated in the expropriation of FertiNitro by the Respondent on 11 October 2010.
2.31.
Expropriation - FertiNitro: The Respondent expropriated FertiNitro on 11 October 2010 with no compensation, in breach of Article 6 of the Treaty.
2.32.
On 10 October 2010, the President of the Respondent announced the expropriation of FertiNitro on his weekly television broadcast "Aló Presidente". During this broadcast, the President signed what appeared to be a decree providing for the expropriation of FertiNitro.24 On 11 October 2010, Decree Number 7713 dated 10 October 2010 was published in Official Gazette No. 380,113.34. It provided for the expropriation of FertiNitro (the "Expropriation Decree").25
2.33.
The Expropriation Decree includes the following provisions: Article 1 provides for the mandatory acquisition by the Respondent of the assets of FertiNitro; Articles 2, 3 and 5 specifically task Pequiven with the role of carrying out the expropriation of FertiNitro and identify Pequiven as the "expropriation entity"; and Article 6 orders Pequiven to occupy the assets. The Expropriation Decree made no provision for the payment of compensation to KOMSA in accordance with the Treaty.
2.34.
On 11 October 2010, Venezuelan State television reported that the Respondent’s Minister of Energy and Petroleum of the Respondent had visited the Plant in person in order to take it over. In his public address at the FertiNitro Plant, the Minister was reported to have stated, "[W]e are already in control of the Plant and we are carrying out an inspection of our facilities."26 Also on 11 October 2010, Mr Clark Inciarte (who was at that time both President of FertiNitro and an employee of Pequiven) indicated during a telephone call with the two KOMSA-appointed directors of FertiNitro that FertiNitro was under the complete control of the State and that its board of directors had ceased to function.27 Following the announcement of the Expropriation Decree, no board of directors or Finance Committee meetings of FertiNitro were convened by FertiNitro.
2.35.
KOMSA had received no advance notice that the Respondent’s President would make this announcement or that the Respondent would expropriate FertiNitro. KOMSA had no opportunity to object to this expropriation of its investment in FertiNitro. To the contrary, the expropriation was announced by the Respondent’s President as a 'fait accompli'.
2.36.
Expropriation - KNI: The Respondent also expropriated KNI’s interest in the Offtake Agreement without compensation, in breach of Article 6 of the Treaty, on 11 October 2010. Contemporary statements made by representatives of Pequiven, as the expropriating entity for the Respondent which had taken over FertiNitro under the Expropriation Decree, confirmed to the Claimants that KNI’s interest in the Offtake Agreement had also been expropriated by the Respondent.
2.37.
Compensation: In summary, the Claimants contend that the Respondent’s several violations of the Treaty have caused considerable losses to the Claimants. Accordingly, the Respondent is obliged to provide to the Claimants full compensation for such losses in accordance with the applicable principles of customary international law.
2.38.
The Claimants claim full compensation including (but not limited to) the profits which KOMSA has lost as a result of the Respondent’s expropriation of its investment in the equity of FertiNitro, its Historical Losses and the Respondent’s expropriation of KNI’s interest in the Offtake Agreement.
2.39.
As later formulated by the Claimants, the compensation claimed by KOMSA for the unlawful expropriation of its interest in FertiNitro and its Historical Losses amount to US$ 444.6 million (as at 30 January 2015); and the compensation claimed by KNI for the expropriation of its interest in the Offtake Agreement amounts to US$ 227.8 million (also as at 30 January 2015).28

(3) The Respondent’s Case

2.40.
Jurisdiction: In summary, the Respondent objects to the competence or jurisdiction of the Tribunal and ICSID to address KNI’s claims regarding the Offtake Agreement. The Respondent contends that it is a "foundational principle of international investment law" that the jurisdiction of arbitral tribunals is limited to "investments" within the meaning of the ICSID Convention and the applicable investment treaty, law or agreement. In this arbitration, therefore, KNI may assert a claim only if the Offtake Agreement (a mere commercial sales agreement) constitutes an "investment" within the meaning of both Article 25(1) of the ICSID Convention and Article 1(2) of the Treaty. The burden of proof lies with KNI, which must prove that it has made a covered investment under the ICSID Convention and the Treaty. The Respondent contends that KNI has failed to do so because no such investment exists with respect to the Offtake Agreement.
2.41.
The meaning of "investment" has an objective and inherent meaning pursuant to both the ICSID Convention and the Treaty. That meaning, in turn, requires the making of a "contribution", over a certain "duration", with an element of "risk" and subject to "territoriality". A mere commercial sales agreement is not an "investment". KNI’s failure to fit the Offtake Agreement within the meaning of "investment" strips both ICSID and this Tribunal of any competence and jurisdiction concerning the alleged expropriation of the Offtake Agreement in October 2010 and even more so over the termination of the Offtake Agreement by FertiNitro in February 2012.
2.42.
Liability: In summary, the Respondent denies any liability to either Claimant under the Treaty. The Respondent is a sovereign state and guarantor of the public interest within Venezuela. The Respondent contends that, as such, it has the obligation and the authority under both national and international law to act in the interest of the people of Venezuela and their general well-being, including the issuance of laws and regulations and the mandatory acquisition of private interests. This right is embedded in the Respondent’s Constitution29 and its Expropriation Law for Public or Social Benefit of 1 July 2002 (the "Expropriation Law").30 These texts provide the legal framework for expropriation in the public interest, as also under customary international law and the Treaty.
2.43.
The Respondent repeatedly confirmed that sovereign control over the domestic production of food and food-related products was a matter of national importance in Venezuela. To that end, in 2007 the Respondent issued the Urea Decree.31 This Decree declared food production to be in the "national interest," "essential for the economic and social development of the Nation," and "an essential element of national safety and sovereignty." As a consequence, the Urea Decree declared nitrogenous fertilizers as goods of "basic necessity" which were critical to the protection of Venezuela’s national interest.
2.44.
In 2008, the Respondent issued Decree No. 5,835 ("Decree 5,835")32 to ensure that the supply of products necessary to food production could continue uninterrupted. This Decree declared goods necessary for food production and products of "basic necessity" to be items in the public utility and social interest.
2.45.
Through these measures, and the promulgation of various national plans designed to boost agricultural productivity, the Respondent articulated a public purpose of securing a sufficient supply of nitrogenous fertilizer to achieve its goal of food sovereignty within Venezuela.
2.46.
Historical Losses : KOMSA asserts, wrongly, that the Respondent breached Articles 4(1), 4(2), and 11(2) of the Treaty in regard to its claims for "Historical Losses." These claims relate principally to the following: (i) the enactment of the Organic Law on Science, Technology and Innovation (the "Science and Technology Law");33 (ii) the issuance of the Municipal Ordinance by the Municipality of Simón Bolívar increasing a pre-existing municipal tax (the "Municipal Ordinance");34 (iii) the Respondent’s alleged refusal to provide to FertiNitro certain VAT credits; and (iv) the Urea Decree and the Urea Resolution. The Respondent submits that these claims for "Historic Losses" are groundless as described below.
2.47.
New and Increased Taxes: The Science and Technology Law was a measure of general application that required companies to invest a small percentage of their revenues back into the company through scientifically focused research and development. Nothing in that law conflicts with the Respondent’s obligations under the Treaty. The increase in pre-existing municipal tax, from 1% to 2% and ultimately to 2.4%, did not violate any of the Respondent’s obligations under the Treaty. This municipal tax is generally applicable to entities operating in the Municipality of Simón Bolívar; it was not directed at FertiNitro; and it was not punitive.
2.48.
VAT: As regards the Claimants’ claim regarding VAT credits, the factual evidence shows that all VAT credits applied for by FertiNitro were, in fact, granted by the Respondent.
2.49.
The Urea Decree and Urea Resolution : The Urea Decree and Urea Resolution were vital and necessary measures intended to give effect to the Respondent’s policy of securing access to materials critical to the production of food in Venezuela. Those measures required FertiNitro to sell limited quantities of urea to Pequiven to cover any domestic demand that could not be met through Pequiven’s own production. The Respondent was forced to enact such measures after FertiNitro’s refusal to make such sales voluntarily on the basis of need.
2.50.
Interference - FertiNitro: There is no evidence that the Respondent interfered with the management and operation of FertiNitro. To the contrary, the evidence shows that the Respondent took no steps to interfere with FertiNitro’s management or operation. FertiNitro’s board of directors consisted of nine directors, of which only three were appointed by Pequiven, with the remaining six appointed by KOMSA and FertiNitro’s other shareholders. According to the Joint Investors’ Agreement of 8 April 1994 (the "JIA"), no decision could be taken without KOMSA’s acceptance.35
2.51.
Expropriation - FertiNitro : The Respondent denies this claim. FertiNitro was a Venezuelan corporation and, as such, operated in Venezuela within the legal, political, social and economic framework of Venezuela. Pequiven was a Venezuelan State-owned petrochemical company and the 35% owner of FertiNitro and, as such, it spent years unsuccessfully attempting to persuade FertiNitro voluntarily to engage in commercial activities that would further the Respondent’s legitimate and reasonable policy objectives relating to food security in Venezuela. When those efforts failed, Pequiven attempted to purchase FertiNitro outright, but Pequiven was rebuffed by KOMSA.
2.52.
After it became clear that FertiNitro would not voluntarily undertake commercial activities designed to accommodate the Respondent’s interests, the Respondent was left with no option but to set in motion procedures to acquire FertiNitro in accordance with Venezuelan law. Thus, on 11 October 2010, the Respondent published the Expropriation Decree, ordering the mandatory acquisition of FertiNitro’s assets. This Expropriation Decree declared that the acquisition was part of the Respondent’s long-standing policy to protect Venezuela from the harmful effects of fluctuations in the global food market by securing domestic and sovereign control over industries critical to the production of food within Venezuela.
2.53.
Although the Expropriation Decree initiated the acquisition process, it did not in and of itself operate to transfer the ownership of FertiNitro’s assets. According to Venezuelan law, such a transfer only occurs following a judgment by the Venezuelan courts. Pequiven, as the designated acquiring entity, initiated the necessary proceedings in the Venezuelan courts on 26 July 2011, after KOMSA withdrew from negotiations over the amount of compensation due following FertiNitro’s acquisition.36
2.54.
The Respondent’s actions in relation to the mandatory acquisition of FertiNitro’s assets were lawful and did not constitute any breach of the Treaty. The evidence shows that the Respondent’s actions surrounding the issuance of the Expropriation Decree and its application were lawful and carried out by the Respondent in accordance with due process. The Claimants’ efforts to seek compensation, therefore, must fail as a matter of liability under the Treaty. Moreover, Venezuelan law provides more than adequate procedures to compensate KOMSA. For all these reasons, the Tribunal should dismiss KOMSAs’ claim.
2.55.
Expropriation - KNI: This claim is denied by the Respondent (in addition to its jurisdictional objection). KNI asserts, wrongly, that KNI’s interest in the Offtake Agreement was expropriated by the Respondent. The Offtake Agreement was a commercial sales contract, by which Pequiven, IPSL and KNI agreed to purchase 100% of FertiNitro’s production; it was not an "investment" by KNI; and it was not expropriated by the Respondent.
2.56.
As submitted in the Respondent’s jurisdictional objection, KNI’s claim flies in the face of the well-settled principle that sales contracts do not constitute "investments" pursuant to Article 25 of the ICSID Convention; and a commercial sales contract, such as the Offtake Agreement, does not satisfy the definition of "investment" in the Treaty.
2.57.
The Expropriation Decree did not address or cover the Offtake Agreement. The factual evidence shows that the Offtake Agreement remained in effect for over 16 months after the date when the Expropriation Decree was issued by the Respondent. Ultimately, FertiNitro’s directors (not the Respondent) decided to terminate the Offtake Agreement on 28 February 2012. That decision was made for commercial reasons and was taken solely by FertiNitro. In these circumstances, the Claimants’ claim that KNI’s interest in the Offtake Agreement was expropriated by the Respondent must fail under the Treaty.
2.58.
Compensation: In summary, in the event that the Tribunal determines that the Respondent’s actions in relation to the mandatory acquisition of FertiNitro’s assets did violate Article 6 of the Treaty, the Claimants are entitled only to the "fair market value" of KOMSA’s interests in FertiNitro, as provided by both Venezuelan and international law. Despite the clarity of Venezuelan and international law, the Claimants are seeking substantially more than a "fair market value" in this arbitration.
2.59.
Further, the Claimants have asserted several additional claims in this arbitration, for which they argue they are entitled to extraordinary, unreasonable and unsupported amounts for KNI’s interest in the Offtake Agreement and additional amounts as KOMSA’s "Historical Losses" for the alleged breaches of Articles 4(1), 4(2), 6 and 11(2) of the Treaty. There is no support for these claimed amounts; and the Claimants have failed to substantiate any losses associated with those alleged breaches of the Treaty.
2.60.
The Respondent concludes that the amount of compensation claimed by the Claimants in this arbitration is obscenely overstated. The Treaty sets forth a precise and exhaustive standard of compensation. Under this standard, the Claimants are entitled only to the "fair market value" of KOMSA’s interest in FertiNitro immediately before the issuance of the Expropriation Decree on 11 October 2010. There is no legal basis to support the Claimants’ position that they are both entitled to some measure of punitive damages by virtue of the allegedly unlawful nature of the Respondent’s acts. In particular, the amount the Claimants seek in relation to the Expropriation Decree is grossly overstated; and the Claimants’ "fair market value" calculations are wrongly predicated on untenable assumptions.

PART III: THE PRINCIPAL ISSUES

(1) Introduction

3.1.
The Tribunal lists below the six principal issues relevant to this Award. This list is not exhaustive of all issues raised by the Parties in this arbitration.

(2) The Principal Issues

3.2.
Issue 1 - Jurisdiction: KNI and the Offtake Agreement (not KOMSA): This jurisdictional issue arises under Articles 1(2) and 2 of the Treaty and Article 25(1) of the ICSID Convention. This jurisdictional issue is addressed in Part VI of the Award below.
3.3.
Issue 2 - Factual Background: These factual matters are addressed principally in Part V of this Award below, as also when addressing issues of jurisdiction, liability and compensation in Parts VI, VII, VIII and IX.
3.4.

Issue 3 - Liability: The issues of liability arise under Articles 4(1), 4(2), 6 and 11(2) of the Treaty, as cited in Part IV of this Award. Liability for expropriation under Article 6 of the Treaty, as regards KOMSA and KNI respectively, is addressed in Part VII of this Award below. Liability under Articles 4(1), 4(2) and 11(2) of the Treaty, as regards KOMSA, is addressed in Part VIII of this Award below.

3.5.
Issue 4 - Compensation: This issue arises under the Treaty and, as submitted by the Claimants, customary international law. As regards the former, Article 6 of the Treaty provides, in material part:. Such compensation shall amount to the market value of the investment expropriated immediately before the expropriatory action was taken or became public knowledge, whichever is earlier, shall include interest from the date of expropriation, be paid without delay in a freely convertible currency to the person entitled thereto and be freely transferable." Compensation is addressed in Part IX of this Award below.
3.6.
Issue 5 - Interest: This issue arises under the Treaty and, as submitted by the Claimants, under customary international law. As to the former, Article 6 of the Treaty provides, in material part that compensation thereunder "shall include interest from the date of expropriation." Interest is addressed in Part XI of this Award below.
3.7.

Issue 6 - Costs: The issue of legal and arbitration costs arises under Article 61(2) of the ICSID Convention and Rule 47(1)(j) of ICSID Arbitration Rules. Costs are also addressed in Part XI of this Award below.

(3) Detailed Issues, Questions and Related Matters

3.8.
During the arbitration, the Parties and (for the Third Hearing) also the Tribunal developed successive lists of issues, questions and ancillary comments on related matters. These are lengthy, repetitive and duplicate much of what already appears in a different form elsewhere in this Award. Nevertheless, the schedule below served as a check-list of matters that the Tribunal addressed during the Hearings and in arriving at its several decisions in this Award. However, it has not been necessary for the Tribunal to decide all these matters. Again, the schedule is not exhaustive of all detailed issues, questions and related matters raised by the Parties during the arbitration.

* Schedule of Detailed Issues, Questions and Related Matters

Issue 1 - Jurisdiction: KNI and the Offtake Agreement

3.9.
According to the Respondent, as already briefly summarised above, the Tribunal has no jurisdiction to address the claim made by KNI in respect of the Offtake Agreement. According to the Claimants, the Offtake Agreement was an integral part of the FertiNitro Project; and KNI’s interest in the Offtake Agreement qualifies as an "investment" under both the ICSID Convention and the Treaty. The Claimants therefore take issue with the Respondent’s jurisdictional objection.

Issue 2 - Factual Background

3.10.
According to the Claimants, three essential facts were and remain entirely unchallenged on the evidential record adduced in this arbitration. First, the Respondent’s 'Apertura' policy, and its other assurances, precipitated the Claimants’ investments in Venezuela. Second, starting in 2005, the Respondent progressively interfered with the Claimants’ investments. Third, on 11 October 2010, without any formal notice, the Respondent openly and unambiguously expropriated both KOMSA’s equity interest in FertiNitro and KNI’s interest in the Offtake Agreement. There are thus, according to the Claimants, few (if any) principal issues as to the factual background to the Parties’ dispute.
3.11.
According to the Respondent, none of the facts alleged by the Claimants establish any breach of its obligations under the Treaty. The Claimants are put to proof of their factual allegations to the contrary.

Issue 3: Liability

3.12.
Expropriation: According to the Claimants, the Respondent breached Article 6 of the Treaty by unlawfully expropriating KOMSA’s interest in FertiNitro and KNI’s interest in the Offtake Agreement on 11 October 2010; and, to date, the Respondent has failed to compensate the Claimants for its expropriation of the Claimants’ investments.
3.13.
According to the Respondent, its mandatory acquisition of FertiNitro’s assets was lawful because the Respondent complied with the requirements of Article 6 of the Treaty. Also according to the Respondent, it did not mandatorily acquire the Offtake Agreement; FertiNitro terminated the Offtake Agreement in February 2012 for commercial reasons; and FertiNitro’s decision to terminate the Offtake Agreement is not attributable to the Respondent under international law.
3.14.
FET : This issue of liability arises under Article 4(1) of the Treaty. It provides, in material part, that the Respondent "shall provide, in accordance with the rules and principles of International Law, investments in its territory of investors of the other Contracting Party fair and equitable treatment […]" (the "FET standard").
3.15.
According to the Claimants, the Respondent breached its obligation under Article 4(1) to accord fair and equitable treatment to the Claimants’ investments. According to the Respondent, it did not breach the FET standard of Article 4(1) of the Treaty. The Respondent contends that this FET standard is tied to the minimum standard of customary international law; and that the Claimants have failed to substantiate their claims.
3.16.
FPS: This issue arises under Article 4(1) of the Treaty. It provides, in material part, that the Respondent: "shall provide, in accordance with the rules and principles of International Law, investments in its territory of investors of the other Contracting Party […] full protection and security […]" (the "FPS standard").
3.17.
According to the Claimants, the Respondent breached its obligation under Article 4(1) to accord full protection and security to the Claimants’ investments. According to the Respondent, it complied with its obligation under Article 4(1) to afford full protection and security: this FPS standard relates to physical injury only; and the Respondent did not fail to protect KOMSA’s investment.
3.18.
Interference: This issue also arises under Article 4(1) of the Treaty. It provides, in material part, that the Respondent "shall [not] impair by arbitrary or discriminatory measures the management, operation, maintenance, use, enjoyment, expansion, disposal or liquidation of such investments."
3.19.
According to the Claimants, the Respondent breached its obligation under Article 4(1) by putting in place arbitrary and discriminatory measures that impaired KOMSA’s management, operation, use and enjoyment of its investment. According to the Respondent, it did not impair the management, operation, use or enjoyment of FertiNitro through any arbitrary or discriminatory measures. The Respondent submits that the Claimants have misapplied the applicable standard; and the Claimants have provided a misleading account of the Respondent’s actions to allege a breach of Article 4(1) of the Treaty.
3.20.
National Treatment : This issue arises under Article 4(2) of the Treaty. It provides, in material part: "The treatment accorded by each Contracting Party to the investment by investors of the other Contracting Party in its territory, or to the investors themselves as regards their investments, shall not be less favourable than that accorded to investments of their own investors […], or to the investors concerned as regards their investments" (the "National Treatment standard").
3.21.
According to the Claimants, the Respondent breached its obligation under Article 4(2) to accord to the Claimants and their investments treatment in accordance with the National Treatment standard. According to the Respondent, it did not breach the National Treatment standard in Article 4(2) of the Treaty. The Respondent submits that the Claimants have misapplied the applicable standard; and that it did not treat Pequiven more favourably than KOMSA.
3.22.
Umbrella Clause: This issue arises under Article 11(2) of the Treaty. It provides: "Each Contracting Party shall observe any obligation it has assumed regarding the treatment of investments in its territory by investors of the other Contracting Party" (the "Umbrella Clause").
3.23.
According to the Claimants, the Respondent failed to observe the obligations assumed in Article 11(2) regarding the treatment of the Claimants’ investments. According to the Respondent, it has not breached Article 11(2) of the Treaty, particularly because there were no such "obligations".

Issue 4 - Compensation

3.24.
In brief, the Claimants submit that the Respondent must pay full compensation under Article 6 of the Treaty and international law for all their losses caused by the Respondent’s expropriatory and other non-expropriatory violations of the Treaty (namely KOMSA’s "Historical Losses"). Such compensation for KOMSA amounts to a total principal sum of US$ 444.6 million (calculated as at 30 January 2015). As to KNI, such compensation amounts to a total principal sum of US$ 227.8 million (calculated as at 30 January 2015).
3.25.
In brief, the Respondent submits that the Claimants’ quantification of their damages must be rejected by the Tribunal, for several reasons. First, the Respondent contends that the compensation claimed by KOMSA and KNI is vastly overstated. Second, it submits that the relevant standard of compensation is to be found in the Treaty (not in customary international law). Third, the Respondent contends that KOMSA’s alleged "Historical Losses" are unfounded.

Issue 5 - Interest

3.26.
The Claimants submit that they are they are entitled to compound interest on any sums awarded by the Tribunal. The Respondent contends that the Claimants’ claims for compound interest are ill-founded.

Issue 6 - Costs

3.27.
The Claimants seek an order requiring the Respondent to pay the costs of the arbitration, including all the fees and expenses of ICSID and the Tribunal and all the legal costs and expenses incurred by the Claimants, apportioned as between the Claimants in the ratio in which they are awarded compensation. The Respondent seeks an order requiring the Claimants to bear all costs and fees incurred in this arbitration, including the Respondent’s reasonable attorney’s fees and expert fees.

The Third (June) Hearing

3.28.
For the purpose of the Third (June) Hearing before the reconstituted Tribunal, so as to allow the Parties to prepare in full their respective oral submissions, the Tribunal sent to the Parties a non-exhaustive check-list of issues on 16 May 2016 and later a further list of issues on 2 June 2016, taken from the Parties’ own pleadings. These documents are set out successively below, in relevant part.

*The Check-List of 16 May 2016 (in Three Parts)

* Part I (from the Claimants’ pleaded case):

3.29.
Claimants’ Issue 1 - Jurisdiction:
3.30.
The Tribunal’s jurisdiction over KNI’s claim is clear, because:

A. The Offtake Agreement was an integral part of the FertiNitro Project;

B. KNI’s rights under the Offtake Agreement qualify as an "investment" under both the ICSID Convention and the Treaty (and satisfy the non-jurisdictional indicia), because:

(i) The Offtake Agreement is an "investment" under the ICSID Convention;

(ii) The Offtake Agreement is an "investment" under the Treaty; and

(iii) In any event the Offtake Agreement also satisfies the non-jurisdictional indicia.

3.31.
Claimants’ Issue 2 - The Principal Facts: The oral testimony at the First (September) Hearing confirmed the central tenets of the Claimants’ case and materially undermined the Respondent’s Case, because:

A. The essential facts remain entirely unchallenged on the evidential record in this arbitration, as listed under B, C and D below.

B. The Respondent’s "Apertura" policy, with its other assurances, precipitated the Claimants’ investment in Venezuela.

C. Starting in 2005, the Respondent progressively interfered with the Claimants’ investments.

D. On 10/11 October 2010, without any formal notice, the Respondent openly and unambiguously expropriated both KOMSA’s equity in FertiNitro and KNI’s rights under the Offtake Agreement.

E. The First (September) Hearing showed that the Respondent’s claim (that it never expropriated the Offtake Agreement) is a study in contradiction, because

(i) If the Respondent did not expropriate the Offtake Agreement, as it claims, then it could not have had a legitimate purpose for the expropriation of FertiNitro;

(ii) The Respondent always planned to take KNI’s offtake; and

(iii) The Urea Decree and the Urea Resolution already guaranteed the Respondent access to FertiNitro’s product at significantly below production cost.

F. The First (September) hearing confirmed that Pequiven was, at all relevant times, an agent of the Respondent.

3.32.
Claimants’ Issue 3 - Liability: The Respondent’s conduct violated the Treaty:

A. Expropriation: The Respondent breached Article 6 of the Treaty by unlawfully expropriating KOMSA’s equity in FertiNitro and KNI’s rights under the Offtake Agreement:

(i) The Respondent’s expropriation of the Claimants’ investments was not carried out in the public interest;

(ii) The Respondent’s expropriation of the Claimants’ investments was carried out in a discriminatory manner;

(iii) The Respondent’s expropriation of the Claimants’ investments was not carried out under due process of law; and

(iv) To date, the Respondent has failed to compensate the Claimants for its direct expropriation of the Claimants’ investments.

B. FET: The Respondent breached its duty under Article 4(1) of the Treaty to accord fair and equitable treatment to the Claimants’ investments.

C. FPS: The Respondent breached its duty under Article 4(1) of the Treaty to accord full protection and security to the Claimants’ investments.

D. Impairment: The Respondent breached Article 4(1) of the Treaty by putting in place arbitrary and discriminatory measures that impaired the Claimants’ management, operation, use and enjoyment of its investments.

E. National Treatment: The Respondent breached its duty under Article 4(2) of the Treaty to accord national treatment to the Claimants’ investments.

F. Umbrella Clause: The Respondent breached its obligations assumed under Article 11(2) of the Treaty regarding the treatment of the Claimants’ investments.

3.33.
Claimants’ Issue 4 - Compensation :

A. The Claimants have demonstrated that the Respondent must pay full compensation under international law:

(i) Recent jurisprudence confirms that the Respondent must pay full compensation to the Claimants in a "but for" scenario for the illegal expropriation of their investments;

(ii) KOMSA is also entitled to full compensation under international law for the losses caused by the Respondent’s 'other (non-expropriation) violations’ of the Treaty; and

(iii) KOMSA is entitled to compensation for its 'Historical Losses'.

B. Testimony from the First (September) Hearing demonstrated that the Parties’ quantum experts have adopted fundamentally different approaches to the valuation exercise:

(i) Mr Giles’s valuation (for the Claimants) is supported by contemporaneous documentary evidence and the testimony of the only independent fertiliser industry expert in this arbitration (Mr Sanders); and

(ii) Dr Flores’s valuation (for the Respondent) is a coalescence of (i) a series of assertions that are either outside the evidential record or are beyond his expertise; and (ii) a mechanical averaging of data and sources without any appreciation of the contemporaneous and industry evidence.

C. Whilst the Parties’ quantum experts agree on a number of compensation parameters, their outstanding differences of fact and expertise on quantum issues remain significant.

3.34.
Claimants’ Issue 5 - Compound Interest: The Claimants have demonstrated that they are entitled to compound interest.

A. The Treaty confirms that compound interest is payable;

B. The last five years of ICSID jurisprudence (on the record of these proceedings) confirms that compound interest is payable; and

C. Leading commentaries confirm that compound interest is payable.

* Part II (from the Respondent’s pleaded case):

3.35.
Respondent’s Issue 1 - Jurisdiction: The Tribunal has no jurisdiction over the claims relating to the Offtake Agreement, because:

A. The Offtake Agreement is a sales contract that does not constitute an "investment" within the meaning of the Treaty or Article 25 of the ICSID Convention:

(i) Sales Contracts are not investments under international law; and

(ii) Complexity, length, project finance implications or the general unity of investment concept do not transform the Offtake Agreement into an investment.

B. KNI has neither made a contribution nor incurred the type of risk necessary to qualify as an investment under the Treaty or under Article 25 of the ICSID Convention, because:

(i) The Term "investment" has an objective and inherent meaning under both the Treaty and the ICSID Convention, which requires the assumption of an investment risk and the making of a contribution; and

(ii) KNI has not incurred an investment risk in connection with the Offtake Agreement.

C. The Offtake Agreement does not have a territoriality nexus with the Republic of Venezuela to qualify for protection under the Treaty.

3.36.
Respondent’s Issue 2 - Expropriation: The Respondent did not mandatorily acquire the Offtake Agreement, because:

A. The Offtake Agreement granted KNI a right to purchase FertiNitro’s product;

B. Decree 7713 did not order the mandatory acquisition of KNI’s rights under the Offtake Agreement or of the Offtake Agreement itself;

C. KNI continued to purchase offtake under the Offtake Agreement until February 2012;

D. FertiNitro terminated the Offtake Agreement in February 2012 for commercial reasons; and

E. FertiNitro’s decision to terminate the Offtake Agreement is not attributable to the Respondent.

3.37.
Respondent’s Issue 3 - Expropriation: The mandatory acquisition of FertiNitro’s assets was lawful; and the Respondent complied with the requirements of Article 6 of the Treaty, because.

A. The Respondent’s acquisition of FertiNitro’s assets was in the public interest:

(i) The Respondent should be afforded ample deference regarding its public interest policies; and

(ii) The mandatory acquisition of FertiNitro’s assets was carried out pursuant to the public policy of food security.

B. The mandatory acquisition of FertiNitro’s assets was carried out in a non-discriminatory manner, because:

(i) Pequiven/IPSL and KOMSA/KNI were not similarly situated;

(ii) KOMSA did not receive differential treatment; and

(iii) Any differential treatment was not improper because it was based on a reasonable justification.

C. The Respondent’s actions were carried out under the process of law, because:

(i) "Advance Notice" is not a requirement of due process under the Treaty or international law; and

(ii) The Respondent repeatedly provided notice to KOMSA that it planned to take control of FertiNitro.

D. The Respondent met (and continues to meet) its payment obligation under Article 6 of the Treaty, because:

(i) Article 6 of the Treaty requires the Respondent to make a reasonable offer of compensation - not immediate payment;

(ii) The Respondent made a reasonable offer of compensation, which KOMSA rejected; and

(iii) The Respondent will compensate KOMSA through the Mandatory Acquisition Procedure.

3.38.
Respondent’s Issue 4 - FET: The Respondent did not breach the FET standard in Article 4(1) of the Treaty, because:

A. The applicable standard is tied to the minimum standard of customary international law;

B. The Claimants have failed to substantiate their claims, because:

(i) The Claimants have failed to establish that they had any legitimate expectations in relation to the Respondent’s tax regime;

(ii) The Respondent has provided FertiNitro with VAT Credits in line with the Respondent’s obligations;

(iii) The Respondent did not interfere in the management and operations of FertiNitro;

(iv) The Respondent did not frustrate any legitimate expectation by issuing the Urea Decree and Urea Resolution; and

(v) The Respondent provided a stable and predictable legal and business environment, treated the Claimants with transparency and procedural fairness and did not abuse its authority.

3.39.
Respondent’s Issue 5 - FPS: The Respondent complied with its obligation under Article 4 of the Treaty to afford full protection and security, because:

A. The FPS standard relates to physical injury.

B. The Respondent did not fail to protect KOMSA’s investment.

3.40.
Respondent’s Issue 6 - Interference/Impairment: The Respondent did not impair the management, operation, use or enjoyment of FertiNitro through arbitrary or discriminatory measures under Article 4(1) of the Treaty, because:

A. The Claimants have misapplied the applicable standard; and

B. The Claimants have also provided a misleading account of the Respondent’s actions that are alleged to have breached Article 4(1) of the Treaty.

3.41.
Respondent’s Issue 7 - National Treatment: The Respondent did not breach the National Treatment standard under Article 4(2) of the Treaty, because:

A. The Claimants have misapplied the applicable standard; and

B. The Respondent did not treat Pequiven more favourably than KOMSA.

3.42.
Respondent’s Issue 8 - Umbrella Clause: The Respondent did not breach Article 11(2) of the Treaty.
3.43.
Respondent’s Issue 9 - Compensation: The Tribunal must reject the Claimants’ quantification of damages, because:

A. The compensation claimed by KOMSA and KNI is vastly overstated:

(i) The relevant standard of compensation is found in the Treaty, not in customary international law;

(ii) Irrespective of the legal standard for compensation, the Parties agree that the expert witnesses on compensation should apply the Fair Market Value (FMV) standard; and

(iii) The Claimants ultimately fail to apply the FMV standard.

B. The Fair Market Value (FMV) of KOMSA’s economic interest in FertiNitro was no more than US$ 34.6 million:

(i) While Dr Flores’ DCF valuation is reasonable, Mr Giles’ DCF analysis is overstated and does not reflect FertiNitro’s FMV because:

a. The Claimants’ DCF analysis is inconsistent and highly speculative;

b. The Claimants’ DCF valuation inappropriately excludes actual production volumes from 2009 and 2010 in projecting future production:

(1) The Claimants inappropriately project a three-year turnaround cycle for FertiNitro;

(2) The number of gas and electricity disruptions and unplanned shutdowns in 2009 and 2010 was not materially higher than in recent prior years;

(3) The Claimants’ position that a hypothetical buyer would believe FertiNitro could consistently achieve nameplate production levels is unfounded;

(4) The Claimants’ position that the exclusion of the 2009-2010 period is justified by law is entirely baseless;

c. The Claimants’ projections of FertiNitro’s future costs are understated:

(1) The Claimants unreasonably relied upon budgeted instead of actual turnaround and maintenance costs;

(2) The Claimants’ other cost estimates are also understated.

d. The Claimants’ proposed discount rate is understated:

(1) The Claimants’ reliance upon out-dated global market risk premium data is unreasonable and inappropriate;

(2) The Claimants inappropriately relied upon limited survey data to determine their base country risk rate;

(3) The Claimants inappropriately excluded political risk from their country risk rate;

(4) The Claimants’ calculation of a 0.40 lambda for FertiNitro is entirely arbitrary and unreasonable;

(5) The Claimants’ application of a 1% liquidity discount is contrary to basic valuation principles; and

(6) The unreasonableness of the Claimants’ discount rate is confirmed by the two ExxonMobil awards and the Flughafen Zürich award.

(ii) The Claimants’ "Reasonableness Checks" do not support their valuation of KOMSA’s 25% Share in FertiNitro:

a. The October 2008 MOU Price, if properly adjusted, confirms Dr Flores’ valuation;

b. Construction costs of other plants are irrelevant;

c. The Advantis Reports confirm Dr Flores’ valuation;

d. The Claimants’ 'new argument' based on FertiNitro’s book value is irrelevant.

C. The Claimants’ valuation of the Offtake Agreement is overstated, because:

(i) The Claimants make the same inappropriate assumptions regarding sales volumes and discount rate as in their valuation of KOMSA’s equity interest in FertiNitro.

(ii) The Claimants’ valuation period improperly includes a 16-month period during which KNI suffered no losses.

(iii) The Claimants use the wrong valuation methodology based on unrealistic factual assumptions, because:

a. The Claimants inappropriately calculate KNI’s lost profits rather than the value of KNI’s alleged rights under the Offtake Agreement;

b. The Claimants fail to prove that they would have been unable to replace the FertiNitro Offtake through purchase on the open market;

c. The Claimants’ lost profits calculations are flawed and highly speculative.

D. The Claimants’ alleged "Historical Losses" are unfounded.

3.44.
Respondent’s Issue 10 - Interest: The Claimants’ claims for compound interest are ill-founded.
3.45.
Respondent’s Issue 11 - Costs: The Claimants’ claims for costs are denied.

* Part III: Specific Further Queries (by the Tribunal)

3.46.
The Parties were invited by the Tribunal to summarise at the Third (June) Hearing their respective cases on the relationship between the Offtake Agreement and the FertiNitro Project.
3.47.
The Parties were requested to summarise their respective cases on whether or not the Offtake Agreement satisfies the legal and economic characteristics of an investment under the Treaty.
3.48.
The Parties were requested to summarise the evidence regarding the impact of Decree 7713 on KNI’s rights under the Offtake Agreement.
3.49.
The Parties were requested to summarise their respective cases on the attribution under the Treaty or otherwise to the Respondent of FertiNitro’s decision to terminate the Offtake Agreement.
3.50.
In addition, the Parties were invited to address the following matters:

3.50.1. What steps, if any, did either of the Claimants take to oppose the Urea Decree?

3.50.2. What has happened with actual and projected natural gas price, since the last submissions by the Parties on this subject?

3.50.3 Why should the "expected rate of return" on equities rather than the "required rate of return" be used for the determination of the market risk premium?

3.50.4. Taking into account the fact that sales of product to KNI, after an interruption between October 2010 and January 2011, started again in January 2011 until the termination of the Offtake Agreement in February 2012, how much money, if any, did KNI lose compared to the continuing operation of that Offtake Agreement?

3.50.5. Would the Parties elaborate on their respective views concerning the relevance to this case (if any) of the discount rates used in the two ExxonMobil awards and in the Flughafen and Gold Reserve awards and the Advantis Report of May 2011, referred to by the Parties in their respective submissions?

3.50.6. What is the relevance, if any, of the Booz Allen valuation of FertiNitro made in 2007?

* The Tribunal’s Additional Topics of 2 June 2016 for the Parties

A. Offtake Agreement

3.51.
Topic A1: Assuming, arguendo, that the Offtake Agreement was included within the ambit of the Expropriation Decree, what is the legal effect of a Venezuelan decree on the rights and obligations under the Offtake Agreement, which is governed by the laws of the State of New York?
3.52.
Topic A2: Assuming, arguendo, that the Offtake Agreement was not included within the ambit of the Expropriation Decree, was the termination of the Offtake Agreement on 28 February 2012 a breach of the Offtake Agreement?
3.53.
Topic A3: Was there any exercise of sovereign powers involved in the termination of the Offtake Agreement on 28 February 2012 (assuming, arguendo, that it was not terminated earlier by the Expropriation Decree etc)? If so, what sovereign powers were relied upon and by whom?
3.54.
Topic A4: Did KNI respond to Mr Betulio Hernandez’s letter of 28 February 2012 (Exhibit C-114)? Was there any subsequent correspondence between the Parties to the Offtake Agreement? If so, where is such correspondence to be found on the record?

B. Negotiations and local procedures relating to compensation

3.55.
Topic B1: Do the Claimants agree with the summary provided at paragraph 111 of the Respondent’s Post Hearing Brief? If not, what specific amendments would they wish to make?
3.56.
Topic B2: Have there been any developments relating to the local court proceedings (the "Mandatory Acquisition Procedure") since the Post-Hearing Briefs were filed by the Parties?

C. Quantum Issues

3.57.
Topic C1: Does the Respondent agree with the presentation of the points of agreement and disagreement between Mr Giles and Dr Flores in the tables on pages 55-60 of the Claimants’ Post-Hearing Brief? If not, what specific amendments would the Respondent wish to make?

Projection of Future Cash Flows

3.58.
Topic C2: Are there any examples of tribunals adopting budgetary forecasts for production and/or costs for the purposes of calculating the cash flows of an enterprise for a DCF valuation in respect of a time period before the violation of an investment treaty obligation in circumstances where actual data for production and/or costs were available?
3.59.
Topic C3. What is the general impact of inflation and the freeze on the exchange rate in Venezuela on FertiNitro’s costs between 2008-2010?

Offtake Agreement

3.60.
Topic C4: Is the calculation of damages relating to the Offtake Agreement by either quantum expert consistent with the manner in which damages would be calculated on the hypothesis of a breach of the Offtake Agreement under the laws of the State of New York? If not, how are they different?

Market Risk and the Country Risk Premium

3.61.
Topic C5: Does the Respondent accept the Claimants’ definition of market risk and country risk at paragraph 198 of its Post-Hearing Brief?
3.62.
Topic C6: Explain the basis for the market risk and country risk premiums in the Advantis valuation reports of May and July 2011.
3.63.
Topic C7: What should be the evidential threshold for the application of a lambda factor to an enterprise operating in a particular country? In other words, how common is it in valuation practice to apply a lambda factor to take into account greater or lesser exposure of a particular enterprise to country risk and what degree of certainty is required?
3.64.
Topic C8: Are there any examples of tribunals adopting a liquidity discount in investment treaty arbitration?
3.65.
Topic C9: Compare and contrast the market risk and country risk premiums adopted by other tribunals in publicly available investment treaty awards involving Venezuela.
3.66.
Topic C10: Is an asset that qualifies for Treaty protection analogous to having "insurance-like protection" [Transcript, D6/P66 (Giles)]? Would it be appropriate to discount country risk in relation to a lawful as opposed to unlawful expropriation? Sanity Checks on Valuations
3.67.
Topic C11: Does the book value of KOMSA’s 25% interest in FertiNitro at the time of the valuation date provide an appropriate sanity check on the DCF valuations in this case?
3.68.
Topic C12: What adjustments, if any, would need to be made to the MOU valuations in 2007 and 2008 for them to be relevant as a sanity check on a DCF valuation done at the valuation date in 2010?
3.69.
Topic C13: What adjustments, if any, would need to be made to the Advantis valuations in May and July 2011 for them to be relevant as a sanity check on a DCF valuation done at the valuation date in 2010?

PART IV: THE PRINCIPAL LEGAL TEXTS

(1) Introduction

4.1.
It is necessary to cite in full several of the relevant legal texts at the outset of this Award, for ease of reference elsewhere. This is not to suggest that, to decide the legal issues in dispute between the Parties, the Tribunal may be limited to the sources identified herein or otherwise invoked by the Parties. To the contrary, the Tribunal agrees with the following statement of the Daimler v. Argentina ad hoc committee37:

"This Committee is of the view that an arbitral tribunal is not limited to referring to or relying upon only the authorities cited by the parties. It can, sua sponte, rely on other publicly available authorities, even if they have not been cited by the parties, provided that the issue has been raised before the tribunal and the parties were provided an opportunity to address it. Once such an opportunity was provided the Tribunal was not obliged to confine itself to only those authorities, which had been cited by the parties. No rule of law or procedure or requirement of due process prevented it from referring to or relying upon other authorities that were in the public domain. Such reliance did not violate any rule of natural justice including the right to be heard."

4.2.
Where the original text is Spanish, the Tribunal here cites the English translation, as noted.

(2) The Switzerland-Venezuela Treaty38

4.3.
Article 1(1) of the Treaty defines "investors" for purposes of the Treaty as follows:

"The Term "investor" refers with regard to either Contracting Party to:

a) natural persons who, according to the law of that Contracting Party, are considered to be its nationals;

b) legal entities, including companies, corporations, business associations and other organizations which are constituted or otherwise duly organised under the law of that Contracting Party;

c) legal entities not established under the law of that Contracting Party but effectively controlled by natural persons as defined in (a) above or by legal entities as defined in (b) above."

4.4.
Article 1(2) of the Treaty defines the term "investment" as follows:

"The term 'investment' comprises every kind of asset and more particularly, though not exclusively:

a) movable and immovable property as well as any other rights in rem;

b) shares, parts or any other kinds of participation in a company;

c) claims to money or to any performance under a contract;

d) intellectual property rights, technical processes, know-how and goodwill;

e) concessions and other rights granted under public law."

4.5.
Article 2 of the Treaty provides:

"The present Agreement shall apply to investments in the territory of one Contracting Party made in accordance with its laws and regulations by investors of the other Contracting Party, whether prior to or after the entry into force of the Agreement. It shall, however, not be applicable to divergencies or disputes the causes of which have arisen prior to its entry into force."

4.6.
Article 4(1) of the Treaty provides:

"Each Contracting Party shall provide, in accordance with the rules and principles of International Law, investments in its territory of investors of the other Contracting Party fair and equitable treatment and full protection and security; neither of them shall impair by arbitrary or discriminatory measures the management, operation, maintenance, use, enjoyment, expansion, disposal or liquidation of such investments."

4.7.
Article 4(2) of the Treaty provides:

"The treatment accorded by each Contracting Party to the investment by investors of the other Contracting Party in its territory, or to the investors themselves as regards their investments, shall not be less favourable than that accorded to investments of their own investors or those of any third State, or to the investors concerned as regards their investments."

4.8.
Article 6 of the Treaty provides:

"Neither of the Contracting Parties shall take, either directly or indirectly, measures of expropriation, nationalization or any other measures having the same nature or the same effect against investments of investors of the other Contracting Party, unless the measures are taken in the public interest, on a non-discriminatory basis, and under due process of law, and provided that provisions be made for effective and adequate compensation. Such compensation shall amount to the market value of the investment expropriated immediately before the expropriatory action was taken or became public knowledge, whichever is earlier, shall include interest from the date of expropriation, be paid without delay in a freely convertible currency to the person entitled thereto and be freely transferable."

4.9.
Article 9 of the Treaty provides:

"(1) With a view to an amicable solution of disputes between a Contracting Party and an investor of the other Contracting Party consultations will take place between the parties concerned.

(2) If these consultations do not result in a solution within six months from the date of the request for consultations, the investor may submit the dispute to the arbitration of the International Center for Settlement of Investment Disputes (I.C.S.I.D.) instituted by the Convention on the settlement of investment disputes between States and nationals of other States, opened for signature at Washington, on 18th March, 1965.

(3) As an alternative to I.C.S.I.D. arbitration the parties to the dispute may, by mutual consent, have recourse to an ad hoc arbitral tribunal which unless otherwise agreed upon by the parties to the dispute shall be established under the arbitration rules of the United Nations Commission on International Trade Law (U.N.C.I.T.R.A.L.). Such arbitration shall in any case take place if for whatever reason I.C.S.I.D. arbitration is not available.

(4) The arbitral award shall limit itself to determine whether the Contracting Party concerned has failed to comply with an obligation under this Agreement, whether such failure has resulted in damages to the investor, and, if this is the case, the amount to be paid by the Contracting Party to the investor as compensation for such damages.

(5) Each Contracting Party hereby consents to the submission of an investment dispute to international arbitration in accordance with the provisions of this article.

(6) The Contracting Party which is a party to the dispute shall not at any time during the procedures, assert as a defence its immunity or the fact that the investor has received compensation under an insurance contract covering the whole or part of the incurred damage or loss.

(7) The arbitral award shall be final and binding for the parties involved in the dispute."

4.10.
Article 11(2) of the Treaty provides:

"Each Contracting Party shall observe any obligation it has assumed regarding the treatment of investments in its territory by investors of the other Contracting Party."

(3) The Offtake Agreement39

4.11.
Article 2.2 of the Offtake Agreement provides:

"Allocation of Products. Subject to the provisions of Sections 11.4 and 11.5, the Parties agree that the allocation of Products to each Buyer hereunder is expected to be fifty percent (50%) of the actual total Plants [sic] Output, with the following provisions to apply to the allocation of Products assuming full production in a given Contract Year:

(a) Koch shall have the exclusive right and obligation to purchase from Seller for resale or its own consumption (i) seventy five percent (75%) of the Plants [sic] Output of ammonia available for sale during each Contract Year (estimated to be approximately 270,000 tons annually assuming full production at Nameplate Capacity) and (ii) forty-four percent (44%) of the Plants [sic] Output of urea for sale during each Contract Year (estimated to be approximately 640,000 annually tons assuming full production at Nameplate Capacity) and

(b) Pequiven Offtaker shall have the exclusive right and obligation to purchase from Seller for resale or its own consumption (i) twenty-five percent (25%) of the Plants [sic] Output of ammonia available for sale during each Contract Year (estimated to be approximately 90,000 tons annually assuming production at Nameplate Capacity) and (ii) fifty-six percent (56%) of the Plants [sic] Output of urea for sale during each Contract Year (estimated to be approximately 820,000 tons annually assuming production at Nameplate Capacity)."

4.12.
Article 2.3 of the Offtake Agreement provides:

"Assignment of Markets. Each Buyer agrees that the following territorial restrictions shall apply throughout the Primary Term with respect to the marketing and sale of Products:

(a) Koch shall have the exclusive right to market and sell Products for delivery to and ultimate consumption in North America.

(b) Pequiven Offtaker shall have the exclusive right to market and sell Products for delivery to and ultimate consumption in South America, Central America, and the Caribbean.

(c) Each Buyer further agrees not to sell Products such Buyer knows or has reason to believe ultimately will be resold in essentially their original form into any of the countries reserved to the other Buyer under paragraph (a) or (b) above, respectively.

(d) Notwithstanding any provision in this Section 2.3 to the contrary, at Koch’s sole option, Koch may request that Pequiven Offtaker market, on Koch’s behalf, all or a portion of Koch’s allocated Products taken hereunder in South America, Central America and/or the Caribbean. Likewise, at Pequiven Offtaker’s sole option, Pequiven Offtaker may request that Koch market on Pequiven Offtaker’s behalf all or a portion of Pequiven Offtaker’s allocated Products taken hereunder in North America. Each Buyer may elect to accept or reject the other Buyer’s request under this Section 2.3(d) in its sole discretion. If a Buyer ("Passive Agent") accepts the other Buyer’s ("Active Principal") request under this Section 2.3(d), the Buyers shall share equally the difference (whether positive or negative) between: (i) the price obtained by the Passive Agent, on a best efforts basis, from a Third Party (net of all expenses, fees and charges reasonably incurred by the Passive Agent in marketing, selling and/or transporting the Active Principal’s Products) and (ii) the applicable FOB Jose Price stated in Section 3.1 below.

(e) Notwithstanding any provision in this Section 2.3 to the contrary, at Koch’s sole option, it may make a request to market in North America, on Pequiven Offtaker’s behalf, all or a portion of Pequiven Offtaker’s allocated Products taken hereunder. Likewise, at Pequiven Offtaker’s sole option, it may make request to market in South America, Central America and/or the Caribbean, on Koch’s behalf, all or a portion of Koch’s allocated Products taken hereunder. Each Buyer may elect to accept or reject the other party’s request under this Section 2.3(e) in its sole discretion. If a Buyer ("Passive Principal") accepts the other Buyer’s ("Active Agent") request, the Buyers shall share equally the difference (whether positive or negative) between: (i) the price obtained by the Active Agent, on a best efforts basis, from a Third Party (net of all expenses, fees and charges reasonably incurred by the Active Agent in marketing, selling and/or transporting the other Passive Principal’s Products) and (ii) the applicable FOB Jose Price stated in Section 3.l below."

4.13.
Article 3.1 of the Offtake Agreement provides:

"Purchase price. The purchase price of Products to be sold in North America, Central America, South America and the Caribbean shall be calculated in accordance with the formulae set forth in Sections 3.1(a) and (b). The purchase price of Products to be sold for delivery in other markets ("Alternative Markets") shall be determined in accordance with the provisions of Sections 3.1(d) and (e): [...]"

4.14.
Articles 3.2 and 3.3 of the Offtake Agreement provide:

"3.2. Failure to Take Delivery of Products. The provisions of subsections (a) and (b), below, shall apply during the time any loans are outstanding under the Loan Agreements. Upon the repayment in full of the loans made to Seller under the Loan Agreements, the provisions of subsection (c), below, shall apply.

(a) Take-or Pay if Tender Obligation Met. If Seller is prepared and able to meet its obligation to tender Product to a Buyer and such Buyer fails to take delivery of its allocation of Products in accordance with Articles II, V or VI ("Non-Taking Buyer") within thirty (30) days after the scheduled delivery date therefor, such Non-Taking Buyer shall nevertheless pay Seller (i) the corresponding price, determined in accordance with the applicable formula in Section 3.1(a) or Section 3.1(b) (without reduction for the relevant marketing fee discount), for all such Products tendered by Seller but not taken by such Non-Taking Buyer and (ii) all costs and expenses of Seller in the event that the Non-Taking Buyer’s failure to take the Products contributes to a reduction of Plant production. Notwithstanding the foregoing, no Buyer shall be required to pay for (y) quantities of Products not tendered or not taken by reason of a Force Majeure Event and (z) quantities of Products not tendered by reason of non-performance by Seller in accordance with the terms of this Agreement except to the extent such non-performance was attributable to the Non-Taking Buyer.

(b) Products Not Taken. Seller shall promptly give notice of any Non-Taking Buyer’s failure to take any Product to the other Buyer so long as such other Buyer is taking delivery of its allocation of Products in accordance with Articles II, V or VI ("Taking Buyer"). The Taking Buyer shall have a right of first refusal to purchase any Product not taken by the Non-Taking Buyer, for resale or [sic] its own consumption, at the corresponding Product price determined pursuant to Section 3.1. (a) or (b), as the case may be, and upon acceptance, the obligations to purchase and take delivery of such Product shall be binding upon the Taking Buyer. If the Taking Buyer declines or fails to exercise such right of first refusal by giving notice thereof to Seller within five (5) days after the Taking Buyer’s receipt of the notice from Seller, Seller shall have the right to sell such Product to a Third Party at any price. Notwithstanding the sale of the corresponding Products pursuant to this Section 3.2(b), the Non-Taking Buyer shall pay the Seller the amounts set forth in Section 3.2(a) (without reduction for the Ammonia Marketing Fee Discount or the Urea Marketing Fee Discount, as appropriate), together with any sales costs that Seller incurred to sell the Product. Seller shall provide a credit to a Non-Taking Buyer for amounts received by Seller from the Taking Buyer or a Third Party under this Section 3.2(b) if the Non-Taking Buyer has paid the amounts due to Seller pursuant to Section 3.2(a) (together with any sales costs that Seller incurred to sell the Product), such credit to be applied by Seller against future invoices issued by the Seller to the relevant Buyer.

(c) Modification of Certain Provisions Upon Repayment of Loans. Notwithstanding any provision contained herein to the contrary, upon the repayment in full of the loans made by the lenders to Seller under the Loan Agreements, including any refinancing thereof, each Buyer’s obligation to take-or-pay for Product if tendered under Section 3.2(a) above shall terminate, and the modifications to this Agreement set forth in Exhibit B shall be effective for all purposes hereunder as of such date.

3.3. Income Taxes. Except as specifically provided in Section 3.1(f), each Buyer shall indemnify Seller against and hold it harmless from any and all taxes assessed or claimed against such Buyer based on or measured against such Buyer’s income (including penalties, interest and expenses) imposed by any jurisdiction or political subdivision thereof or therein (other than the Republic of Venezuela or any Venezuelan state or local governmental or taxing authority therein) arising out of or relating to the sale of Products hereunder or the performance by Buyer of its obligation hereunder, whether or not such taxes were correctly or legally assessed."

4.15.
Article 11.1 of the Offtake Agreement provides:

"Term of Agreement - Subject to the terms and conditions herein, this Agreement shall be effective as of the date first written above and shall run for a primary term of twenty (20) Contract Years thereafter ("Primary Term"); provided, however, in the event that the Bonds have not been fully paid or redeemed and remain outstanding under their original repayment schedule upon the conclusion of the Primary Term, neither of the Buyers not the Seller shall cancel this Agreement and the Primary Term shall be extended for such period of time as the Bonds remain outstanding under their original repayment schedule. This Agreement shall be automatically renewed following the Primary Term for one or more successive terms of five (5) Contract Years (each a "Secondary Term") unless one of the Parties gives written notice to the contrary to the other Parties at least six (6) months prior to the end of the Primary Term or the then current Secondary Term, as appropriate. If this Agreement is renewed for one or more Secondary Terms, the Parties shall consult with each other at least three (3) months prior to the commencement of any such Secondary Term to determine whether, under the circumstances then prevailing, the provisions of Section 2.3 shall apply."

4.16.
Article 12.2 of the Offtake Agreement provides:

"(a) Arbitration Pursuant to ICC Rules. If the Dispute has not been resolved through negotiation within ninety (90) days after the date of the notice of Dispute received pursuant to Section 12.1, the Dispute shall be finally settled and resolved by arbitration in accordance with the ICC Rules, subject to such modifications of the ICC Rules as are set forth in this Article XII."

"(c) Venue and Language. The arbitration proceeding shall be conducted in the City of Miami, Florida, United States of America, or any other location upon which the parties to the arbitration proceeding may agree, in the English language [...] "

"(f) Applicable Law. The arbitrators shall be required to apply New York substantive law in ruling upon any Dispute in accordance with the Parties’ intent as expressed in Section 13.1."

4.17.
Article 13.1 of the Offtake Agreement provides (printed in upper case):

"[…] This Agreement shall be governed by, construed under, and enforced in accordance with the laws of the State of New York, United States of America, without regard to the Conflicts-of-Law provisions thereof."

(4) The Urea Decree40

4.18.
The Urea Decree provides (as translated into English), beginning with its Preamble:

"WHEREAS the production of food is of national interest and is fundamental for the economic and social development of the Nation, an essential element of national safety and sovereignty, […]"

4.19.
Article 1 of the Urea Decree provides:

"Nitrogenous fertilizers and the supplies necessary for their manufacture, in their various formats and presentations, aimed at satisfying the national demand, are declared to be basic necessities throughout the national territory."

4.20.
Article 2 of the Urea Decree provides:

"Manufacturers, suppliers, merchants, distributors, importers and exporters of nitrogenous fertilizers and the supplies necessary for their manufacture are required to supply these on a priority basis to the national market, in accordance with the price regulations established for their sale."

4.21.
Article 3 of the Urea Decree provides:

"The activity for marketing nitrogenous fertilizers and the supplies necessary for their manufacture, conducted by individuals and legal entities, shall be subject to the prices, volumes, controls, regulations and audits established by joint Resolutions by the Ministry of Agriculture and Land, the Ministry of Light Industries and Trade and the Ministry of Energy and Petroleum, which are to be issued within thirty days after the publication of this Decree."

(5) The Urea Resolution41

4.22.
The Urea Resolution provide (as translated into English), beginning with its Article 1:

"The purpose of this Resolution is to regulate control and inspect the production commercialization, distribution and sales of urea, to guarantee the supply of the national market. Furthermore, it regulates its exports once the internal demand has been satisfied."

4.23.
Article 10 of the Urea Resolution provides:

"The State Company, Petroquimica de Venezuela S.A. (Pequiven S.A.) may purchase the urea it requires to cover the needs of the Nation, from any manufacturer established in the country, at the maximum bulk sales price at the plant gate of Bs. 155,200/MT (Bolivars per Metric Ton)."

(6) The Decree 5,83542

4.24.
Decree 5,835 provides (translated into English), as to Article 4:

"All of the goods necessary to carry out the activities of production, manufacture, importing, gathering, transportation, distribution and sale of foods or products declared to be of first need or subject to price controls are hereby declared to be of, and are therefore subject to, public utility and social interest.

The National Executive shall, without other prior formality, initiate expropriation through decree for reasons of food security and sovereignty "

(7) The Expropriation Decree43

4.25.
The Expropriation Decree provides (as translated into English), beginning with its Article 1:

"The mandatory acquisition of movable and real estate assets is ordered, including improvements, installations, facilities, industrial equipment, office and other assets, required or necessary for the production, processing, transportation and warehousing activities of fertilizers (urea and ammoniac) that are owned by, or in the possession of, the business companies Fertilizantes Nitrogenados de Oriente, S.A., Fertilizantes Nitrogenados de Venezuela, S.R.L., Fertilizantes Nitrogenados de Oriente, C.E.C. y Fertilizantes Nitrogenados de Venezuela, C.E.C., or any other company or persons related, with the objective of achieving the absolute and effective realization of the national plans of sowing and production formulated by the National Executive, and that are necessary for the execution of the 'Socialist Plan for AgriFood Sovereignty'"

4.26.
Article 2 of the Expropriation Decree provides:

"The project "Socialist Plan for Agri-Food Sovereignty" will be executed by Petroquímica de Venezuela, S.A. (PEQUIVEN), assigned to the People’s Power Ministry for Energy and Petroleum, as the expropriation entity, or the subsidiary that the entity appoints."

4.27.
Article 3 of the Expropriation Decree provides:

"The expropriated goods will be transferred free of encumbrances or limitations to the Venezuelan State by means of the company Petroquímica de Venezuela, S.A. (PEQUIVEN), as the expropriation entity, or the subsidiary that this entity appoints, in accordance to what is stipulated in article 11 of the Expropriation Law for Public or Social Benefit."

4.28.
Article 4 of the Expropriation Decree provides:

"In compliance to what is stipulated in article 12 of the Expropriation Law for Public or Social Benefit, the company Petroquímica de Venezuela, S.A. (PEQUIVEN) is hereby authorized to carry out the necessary steps for the acquisition of real estate and other assets as stipulated in article 1 of the present Law, subrogating its position in all rights and obligations that correspond to the Bolivarian Republic of Venezuela on such matters."

4.29.
Article 5 of the Expropriation Decree provides:

"Petroquímica de Venezuela, S.A. (PEQUIVEN) will initiate and carry out the expropriation process as stipulated in the Expropriation Law for Public or Social Benefit until total and definite transfer of the ownership of the properties indicated in article 1 of the present Law takes place."

4.30.
Article 6 of the Expropriation Decree provides:

"In compliance with stipulations of article 3 of the Decree with Rank, Value and Force of the Organic Law for Security and Agri-food Sovereignty, the occupancy of the assets indicated in article 1 of the present Law by the company Petroquímica de Venezuela, S.A. (PEQUIVEN) is ordered with the objective of placing these into operation, administration and capitalization."

(8) The Expropriation Law44

4.31.
The Expropriation Law provides (as translated into English), beginning with Article 2:

"Concept of expropriation. Expropriation is an institution of Public Law by which the State acts in furtherance of a purpose having public utility or societal interest, in order to obtain the compulsory transfer unto itself of the right to property or some other private right, by final judgment and timely payment of fair compensation."

4.32.
Article 7 of the Expropriation Law provides:

"Requirements for expropriation. The Compulsory expropriation of property of any nature may only take effect through compliance with the following requirements:

1. Formal finding declaring the public interest.

2. Declaration that carrying out such [interest] necessarily requires the total or partial transfer of the property or right.

3. Fair price for the property subject to expropriation.

4. Timely payment in cash of fair compensation."

4.33.
Article 31 of the Expropriation Law provides:

"Rights of the holder. The holder has the right to become a party to the expropriation proceeding, in order to seek, from the price of the expropriated property, the portion applicable to him for the value of his improvements and for damages suffered by him."

4.34.
Article 35 of the Expropriation Law provides:

"Procedure in the absence of compromise. In the event that a compromise is not reached, the judge shall call a hearing during the third business day thereafter, for the naming of a Valuation Commission, appointed in accordance with the provisions of Article 19 of this Law, which shall establish the fair price pursuant to the regulations of the Code of Civil Procedure."

4.35.
Article 36 of the Expropriation Law provides:

"Elements requiring consideration. The fair price valuation of any property or right to be expropriated, in whole or in part, shall specifying its type, quality, location, approximate dimensions, its likely production and all other circumstances that bear upon the evaluations and calculations made to determine its fair value. In all cases, the valuation shall represent the equivalent value applicable to the expropriated property. Among the elements of the valuation, in the case of real property, [the following] are required to be considered:

1. The taxable value of the property, declared or tacitly accepted by the owner.

2. The value set forth in conveyance documents, executed at least six (6) months prior to the expropriation decree.

3. The average prices at which similar properties have been sold in the last twelve (12) months, counted as of the date the valuation was prepared.

In the event that any of these elements, which are required to be considered, are absent, the experts shall provide express reasons therefor in the valuation report. Under no circumstances shall the incremental value of real property be taken into account, attributable to its proximity to the work in progress."

(9) Mr Hernandez’s Letter Dated 28 February 201245

4.36.
This document is not a legal text; but it merits citing at length here. It is the letter from Betulio Hernández, President of the Temporary Ad-Hoc Board of Trustees, to KNI on the impact of the Expropriation Decree (Decree 7,713) on the Offtake Agreement (as translated into English):

"I hereby notify you that, in accordance with the Resolution issued by the Board of Temporary Ad-Hoc Trustees of Fertilizantes Nitrogenados de Venezuela, FertiNitro, C.E.C., ("FertiNitro"), as is evidenced by appointment effected by Decrees handed down by the Second Civil, Commercial, Agricultural, and Traffic Court of First Instance of the Judicial District of the State of Anzoátegui on August 8 and 9, 2011 and September 22, 2011, Case BP02-V-2011-000998, the first two of which have been recorded in the First Commercial Registry of the State of Anzoátegui on August 11, 2011, under No. 09, Volume 1; effective from the date of this communication, FertiNitro shall not sell any more nitrogen fertilizers (urea and ammonia) to Koch Oil, S.A. under the marketing agreement entered into between Petroquímica de Venezuela S.A., International Petrochemical Sales Limited, Koch Oil S.A., and Fertilizantes Nitrogenados de Venezuela, C.E.C. on April 8, 1998; all of which is in fulfilment of what is established in Decree 7,713 published in Official Gazette of the Bolivarian Republic of Venezuela No. 39,528 of October 11, 2010, which orders the compulsory acquisition of movable and immovable property, including improvements, facilities, plants, industrial and office equipment and all other assets necessary or required for the production, processing, transport, and storage of fertilizers (urea and ammonia) that belong to or are in the possession of the companies Fertilizantes Nitrogenados de Oriente, S.A., Fertilizantes Nitrogenados de Venezuela, S.R.L., Fertilizantes Nitrogenados de Oriente, C.E.C. and Fertilizantes Nitrogenados de Venezuela, C.E.C., or any other related companies or persons."

(10) The ICSID Convention

4.37.
Article 25 of the ICSID Convention provides:

"(1) The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre. When the parties have given their consent, no party may withdraw its consent unilaterally.

(2) "National of another Contracting State" means:

(a) any natural person who had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration as well as on the date on which the request was registered pursuant to paragraph (3) of Article 28 or paragraph (3) of Article 36, but does not include any person who on either date also had the nationality of the Contracting State party to the dispute; and

(b) any juridical person which had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration and any juridical person which had the nationality of the Contracting State party to the dispute on that date and which, because of foreign control, the parties have agreed should be treated as a national of another Contracting State for the purposes of this Convention.

(3) Consent by a constituent subdivision or agency of a Contracting State shall require the approval of that State unless that State notifies the Centre that no such approval is required.

(4) Any Contracting State may, at the time of ratification, acceptance or approval of this Convention or at any time thereafter, notify the Centre of the class or classes of disputes which it would or would not consider submitting to the jurisdiction of the Centre. The Secretary- General shall forthwith transmit such notification to all Contracting States. Such notification shall not constitute the consent required by paragraph (1)."

4.38.
Article 41 of the ICSID Convention provides:

"(1) The Tribunal shall be the judge of its own competence.

(2) Any objection by a party to the dispute that that dispute is not within the jurisdiction of the Centre, or for other reasons is not within the competence of the Tribunal, shall be considered by the Tribunal which shall determine whether to deal with it as a preliminary question or to join it to the merits of the dispute."

4.39.
Article 42(1) of the ICSID Convention provides:

"The Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties. In the absence of such agreement, the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable."

PART V: THE PRINCIPAL FACTS

(1) Introduction

5.2.
The FertiNitro project originated in 1998; and the plants commenced commercial operations in 2001. FertiNitro’s plants encountered several technical and operational difficulties. These led to an international commercial arbitration between FertiNitro and the project’s EPC contractor and minority shareholder, Snamprogetti. The Parties disagree as to the causes and consequences of the Plants’ operational and technical difficulties.
5.3.
Venezuela’s food production and agriculture have been marked by underdevelopment since the 1990s. In response, the Respondent developed a policy to attain greater food security for the people of Venezuela, which included, amongst others matters, laws and regulations to secure State control over the domestic production of food and food-related products, including fertilizer for domestic agriculture.
5.5.
The Tribunal includes below in chronological order certain principal facts relevant to its several decisions in regard to the Claimants’ two claims for expropriation under Article 6 of the Treaty and to KOMSA’s "Historical Claims" under Articles 4 and 11 of the Treaty. Accordingly, notwithstanding an element of repetition later in this Award, this chronology is not an exhaustive account of all factual issues in dispute between the Parties. The Tribunal has nonetheless considered the evidence in full, as adduced by the Parties in this lengthy arbitration.
5.6.
This chronology addresses, as found by the Tribunal on the materials adduced by the Parties: (i) the development of the FertiNitro project; (ii) the construction and operation of the FertiNitro Plant; (iii) Pequiven’s negotiations to buy-out FertiNitro’s private shareholders (including KOMSA); (iv) Venezuela’s legal and regulatory framework leading to the Expropriation Decree dated 10 October 2010; (v) the events following the Expropriation Decree; and (vi) certain other measures taken by the Respondent which, so the Claimants allege, have interfered with their investments in violation of the Treaty.

(2) Factual Chronology

(i) The Development of the FertiNitro Project

5.7.
In the 1990s, Venezuela (as also certain other countries in Latin America) pursued economic policies that sought, among other matters, to attract foreign investment and reduce State control over important economic sectors. In the case of Venezuela, such policies covered the petrochemical and hydrocarbon sector.46
5.8.
By the end of the 1990s, Venezuela imported more than 64% of its food and agricultural products;47 it had a surplus of non-commercialised natural gas, deriving from its petroleum reserves; and it sought to develop its petrochemical sector.48
5.9.
Pequiven, KOMSA,49 Snamprogetti Netherlands BV, a company organized under the laws of the Netherlands, ("Snamprogetti"), and Polar Uno CA, a company organized under the laws of Venezuela ("Polar") entered into a series of agreements as "Owners" for the development, construction and operation of two ammonia and two urea plants, to be located in an industrial complex in the Venezuelan State of Anzóategui, in the northeast of the country (the "FertiNitro project"). Ammonia and urea are nitrogen-based fertilisers that are used to increase productivity and crop yield in agriculture.50 Ammonia is required to produce urea; and therefore "ammonia is the basic building block of the nitrogen fertilizer industry."51
5.10.
On 8 April 1998, the Owners concluded the Joint Investors Agreement (the "JIA"), providing for the incorporation and capitalisation of four interrelated Venezuelan companies,52 organised in an investment structure through which the Owners would own, construct and operate the FertiNitro Project.53 As already indicated above, these four interrelated Venezuelan companies are described as the "FertiNitro Companies" or collectively as "FertiNitro".
5.11.
On that same day, in accordance with the JIA,54 FertiNitro Venezuela CEC, Pequiven, International Petrochemical Sales Limited ("IPSL", a subsidiary of Pequiven) and KOMSA (later succeeded by KNI as described below) concluded the Offtake Agreement.55 Pursuant to the Offtake Agreement, Koch and Pequiven/IPSL (the "Offtakers") agreed to purchase on a "take or pay" basis a guaranteed quantity of ammonia and urea produced by FertiNitro at a discounted set price,56 for the Offtakers’ own consumption or resale in both the local and export markets, for a 20-year term.57 The Offtake Agreement could be "automatically renewed" thereafter for five-year terms, unless otherwise notified by any of the parties to the Offtake Agreement.58
5.12.
On 30 June 2000, KOMSA assigned its rights and obligations under the Offtake Agreement to Koch Oil Marketing S.A. On 3 April 2003 Koch Oil Marketing S.A. assigned its rights under the Offtake Agreement to KNI.59
5.13.
The Offtake Agreement gave to Pequiven/IPSL the exclusive right to market and sell ammonia and urea domestically, as also in South America, Central America and the Caribbean. Pequiven’s sales to the local domestic market were not to exceed 10% of its total volume of purchased product with FertiNitro. That percentage rose to 15% in 2004 and further 1% per year thereafter.60 KOMSA (later KNI) had the exclusive selling rights for North America, including Mexico. Each of KOMSA/KNI and Pequiven/IPSL bought approximately 50% of FertiNitro’s total production of urea and ammonia in any given month.61
5.14.
In addition to the JIA and Offtake Agreement, numerous contracts were concluded in connection with the FertiNitro project.62 These included the Engineering, Procurement and Construction Contract by and between, FertiNitro, CEC, and Snamprogetti for the "turn-key" construction by Snamprogetti of the ammonia and urea plants (the "EPC Contract"),63 as well as agreements for the supply of gas, electricity and water, among many others.64 Under these gas agreements, FertiNitro received gas from PDVSA at preferential prices.
5.15.
As already indicated, FertiNitro was 35% owned by KOMSA, 35% owned by Pequiven, 20% owned by Snamprogetti and 10% owned by Polar, in accordance with the terms of the Joint Investors’ Agreement (the "JIA").65 KOMSA held its interest in FertiNitro through Koch José, a company organised under the laws of the Cayman Islands.66 KOMSA transferred 28,571% of its equity in Koch José on 18 February 1998, to the Latin American Infrastructure Fund ("LAIF").67 As a result, KOMSA and LAIF indirectly owned 25% and 10% of FertiNitro, respectively.
5.16.
The FertiNitro project included a project finance lending structure where the lenders "receive[d] a security interest in the project’s cash flow and assets";68 and such lenders and bondholders looked to the assets and income stream of the project for repayment. Under this structure, "the project’s debt [was] secured by the receivables owed by Koch [KOMSA] and Pequiven to FertiNitro under the Offtake Agreement".69 In accordance with this financing structure, the Offtake Agreement was to remain in effect for a period equal to the length of FertiNitro’s financing obligations and at least 20 years.70
5.17.
FertiNitro was organised as a commercial enterprise; and its management was undertaken through a nine-member board of directors of the FertiNitro Companies.71 After the transfer of shares to LAIF, FertiNitro’s board of directors was composed of three directors appointed by Pequiven, two directors appointed by KOMSA, two directors appointed by Snamprogetti, one director appointed by LAIF and one director appointed by Polar.72 The chairman of the board of directors (who also served as President of FertiNitro) alternated between an appointee of either KOMSA or Pequiven, for a two-year term or as otherwise agreed by KOMSA and Pequiven.73 According to Clauses 5.4.1 and 5.4.2 of the JIA, decisions of FertiNitro’s board and shareholders decisions could only be taken with the majority approval from each of the representatives of Pequiven, KOMSA and Snamprogetti.

(ii) The Construction and Functioning of the FertiNitro Plant

5.18.
1998-2001: The construction of the FertiNitro Plant began in 1998 and the Plant commenced commercial production in May 2001.74
5.19.
In accordance with the EPC Contract, each of the ammonia plants was built to have a minimum "nameplate" capacity of 1800 metric tons ("MT"); and each of the urea plants had a nameplate capacity of 2,200 MT.75 The total cost of the project was US$ 1.1 billion, of which over US$ 740 million was funded by bonds and loans from a consortium of banks.76
5.20.
2001-2004: Between 2001 and 2002 FertiNitro made warranty claims against Snamprogetti under the EPC, regarding "defects, deficiencies and failures" of the Plant’s equipment and operations.77 From 2002 onwards, FertiNitro experienced shutdowns for repairs and maintenance issues. FertiNitro started withholding payments due to Snamprogetti in its capacity as EPC contractor.
5.21.
In 2002 Snamprogettti commenced an arbitration under the EPC before the International Court of Arbitration of the International Chamber of Commerce, against FertiNitro (the "ICC Construction Arbitration"), claiming payment of the sums withheld by FertiNitro. FertiNitro advanced counterclaims based on Snamprogetti’s alleged breach of warranties in the EPC related to the design, construction and engineering of the Plant. FertiNitro and Snamprogetti settled the arbitration on 14 December 2004. The settlement included (inter alia) the forgiveness of certain debts owed by FertiNitro to Snamprogetti and a cash payment by Snamprogetti to FertiNitro of US$ 6.5 million.78
5.22.
2004-2009: The Parties disagreed on the working conditions of the FertiNitro Plant after the settlement of the ICC Construction Arbitration and FertiNitro’s corresponding repairs to the Plant. The Claimants assert that: "following the settlement [...] in late 2004, and after the necessary construction repairs were made, the plant’s performance significantly improved";79 and that "by 2006, it was achieving 98 percent of the previously anticipated production levels."80 The Respondent alleges that many critical repairs remained outstanding as more than one third of the critical issues identified by the 2003 Report of the project’s independent engineers (Jacobs Consultancy)81 could not have been completely resolved by 2005.82
5.23.
The Plant’s production levels between 2003 and 2009, as reported by the FertiNitro Monthly Reports for the relevant years, are shown in the table below.83 The table shows the production of the plant as percentage of the nameplate capacity. According to the Respondent, based on the reports of the Jacobs Consultancy, "on an annual basis, FertiNitro has never in its history succeeded in reaching nameplate production levels."84 The Claimants contend that these calculations wrongly assume that the plant would operate 365 days of the year.85

YearAmmoniaUrea
2003 66% 58%
2004 84% 77%
2005 72% 71%
2006 91% 86%
2007 83% 81%
2008 77% 74%
2009 78% 74%

5.24.
From 2006, there was a clear downturn in production levels.86 The Parties however disagree as to the causes. According to the Claimants, the operational problems are related to "the repeated failures of PDVSA Gas and Pequiven to supply the contracted levels of gas and electricity to the plant, combined with Respondent’s increased interference with and distraction of the management of the plant."87 For its part, the Respondent admits that there were problems in the supply of raw materials;88 but it adds that FertiNitro’s operational issues "have their roots" in the plant’s construction and design flaws attributable to the EPC Contractor.89
5.25.
FertiNitro was also subjected to and failed a "reliability test", and thereafter continued to experience planned and unplanned shutdowns, relating among others to mechanical failures.90 In between these tests, FertiNitro underwent "turnarounds." A "turnaround" is a scheduled period of down time in which all production in a plant is stopped; and catalysts and raw materials are removed. FertiNitro had its first turnaround in 2005. Thereafter, turnarounds took place in 2008, 2009 and 2010. The cost of the turnarounds, as well as the annual maintenance costs, significantly exceeded the originally allocated budget and also significantly increased after 2008.91

(iii) Pequiven’s Negotiations to Buy-Out the FertiNitro Private Shareholders

5.26.
2005-2006: Between June 2005 and October 2006 the Pequiven-appointed directors submitted to the FertiNitro board of directors Pequiven’s proposals to buy additional amounts of urea from FertiNitro on an annual basis at a reduced price for a period from 2005 to 2007.92 The amount of urea that Pequiven was to be allowed to purchase under its proposals was capped at 75,000 tons.93 According to the testimony of Mr Gwaltney, the proposed reduced price was below FertiNitro’s production costs.94
5.27.
During the FertiNitro board meetings, the Pequiven-appointed directors explained that the additional urea was to be used for resale in the domestic market and thereby support the Government’s agricultural plans.95 The Pequiven-appointed directors added that Pequiven’s proposals would only take effect "in the event that Pequiven [could not] cover demands with its own production" from plants at el Moron and el Tablazo.96
5.28.
FertiNitro’s board of directors (with its general management) analysed, considered and eventually rejected Pequiven’s request.97
5.29.
During this same period, a commission was created to analyse the Offtake Agreement.98 It recommended that: (i) the market distribution between the Offtakers should be eliminated; (ii) the limit applicable to domestic sales should be modified; and (iii) the price limits of the Offtake Agreement should be amended.99 These recommendations were not adopted by FertiNitro’s board of directors.
5.30.
In 2005 a draft amended Petrochemical law was submitted to the Respondent’s National Assembly. Its effects on FertiNitro were discussed in several meetings of FertiNitro’s board of directors, held between 2005 and 2007.100
5.31.
During those meetings, Mr Toro, a Pequiven-appointed director, informed the other shareholder-appointed directors that, pursuant to the text of the proposed amended law: (i) FertiNitro would be required to supply the domestic demand for urea before exporting urea; and (ii) the Respondent needed to have at least a 51% controlling share of FertiNitro,101 so as take control of the business, and that "time [was] run[ning] out."102 Mr Toro further stated that "Pequiven will be bringing specific proposals for the consideration of all the shareholders" and that "all shareholders rights and agreements will be respected."103
5.32.
2007: Further to those discussions, from 2007 onwards, Pequiven entered into buy-out negotiations with all the private shareholders in FertiNitro. On 7 November 2007, KOMSA representatives presented a draft Memorandum of Understanding for the sale to Pequiven of the non-Pequiven shareholders’ shares in FertiNitro (the "KOMSA Draft MOU").104
5.33.
According to paragraph 2.1 of the KOMSA Draft MOU:

"The Parties hereby agree that the aggregate purchase price to be paid by Pequiven for the Shares will consist of (a) USD$ 1,210,000,000.00, less the outstanding balance of principal and accrued interest on FertiNitro’s existing bank and bond financing as of the Closing Date, plus (b) the Excess Cash (the 'Purchase Price '). 'Excess Cash' would be defined as FertiNitro’s cash balance on the Closing Date, including all required reserve accounts, less USD$25,000,000."105(Emphasis in original)

5.34.
2008: Discussions relating to the buy-out negotiations were halted between January and April 2008.106 In October 2008, Pequiven presented a revised draft Memorandum of Understanding (the "Pequiven Draft MOU").107 According to paragraph 1 of the Pequiven Draft MOU:

"(a) The purchase price ("Purchase Price ") to be paid by Pequiven to Koch Shareholder for the Acquired Shares is US$297,500,000.00, which shall be payable in cash at the closing of the Proposed Transaction (the "Closing ").

(b) For reference purposes only and with the agreement by Pequiven and Koch Shareholder that the Purchase Price is a fixed amount and not subject to adjustment the Purchase Price was determined by taking a starting value for 100% of the Companies of US$1,200,000,000.00, and (i) subtracting the outstanding balance of principal and all accrued interest on the Companies’ existing bank and bond financing as of October 6, 2008, (ii) adding excess cash, exclusive of reserves, as of such date, and (iii) multiplying the resulting agreed net value of US$850,000,000.00 by the 35% total equity interests in the Companies owned directly or indirectly by Koch Shareholder and LAIF. "108 (Emphasis in original)

5.35.
Neither the KOMSA nor the Pequiven draft MOUs were executed. The Parties’ disagree as to the cause for such non-execution. According to the Claimants, the drafts were not finalised because Pequiven indicated that the sale was no longer a priority for the Respondent.109 According to the Respondent, the "[n]egotiations were interrupted in November 2008 due to financing issues."110
5.36.
In April and October 2008, FertiNitro paid dividends to its shareholders amounting to US$ 150 million.111
5.37.
2009: By the end of December 2009, FertiNitro was in deficit, with its liabilities exceeding its assets.112

(iv) The Respondent’s Measures and the Relevant Legal Framework

5.38.
1998: On 6 December 1998, President Chavez was elected as the Respondent’s Head of State. He took office in February 1999. During the period leading to his election, Venezuela was importing 64% of its food and was a "net importer" of agricultural products.113 Article 305 of the 1999 Venezuelan Constitution enacted under the Government of President Chavez enshrined the policy objectives of pursuing food security and food sovereignty.114 Thereafter, the Respondent engaged in a process to increase its capacity for agricultural production.
5.39.
2001: In September 2001, the Respondent issued a 2001-2007 "Plan for Economic and Social Development of the Nation."115 15 According to paragraph 1.1.3.1-4 of the Plan, the Government was to prioritise improvement in agricultural productivity to meet domestic demands for food. In 2002, the Respondent developed a three-year national programme to develop food security and rural development, with the assistance of the United Nations Food and Agriculture Organization.116
5.40.
2002: On 1 July 2002, the Expropriation Law for Public or Social Benefit entered into effect.117 In accordance with Article 2 of the Expropriation Law, expropriation is an "institution of Public Law by which the State acts in furtherance of a purpose having public utility or societal interest." Article 7 sets out the mandatory requirements for any expropriation, which include: (i) a "formal finding declaring the public interest; (ii) a declaration that carrying out such [interest] necessarily requires the total or partial transfer of the property or right; (iii) a fair price for the property subject to expropriation; and (iv) timely payment in cash or fair compensation." Article 5 of the Law provides:

"The Expropriation Decree consists of a declaration that the execution of a project requires the compulsory acquisition of the totality of a property or various properties, or a portion thereof. [...] The Expropriation Decree shall require a prior finding of public utility, in accordance with the provisions of Articles 13 and 14 of this Law."

5.41.
On 2 December 2002, political and civic organisations began a national civic work-stoppage in Venezuela. It "seriously affected many of the country’s economic activities, especially the oil industry."118 Employees of PDVSA took part in the stoppage.119 It affected Pequiven, whose operations were shut down.120 The stoppage also brought important changes to the staffing of Pequiven, and consequently to the personnel of FertiNitro.121 According to the Claimants, subsequent to the stoppage, the Respondent replaced management in PDVSA, Pequiven and FertiNitro with individuals who were deemed loyal to the Government, regardless of their technical qualifications.122
5.42.
2004: In 2004, Pequiven had to import urea to meet local demand.123 At that time, Pequiven and FertiNitro were the only companies in Venezuela producing urea. Pequiven’s production facilities, "El Tablazo" and "Moron", experienced significant problems. According to the Respondent, Pequiven’s plants could not meet local demand.
5.43.
2005: In 2005, the Respondent adopted a four-year "National Seed Plan" (Plan Nacional de Semillas).124 At that time, the Respondent was importing over 70% of its food, 100% of its vegetable seeds and over 60%-70% of its corn seed.125 The national plan sought to reduce import dependency and to increase domestic food production, through (inter alia) seed production and development.126
5.44.
2006: On 28 July 2006, the "Partial Reform Law of the Law on Incentives for Development of the Petrochemical and Carbochemical Activities and other related activities" entered into force.127 In accordance with Articles 2 and 3 of this law, Pequiven "shall comply and execute the policies dictated by the National Executive [...]" and "shall be the exclusive property of […] Venezuela."
5.45.
In December 2006, President Chavez was re-elected to a third presidential term.
5.46.
2007: On 6 March 2007, Decree 5,218 dated 26 February 2007 (the "Urea Decree") came into effect.128 Pursuant to Articles 1 and 2, nitrogenous fertilizers and the supplies necessary for their manufacture were "declared to be basic necessities throughout the national territory," and manufacturers, suppliers, and exporters of nitrogenous fertilizers were "required to supply [urea] on a priority basis to the national market." In accordance with Articles 3 and 5 of the Urea Decree, the price and production of fertilizers were to be regulated by joint resolutions of the Ministry of Popular Power for Agriculture and Land, the Ministry for Light Industries and Commerce and the Ministry for Energy and Oil.
5.47.
Under the Urea Decree, a joint resolution was adopted, coming into effect on 2 May 2007 (the "Urea Resolution").129 Pequiven was consulted by the Respondent during the drafting process of the Urea Decree and the Urea Resolution.130
5.48.
The Urea Resolution established the maximum price at which urea manufacturers could sell urea to Pequiven. It authorised Pequiven to purchase from any manufacturer in Venezuela the necessary quantities of urea to satisfy national demand.131 In addition, urea manufacturers in Venezuela had to inform the relevant ministry of the Respondent as to the amount of urea produced by them, together with the percentages of urea product destined for domestic and international consumption.132
5.49.
At this time, as was well known to the Claimants and the Respondent, only Pequiven and FertiNitro produced urea in Venezuela.133 Therefore, apart from Pequiven’s production facilities, "El Tablazo" and "Morón", which had encountered difficulties since 2004, the Urea Decree and Urea Resolution, in practice applied only to the FertiNitro Plant (Pequiven being 100% owned by the Respondent).
5.50.
Pursuant to the Urea Decree and Urea Resolution, FertiNitro was required to sell urea to Pequiven at below production costs and below the price specified in the Offtake Agreement.134 After the devaluation of the Venezuelan Bolivar in 2010, the difference in value between the production price and the regulated price increased.
5.51.
During that same period, Pequiven’s other plant, El Tablazo, was exporting urea to other markets, including Ecuador, which could affect the levels of urea required from FertiNitro to meet the local urea demand.135 Mr Toro, the then Pequiven-appointed director, explained that urea was being exported because of "geopolitical reasons" and that those amounts were irrespective of those destined to the local market.136
5.52.
2008: On 31 January 2008, Venezuela’s Decree Law 5,835 became effective. In accordance with Article 4 of the Decree:

"All of the goods necessary to carry out the activities of production, manufacture, importing, gathering, transportation, distribution and sale of foods or products declared to be of first need or subject to price controls are hereby declared to be of, and are therefore subject to, public utility and societal interest.

The National Executive shall, without other prior formality, initiate expropriation through decree for reasons of food security and sovereignty. "137

5.53.
On 31 July 2008, the Law on Food Security and Sovereignty entered into effect.138 Article 3 of the law provided that "[t]he goods that ensure the availability and timely access to foods of sufficient quality […] are declared to be of public interest and social welfare" and that "[w]hen there exist reasons related to food security, the Executive of the Nation may decree the mandatory acquisition in its entirety-with fair compensation and timely payment-of one of several goods needed to carry out projects or activities related to the production […] of foods." In addition, Article 20 granted the Executive the power to, amongst other matters, "pass economic and financial measures that may be necessary for the implementation of national production plans."
5.54.
2009: On 18 June 2009, the Organic Law for the Development of Petrochemical Activities dated 16 June 2009 came into effect (the "2009 Petrochemical Law").139 Article 5 of this Law provides:

"The basic and intermediate petrochemical activity is reserved for the State, as well as the works, assets and facilities required for its operation. This reserve will be exercised directly by the National Executive or through companies of its exclusive ownership. It can also be exercised by the State through Mixed Companies in which it has decision control and a participation of not less than fifty percent (50%) of the capital stock.

Mixed Companies will be subject to the prior authorization of the National Assembly, to which effect the National Executive, acting through the Ministry of the People’s Power competent for Energy and Oil Matters, will inform the National Assembly of the pertinent circumstances and conditions."

5.55.
On 15 July 2009, Mr C. Inciarte, President of FertiNitro and of Pequiven, informed the FertiNitro board of directors that, according to the official policy of the Respondent’s ViceMinistry of Petrochemistry (with which Pequiven agreed), the 2009 Petrochemical Law, and in particular its Article 5, would not apply to FertiNitro, because it was not to be applied retroactively by the Respondent.140
5.56.
2010: On 10 October 2010, President Chavez appeared to sign Decree 7,713, in front of television cameras during his weekly television show called "Alo Presidente." ("Decree 7,713"; or the "Expropriation Decree"). As President Chavez signed the Expropriation Decree, he was recorded as stating (as translated into English):

"Look, so as to accomplish the capable and effective carrying out of the national plans of seeding and production, formulated by the National Executive, and that are necessary for the execution of the work of the socialist agro-alimentary sovereignty plan... Approved, that it be expropriated and it pass to the property, to the nation’s property."141

5.58.
There is disagreement between the Parties on whether any notice was provided to the Claimants (or to KOMSA) of the Expropriation Decree. The Claimants contend that no advance notice of the Expropriation Decree was given by the Respondent.144 The Respondent contends, in turn, "Venezuela provided both constructive and actual notice that FertiNitro could be subject to a mandatory acquisition" through a series of actions starting as early as 2005.145
5.59.
On 11 October 2010, the day following the televised signing of the Expropriation Decree by President Chavez, the Respondent’s Minister of Energy and Oil (Mr Rafael Ramírez) travelled in person to the FertiNitro Plant. He there made the following statement during an interview by journalists broadcast on public television, directed also to employees of FertiNitro, Pequiven and PDVSA assembled at the Plant. This public address merits citing almost in full (as translated into English), with paragraph numbers here added for ease of later reference:146

"[1]. [Minister Rafael Ramirez unrecorded].mandate of our laws, of our government, of our revolution, because this is a fundamental plant for agricultural development of our country, our food sovereignty, this is a plant with which we have been meeting with for a long time, without any success whatsoever, to try to have them adapt to our needs in the national development plan. So that we may see the importance that this company [i.e. FertiNitro]147has in the national agricultural system... well, first is to announce that at a national level we produce 380,000 tons per year of fertilizers, and urea in particular. But this sole plant produces 1,500,000 tons per year of urea. This is a very large plant, the largest we have in the country.

[2] Ok now, this is a plant that, receiving gas produced by the Venezuelan State at as subsidized price, that is to say, between 0.5 and 1.5 dollars per MMBTU, one must consider that outside the country gas is now selling for between 3 and 12 dollars per MMBTU. Notwithstanding this subsidized price, it is impossible that this plant, in which Pequiven had a minority interest, would not adjust to the fertilizer supply requirements for national development.

[3] We currently have a consumption of 600,000 tons of urea, but we are in now in our development plans, the total seeding plan designed by the national government, to cover up to 5 million hectares. We are setting a requirement of more than 1.3 million tons. With the control of this plant that the Venezuelan state will be taking [i.e. the FertiNitro Plant], we now have guaranteed all of the urea that our farm workers may need, all of the urea that our producing sector may need, to sustain this extraordinary seeding plan and to sustain national development.

[4] On another topic, this plant, which had a group of private shareholders, we had serious problems with sales. Being a fertilizer produced with Venezuelan gas, well, we had a limit where we could only acquire up to 10% of its production for the domestic market. And, when they sold it to us, they sold it at a price that was 2.5 to 3 times in excess of the price at which Pequiven sells its fertilizers. [These appear to be references to the Offtake Agreement].

[5] Such that, we are here very satisfied, because we know that this step is a step closer toward our sovereignty. We are with the workers, who are the fundamental actors of this process and, of course, paying attention to the guidelines of Commandant Chavez, of President Chavez, in the deepening of our Bolivarian revolution."

[…]

[6] Well, here we have a plant of about 400 workers. Of course, the private parties were using an outsourcing model. We are going to eliminate the outsourcing and enter upon a process of worker action - regularize all of the relationships with our workers - because socialism is about an economic system where the base, the relationship, the production relationships have to be within the framework of the ethics of socialism. It can't be; we can't have workers here that are being exploited by trans-national companies while they are the ones making the profits outside the country. [These appear to be references (inter alia) to FertiNitro’s foreign shareholders, including KOMSA].

[7] So then, now a process is beginning, of course, a legal proceeding; all of the mechanisms are being initiated to complete the legal steps for expropriation. But we are here with our workers, workers from Pequiven, workers from FertiNitro, and workers from PDVSA, already in control of the plant and making inspections of the installations because, of course, we have to guarantee that all of the assets are preserved, which from here on out belong to the Republic.

[8] Newsperson: The benefits of the countries of ALBA, which FertiNitro will have also? Minister Rafael Ramirez: Well, look. First of all, with this we guarantee our supply to the internal market. And later, we will have the control of sales. Up to this moment, the trans-national that operated here was the one that managed the volumes quoted, in accordance with its own criteria, according to its commercial policy. We, as you all know, in the heart of ALBA in Latin America and in our own domestic market, we have a different view. We have available people and natural resources, such as natural gas, which is the one used in this case, to convert it into inputs for the manufacturing process. In this sense, this plant will allow us to ensure that our policy is carried out in the future. [These appear to be references (inter alia) to the Offtake Agreement].

[9] Newsperson: (Unintelligible). Minister Rafael Ramirez: Well, yes, we are first taking here. We are guaranteeing... take note that a plant stoppage has been started right now, at the beginning of their work. For that reason, there is a lot of movement... because we are always tending to the maintenance of our installations in optimum condition.

[10] Newsperson: What will be the impact of the nationalization of FertiNitro on the people? Minister Rafael Ramirez: Well, very positive, because it will now allow us to have available the volumes of fertilizers that we may need of urea at national prices. Note that Pequiven sells the 50 kilo sack of urea at 19 Bolivars, and here FertiNitro used to sell it to us at 50 Bolivars. That is to say, a difference of more than 2.5 times. Now we will have available the price that is regulated by the state, of 19.5, and we will be able to have available all of the urea that the domestic market may require. In that sense, between this operation and the nationalization of AgroIsleña, now AgroPatria, we are going to have the entire chain to be able to supply our farm working sector, over there in the Andes so that they may produce coffee, there in the plains so they may produce corn, so that they may produce sorghum. That is to say, all that we have seen is a fundamental element for us to be able to transcend the oil-producing model, and it is a fundamental model for guaranteeing the security and the feeding of our people. In the measure that we have the inputs for the entire chain controlled by the state, such that it guarantees that no speculation will take place with them, that is to say, with the fertilizers, the chemicals, the agro-chemicals, our people we be able to continue to have food available, there will be more work the fields and, our people, across the socialist distribution network, we will then be able to have secure food at low prices, in abundance for all of our country. [Again, these appear to be references (inter alia) to the Offtake Agreement].

[11] Newsperson: What steps for our national sovereignty? Minister Rafael Ramirez: That’s right, I also want to underscore and thank the unwavering support of workers, the support of our FUTEC, which is the confederation of our workers, Socialist Workers Vanguard, all of the peoples’ organizations, the worker organizations that from, just yesterday, when the president made the announcements, are here safeguarding these installations, here at FertiNitro, as well as concurrently, our workers are in the State of Carabobo, guaranteeing, safeguarding the installations of Industria Venoco, which has also been nationalized by the revolution. Both steps are very important, because it is a sector in which we have to guarantee sovereignty. In the case of Venoco, we are dealing with a sector fundamental for production of chemicals, lubricants, greases, needed by the electrical and the industrial sectors, where the same situation was being repeated. It being PDVSA, being the State, which supplies the raw materials; well, there is a sale policy that, in a clear way, was impeding the plans to make available the natural resources for service to the people.

[12] Newsperson: How many people? Minister Rafael Ramirez: In FertiNitro, 400 persons. In Venoco we have about 360 persons. Yes, FertiNitro, FertiNitro. In... national they have about [4]50 persons, that’s more or less the number, which is the largest concentration of persons.

[…]

[13] These are very important actions, because these companies, as you well know, were companies and businesses that were remnants of the prior republic. They were companies and businesses of trans-national and national capital that were taking advantage of the supply of raw materials, cheaply, of the Venezuelan state, and of PDVSA in this plant, in particular.

[14] And I want to salute all of the workers and their political organizations. I want to salute the workers of FUTEC. I want to salute the workers of the Socialist Workers’ Vanguard. I want to salute all of our workers who, as of just yesterday, came here to secure and guarantee the operations of, and the integrity of these assets that, today, belong to the Venezuelan state. We know that we can always count on the petroleum workers, we can always count on the petrochemical workers, we can count on the working class, we can count on the workers, the engineers, the technicians that make it all possible, that from day to day, we get our energy inputs. You all know that we have waged the battle for full petroleum sovereignty; that battle, that the Bolivarian government has advanced and consolidated. And today, with Chavez, we can say that we are sovereign in the management of our petroleum resources.

[15] Now we are on the offensive to deepen food sovereignty. Only a few days ago, Commandant Chavez announced the nationalization of the AgroIsleña company, today the AgroPatria company. It is a company that allows us to provide for our farm workers, for our people, the agricultural inputs produced in the country and that the private parties held as a speculative tool, bringing poverty to the fields. This is now under the control of the State.

[16] Yesterday, the nationalization of FertiNitro was announced. So that we can see the importance of this plant we, with our petrochemical industry - Pequiven - produce at a national level two hundred, three hundred eighty thousand tons/year of urea that, as you all know, is fundamental for food production. This sole plant- FertiNitro -produces, on its own, 1,500,000 tons/year of urea. That is to say, five times more than what is produced in all of the plants nation-wide.

[17] But what was the problem? That this plant being, this plant [i.e. the FertiNitro Plant] receives gas produced by Petróleos de Venezuela, gas belonging to all Venezuelans. We sell it to them at a subsidized price, between 0.5 and 1.5 dollars per ton, per MMBTU. One has to consider, that in the world gas sells for 3 and has even gotten as high as 12 dollars per MMBTU. Here there is a subsidized price, 12 times less than it is sold for outside the country. But then these gentlemen, these private capitalists, foreign and national, produce urea fertilizer with that gas in large quantities and the majority of it is exported. That is to say, it doesn't come to supply national needs. [These appear to be references (inter alia) to FertiNitro’s foreign shareholders, including KOMSA, and to KNI and the Offtake Agreement].

[18] It has cost us a lot to get these gentlemen to sell some fertilizer to the country. And after many discussions, we were able to secure that they would sell us only 10% of their production. And do you know at what price they would sell it to us? At triple the price at which Pequiven sells fertilizer in the national market. Such that, all of the fertilizer that was produced was at the disposal of the marketing companies, in this case a North American company, Koch, which would grab all of our fertilizer and sell it outside the country at speculative prices. [These appears to be references (inter alia) to KNI and the Offtake Agreement].

[19] With this nationalization action, we are guaranteeing, in the first instance, that all of the fertilizer that our farm workers may need, all of the fertilizer that our national seeding plan may need, all of the fertilizer that we may need to produce food for our people, will be abundant, cheap and secure for all of our people. That is, that would be, the only reason.

[20] This is what Commandant Chavez has indicated - These large industrial installations located in national territory, which exploit the workers, which speculate with our own resources, should pass into the hands of the Venezuelan state. They should pass into the hands of the people. With the acquisition, with the nationalization of this plant, what we are doing is strengthening our nation’s property, the property of all the men and women that live in the national territory. But in addition, and most importantly, the control of a plant like this one, FertiNitro, will enable us to guarantee the National Seeding Plan and the food sovereignty of the country. It will guarantee that the gas produced by our workers over there in PDVSA Gas, that they produce in Anaco with so much effort and what it has cost us to have controlled our oil & gas industry, may then be converted into fertilizer to benefit our people, so that our men, women and children may have a secure food supply.

[21] Also, in the same way that we are gathered here today in the State of Anzoátegui, in the Jose Antonio Anzoátegui complex, our fellow workers are in the State of Carabobo securing the nationalized installations of the Venoco company...

[22] Finally, I want to say in the name of our President, to guarantee to our workers, that all of the despicable capitalist practices, like the outsourcing and exploitation of workers, will end at this company. There can be no outsourcing whatsoever. There can be no exploitation whatsoever of our workers.

[23] We are going to build socialism... we are going to build socialism and in this sense, the Venezuelan state and the working class have an extraordinary role to play. Fellow workers, the future is yours. For you we are building socialism, for the men and women working every day in our national industries, in order to be able to guarantee to our people, to our communities, the communities that live near all of our industrial complexes, the communities of Viñedo, the communities of Barcelona, the communities of Puerto Espirito, that all of the Venezuelan people will receive the benefits that the Venezuelan state and its workers control, then, as important a company as this one that we are controlling - FertiNitro. Companions, workers, the call is to deepen the combat, to continue deepening our revolution, and, under the guidance and orientation of Commandant Chavez, we are sure that we are going to prevail. Country, Socialism or Death! We shall conquer! Thank you, companions."

5.60.
The Tribunal finds the following facts established by the events of 10 and 11 October 2010, as recorded above. First, the Minister’s visit to and address at the FertiNitro Plant took place in the context of the Expropriation Decree, particularly Article 1 on the "mandatory acquisition of movable and real estate assets"148 of FertiNitro and Article 6 on the "occupancy" of FertiNitro’s assets. Under Article 8 of the Decree, the Minister was responsible for its execution; and the Minister referred expressly to President Chavez’s "announcements" of 10 October 2010: see paragraphs [11] and [16] above. Second, pursuant to the Expropriation Decree, the Minister was carrying out or confirming the Respondent’s "control" of the FertiNitro Plant: see paragraphs [3], [7], [20] and [23] above. Third, that control, in the Minister’s words, derived from FertiNitro’s "nationalisation" and "expropriation" by the Respondent under the Expropriation Decree: see paragraphs [7], [10], [16] and [20] above. Fourth, that control necessarily extended beyond the physical and other assets of the FertiNitro Plant to include the abrogation of any existing contractual restrictions on FertiNitro’s product being sold otherwise than for the domestic Venezuelan market, or as the Respondent might otherwise decide: see paragraphs [3], [4], [8], [10], [17], [18] and [19]. The Expropriation Decree itself said nothing expressly in regard to the abrogation of FertiNitro’s existing contracts; but its effect, read with the Minister’s address, leave no room for doubting the Respondent’s intentions towards the Offtake Agreement. Fifth, as one motive for the Expropriation Decree, the Minister referred in derogatory terms to "trans-national" companies and "foreign" capitalists: see paragraphs [6], [8], [13 and [17] above. Last, but not least, the Minister was careful to describe the Respondent’s actions within the framework of Venezuelan law: see his reference to "legal proceeding" and "legal steps for expropriation" in paragraph [7] above.
5.61.
According to the Respondent, there was no physical occupation of the Plant at that point by Pequiven’s employees or others. Instead, Mr Ramirez, as the responsible Minister "[took] control of the plant and was inspecting the installations in order to guarantee that all of FertiNitro’s assets had been secured."149 The Tribunal does not consider this description to be factually complete. By this time, the FertiNitro Plant was occupied by persons answerable to the Respondent (as distinct from FertiNitro) and whose conduct in seizing and physically controlling the FertiNitro Plant was approved and ratified by the Minister for the Respondent, as evidenced by the terms of his public address on 11 October 2010 and the Expropriation Decree cited above.
5.62.
2011: On 26 July 2011, Pequiven (represented by Mr Barrientos) applied for orders to "request the expropriation of the asset" [of FertiNitro] (in the Spanish text of the application: "solicitar la expropiación de los bienes") to the Second Circuit of First Instance of Civil, Commercial, Agrarian and Transit Law of the Judicial Circuit of the Anzoátegui State.150 As explained by the Respondent’s counsel at the Third (June) Hearing, Pequiven thereby sought orders regarding (inter alia) the appointment of an ad hoc (temporary) board of trustees to run FertiNitro with legal power of control of all aspects of its business.151
5.63.
As regards its authority to request such orders from the Anzoátegui Court, Pequiven’s application read as follows:152

"By virtue of the Expropriation Decree […] PEQUIVEN is authorized to make the necessary arrangements for the acquisition of the movable and immovable property of FERTINITRO, being granted all rights and obligations pertaining to the Bolivarian Republic of Venezuela for such purposes. PEQUIVEN is also authorized to initiate and execute the expropriation proceedings under the Expropriation Law for Public Benefit or Social Interest, published in the Official Gazette of the Bolivarian Republic of Venezuela No. 37,475 on July 1, 2002 (hereinafter "Expropriation Law ") until full and final transfer of ownership of the property listed therein to the Bolivarian Republic of Venezuela, through PEQUIVEN or a designated subsidiary thereof."

5.64.
On 29 July and 8, 9 and 10 August 2011, as requested by Pequiven, orders were made by the Anzoátegui Court pursuant to Article 6 of the Expropriation Decree, with Pequiven treated as the expropriating body under the Decree.153 These court orders overrode the existing governance by-laws of FertiNitro under Venezuelan law.154 However, much earlier as a matter of fact, these by-laws were no longer being applied within or to FertiNitro.

(v) Other Events Following the Expropriation Decree

5.65.
2010 : According to the Respondent, at the time of the Expropriation Decree (dated 10 October 2010), KOMSA’s personnel at FertiNitro were no longer fulfilling their tasks.155 The control exercised by FertiNitro’s board of directors had ceased, as Pequiven "was given control of the operations, management and capitalization of FertiNitro."156
5.66.
No meetings of FertiNitro’s board of directors or committee meetings were convened subsequent to the Expropriation Decree.157 On 9 November 2010, the FertiNitro directors appointed by KOMSA formally resigned from their positions.158 The FertiNitro-appointed directors by Polar formally resigned a few days later, on 22 November 2010.159
5.67.
On 26 November 2010, Mr Flores (of FertiNitro) sent a letter to Mr Strand (for KNI), stating:

"As per our conversation this afternoon, FertiNitro confirms the continuing of the Offtake Agreement under the fulfil of each clause such as: price, allocations of products, assignments of markets, and all the other clauses related in that agreement. Based on, that FertiNitro will send the FNSTOCK before the workday end in order to each Offtaker can see the volumes available in December".160

5.68.
On 1 December 2010, Mr Jorge Perdomo, the General Manager of FertiNitro sent a letter to Mr Strand (for KNI) as follows:

"After the announcement of Venezuelan government about FertiNitro nationalizing. FertiNitro hereby confirms the continuing and fulfilling of the Offtake Agreement made and entered on April 8, 1998 […]

Based on the current start up of the plants, FertiNitro has sent the December and January allocation of products to each Offtakers and it is expected to comply fifty percent (50%) of the actual total plants output, such as it is stipulated in the agreement. Please note that total volume for Koch in December is as follow:

Ammonia: 23,000MT +/- 10%

Urea: 34,345 MT +/- 10%

Please let us know your December program in order to FertiNitro can make all the necessary arrangement with authorities as customs, export permissions, etc."161

5.69.
On 3 December 2010, Mr Gwaltney (for KNI) sent an email message to Mr Perdomo (of FertiNitro) replying as follows:

"I am in receipt of your letter of December 1, 2010 to Jacob Strand of KNI acknowledging the nationalization of FertiNitro and KNI has authorized me to respond on their behalf. As you are aware, the government’s recent action constitutes an expropriation of KNI's, and its affiliates, interests in FertiNitro including, but not limited to, the Offtake Agreement.

Mr. Francisco Garcia recently informed me that he has been appointed by Pequiven to lead a commercial team to negotiate and compensate KNI and FertiNitro’s shareholders for the expropriation. I also understand that Pequiven has confirmed they have taken the offtake in its entirety, as part of the expropriation, and that they will compensate KNI for that. I further understand that Pequiven has requested that KNI purchase product under terms and conditions similar with the Offtake Agreement for a limited period of time while Pequiven negotiates with the lenders so as to ensure steady cash flow, in large part, for the benefit of the lenders. While we are still analyzing the full impact and ramifications of the government’s actions, we understand both Pequiven and FertiNitro’s desire to continue a commercial relationship with KNI despite having expropriated its and its affiliates’ property.

Given this, and on the understanding that Pequiven intends to compensate KNI, and its affiliates, in a manner to which they are entitled for the expropriation of their property under international law, for limited period of time until further notice, KNI agrees to purchase product under terms consistent with the Offtake Agreement. Payment for product shall be to the same historical bank accounts. It is also KNI’s expectation that FertiNitro will conduct its business affairs consistent with any and all lending obligations and in full compliance with all relevant laws.

This communication and KNI’s action in agreeing to purchase product from FertiNitro is on strictly without prejudice basis. KNI and its affiliates, hereby expressly reserve any and all rights that may exist including under the Offtake Agreement, resulting from, or in any way associated with, governmental actions including, but not limited to, rights under any domestic or international laws."162

5.70.
2011: From December 2010 onwards, Pequiven entered into agreements with the FertiNitro project’s bankers and bondholders to settle the debts of FertiNitro. This exercise was apparently completed by January 2012.163
5.71.
During 2011, representatives of Pequiven and of the other FertiNitro shareholders met on various occasions to discuss the amount of compensation due to these other shareholders (including KOMSA) from the Respondent. Such meetings were held on 16 February 2011 in New York;164 6 April and 23 May 2011 in Caracas and 1 September 2011 in Miami.165 A crucial issue between Pequiven and these shareholders was the study of and methodology for FertiNitro’s valuation.
5.72.
The negotiations between Pequiven and the FertiNitro shareholders eventually resulted in amicable settlement agreements with LAIF (as a 10% shareholder). Snamprogetti (as a 20% shareholder and EPC Contractor) also reached an inchoate agreement with Pequiven.166 It seems that there was no concluded agreement with Polar. No agreement was made with KOMSA, still less KNI which was not separately privy to these negotiations.
5.73.
On 28 June 2011, i.e. before the final meeting in September 2011, the Claimants filed their Request for Arbitration before ICSID.
5.74.
As already noted above, on 26 July 2011, Pequiven filed a Petition to the Court of First Instance of the Judicial Circuit of Anzoátegui in order to carry out the mandatory acquisition and requesting that a temporary Ad Hoc Board of Temporary Judicial Administrators be established to govern FertiNitro, further to the Venezuelan law on domestic expropriation procedure.167 Shortly thereafter, the Court designated the requested Ad Hoc Board.168 On 29 July 2011, the Court of First Instance of the Judicial Circuit of Anzoátegui issued a decision accepting jurisdiction to hear the Request for Mandatory Acquisition.169 Thereafter, these legal proceedings continued and, apparently, still continue, without payment of any compensation to the Claimants under the Expropriation Decree.
5.75.
In the summer of 2011, during their negotiations, Pequiven presented to FertiNitro’s shareholders (including KOMSA) valuation reports prepared by financial consultants called Advantis (also mistakenly called in the evidence "Adventis"). Advantis had been created by former officers of Booz Allen in Venezuela.170 There were two written reports of May and July 2011, both dated "September 2010."171 That was not the date of the documents’ production, but rather (presumably) the end-date of the calculations made by Advantis. Advantis were independent consultants retained by Pequiven to value FertiNitro in their negotiations with (inter alios) KOMSA. Advantis was not advising or howsoever acting for the Claimants. Their reports were not "joint reports;" nor were their valuations ever accepted as correct by KOMSA or (so it appears) by the Respondent itself. Neither valuation was professed by Pequiven as a firm offer by the Respondent capable of acceptance by KOMSA, without further negotiations. Moreover, Pequiven had indicated to the shareholders that it did not have the authority nor the funds - to conclude by itself -any agreement for the Respondent.172
5.76.
The circumstances whereby these two reports were transmitted to KOMSA in 2011 remain unclear on the evidence adduced in this arbitration. As to the first Advantis report of May 2011 entitled "Valoracíon de FertiNitro", it appears from contemporary email messages dated 18 and 19 May 2011 that it was sent by Advantis to Pequiven and by Pequiven to KOMSA as a shareholder in FertiNitro,173 presumably for the meeting that took place between their representatives on 23 May 2011 in Caracas.174 Mr Gwaltney (for KOMSA) sent a letter of 19 May 2011 to Pequiven criticising this first Advantis valuation.175 As to the second Advantis report of July 2011 also entitled "Valoracíon de FertiNitro", the Claimants accept that, as with the first report, it was transmitted by Pequiven to KOMSA as a shareholder in FertiNitro.176
5.77.
Mr Barrientos (of Pequiven) explained the background to these Advantis reports in his oral testimony at the First (September) Hearing:177

"At the first meeting that we had in February 2011, one of the requests that Pequiven tabled was that, working together with the expropriated shareholders, that we would hire a third party to come in and give us an evaluation of the company, and then on that basis, establish compensation. But none of the expropriated shareholders accepted that proposal and that is why Pequiven on its own hired a third party to do the evaluation [...] Adventis is a company that has provided services to a variety of mixed companies in valuation for Pequiven, in other areas as well, it is a well recognised firm, and of course this is something that we have taken very seriously. It was something that was enshrined in a Government decree. We [Pequiven] were designated as the expropriating entity and we were taking this very seriously. We hired Adventis, we were trying to reach a consensus with the expropriated shareholders in order to get them involved in selecting a single valuation expert and since they didn't agree with this we felt free to go out and work with the company that we felt was the most qualified to do this job, and that was Adventis. It has considerable credentials which give it trustworthiness for this type of valuation and that’s why we decided to work with them. […] as part of the negotiation team I met with them, along with the rest of the group […] I can tell you that Adventis is a well recognised company and I don't think they would have jeopardised their reputation by getting involved in that type of valuation."

The witness had been asked whether Advantis had been instructed by Pequiven "to make the valuation as low as possible ."178

5.78.
The Tribunal returns to the content of these two Advantis Reports later in Part IX of this Award. For present purposes, it suffices to record that the first report valued FertiNitro at US$ 398 million as at 30 September 2010179 (thereby valuing KOMSA’s 25% interest at US$ 99.5 million); and the second report valued FertiNitro at US$ 452 million as at 30 September 2010 under a first scenario;180 that report also contained an alternative scenario which contained elements which increased and others which decreased the value of Fertinitro with a total value of US$ 561million (thereby valuing KOMSA’s 25% interest at US$ 113 million under the first scenario and US$ 140.25 million under the second).181 Both reports used a DCF methodology.
5.79.
2012: By January 2012, as already indicated, FertiNitro had satisfied the debts owed to its bondholders and banks. As confirmed by the Respondent’s counsel at the Third (June) Hearing:

"In December 2011, FertiNitro satisfied its obligations with respect to the bondholders and the banks. At that point, once those obligations were satisfied, there was no longer a commercial requirement to have the offtake agreement in place. As part of its obligation to operate for the commercial purpose of FertiNitro, the ad hoc board of trustees took the decision that by getting rid of the offtake agreement, it would have the opportunity to pursue more lucrative sales agreements with other customers; or, to the extent necessary, to use production to satisfy domestic demand. "182

5.80.
On 28 February 2012, the President of the ad hoc board of trustees of FertiNitro sent a letter to KOMSA and KNI, for the attention of Mr Gwaltney and Mr Parra, stating (inter alia):

"I hereby notify you that, in accordance with the Resolution issued by the Board of Temporary Ad-Hoc Trustees of Fertilizantes Nitrogenados de Venezuela, FertiNitro, C.E.C., ("FertiNitro"), as is evidenced by appointment effected by Decrees handed down by [the Anzoátegui Court] [...]; effective from the date of this communication, FertiNitro shall not sell any more nitrogen fertilizers (urea and ammonia) to Koch Oil, S.A. under the marketing agreement entered into between Petroquímica de Venezuela S.A., International Petrochemical Sales Limited, Koch Oil S.A., and Fertilizantes Nitrogenados de Venezuela, C.E.C. on April 8, 1998; all of which is in fulfilment of what is established in Decree 7,713 published in Official Gazette of the Bolivarian Republic of Venezuela No. 39,528 of October 11, 2010, which orders the compulsory acquisition of movable and immovable property [..."183

5.81.
The Parties disagree as to the nature of the sales transactions of ammonia and urea from FertiNitro to KNI made from the date of the Expropriation Decree (dated 10 October 2010) to the issuance of FertiNitro’s letter above (28 February 2012).
5.82.
According to the Respondent, all of FertiNitro’s ammonia and urea was sold pursuant to the Offtake Agreement; and that, until February 2012, FertiNitro continued "[complying] with the percentages permitted under the Offtake Agreement to supply the domestic market."184 It was only after February 2012 that the percentage allocated to the domestic market increased substantially to fulfil the Respondent’s needs.185 Similarly, "KNI and Pequiven received their share of urea and ammonia, at the same discounted price."186 In addition, Mr Barrientos (as the Project Manager and General Manager of Pequiven) testified that, after Decree 7,713 was issued, FertiNitro entered into a Stand Still Agreement with its banks and bondholders which provided for the further continuation of the Offtake Agreement; and that it was only terminated later for commercial reasons.187
5.83.
The Tribunal notes that this Stand Still Agreement was apparently made in December 2010 by Pequiven for FertiNitro. It was not adduced in evidence by the Respondent in this arbitration. The Claimants were not parties to this Stand Still Agreement. There is no evidence that its terms were known at the time by KNI, save as Pequiven chose to describe its effect to the Claimants.
5.84.
In response to the Respondent’s case, the Claimants allege that the "post expropriation product purchases made by KNI from FertiNitro were made pursuant to a new ad hoc arrangement".188 They claim that "after the expropriation, the bondholders and creditors continued to look to the product purchases and the revenues they generated, continued to have power, through the trustee, over the Offshore Accounts, and could have exercised remedies, including assuming control of the plant in the event [of default]."189
5.85.
The Tribunal finds, on the limited evidence adduced in this arbitration, that the Respondent’s conduct was ambiguous, being dependent upon different perspectives. Even from Pequiven’s own perspective, as Mr Barrientos acknowledged in his testimony:

"Without any doubt whatsoever, immediately after Decree 7713, a great deal of uncertainty arose."190 Towards FertiNitro’s banks and bondholders, it became important for the Respondent ostensibly to maintain the continuing efficacy of the Offtake Agreement, as apparently achieved by the Stand Still Agreement, so as to avoid a cross-default under the Common Security Agreement and other agreements with the banks and bondholders. From the Respondent’s perspective towards KNI, there was there no such necessity. The Tribunal returns to KNI’s position in Part VII below.

(vi) The "Historical Claims" (as regards Taxes and VAT)

5.86.
As summarised in Part II above, KOMSA advances claims relating to three tax related measures and VAT credits, as part of its "Historical Claims".
5.87.
New Taxes: In August 2005, the Respondent enacted the Organic Law on Science, Technology and Innovation (Ley Orgánica de Ciencia, Tecnología e Inovación) ("Science and Technology Law").191 In accordance with Articles 35 and 42 of this Law, "large companies in the country dealing with the activities established in the Organic Law on Hydrocarbons and Gaseous Hydrocarbons" shall donate two per cent of their gross revenue obtained in the Venezuelan territory, to activities that would be "considered to be Contributions and Investments in Science, Technology and Innovations and their Application."192 According to the Respondent, Article 39 of the Science and Technology Law provides that contributions can be tax deductible.193
5.88.
This Science and Technology Law, a law of general application, was being implemented before FertiNitro began to operate and upon FertiNitro’s initiation of operations it also became applicable to it. After the enactment of the 2009 Petrochemical Law, FertiNitro’s contribution rate under the Science and Technology Law was reduced from 2% to 0.5%, because petrochemical activities stopped being categorized as an activity within the Hydrocarbon sector.194
5.89.
According to the Claimants, the total amount that FertiNitro contributed in compliance with the Science and Technology Law in the period 2006-2010 amounted to approximately US$ 22.35 million.195 According to the Respondent "FertiNitro’s contributions were almost exclusively invested internally,"196 and "on rare occasions, [FertiNitro] contributed to a public project."197
5.90.
Increased Taxes: On 30 December 2005, the municipality of Simón Bolivar, in the State of Anzoátegui (where the FertiNitro Plant is located), issued an ordinance that set or modified the tax rate applicable to all companies considered to be in the "industrial, commercial, service or similar economic activities" in the municipality (the "Municipal Ordinance").198 The Municipal Ordinance, applicable to FertiNitro for the 2006 fiscal year, established an increase in the municipal tax rate from 1% to 4%.199
5.91.
Pursuant to the Municipal Ordinance "[a]ll industrial economic activities exercised by consortium or any other kind of association [...] of the Energy Natural Gas Production Sector and all activities related to the oil and gas and petrochemical industry […] linked to the activity that is directly or indirectly related to the Jose Petrochemical Complex" would be subject to a 4% tax rate over the company’s gross revenue.200 The Parties disagree on which types of companies are located in the Jose Petrochemical complex and would be affected by the Ordinance.201
5.92.
In 2006, before FertiNitro would start paying the taxes at the higher rate, Pequiven engaged in negotiations with the municipality to reduce the municipal tax for all the mixed companies in which Pequiven had equity investments, including FertiNitro, Metor, Superoctoanos and Supermetanol.202 FertiNitro’s Board agreed to entrust Pequiven to handle such negotiations.203
5.93.
In connection with these negotiations, on 14 November 2006, the Municipality issued a decree pursuant to which FertiNitro would be applied a 2% municipal tax for 2006 and 2.4% for 2007, instead of 4% (the "Municipal Decree").204 The Decree was formally notified to FertiNitro on 6 December 2006.205
5.94.
On 14 December 2006, the FertiNitro Board of Directors Meeting issued a Resolution that "ratified the General Management’s decision to accept the 2% rate for 2006 and approved accepting the 2.4% rate for 2007."206
5.95.
VAT: As an exporter from Venezuela, FertiNitro had the right under Venezuelan law to recover credits for VATs borne for the acquisition and import of goods and services used in the manufacture of goods for export.207 Such tax credits were provided in the form of Special Certificates of Tax Refunds (or "CERTS" for the Spanish acronym) and were governed by the Law of May 1999 on Partial Reform of the Law on Value Added Tax (the "VAT Law").208 CERTS could "be used or assigned for the payment of national taxes [...] tax liability, tax penalties and procedural expenses."209 CERTS are issued in Bolivares and the income tax is also levied in Bolivares. The Respondent did not make "actual payments" to FertiNitro pursuant to VAT credit requests.
5.96.
Ms Carolina Nunez, a former SENIAT employee, testified that: "[b]etween 2007 to 2012, the process took as long as two or three years from submission of a request to final issuance of a CERT" (even though the Law prescribes a 30-day period); and it affected all tax payers equally.210
5.97.
During the course of its operations, FertiNitro regularly submitted request for reimbursements to the Respondent’s competent authorities. On or around 2007 and thereafter, the Respondent’s tax authorities failed to issue certain of the requested CERTS to FertiNitro on a timely basis.211 FertiNitro complained to the relevant tax authorities.212
5.98.
The Parties disagree on whether the requested VAT credits were ultimately granted to FertiNitro. According to the Respondent, "each of the VAT credits claimed by the Claimants in this proceeding was provided to FertiNitro."213 It adds that the amounts issued to FertiNitro could differ from the amount initially requested; and that FertiNitro never complained about those differences.214
5.99.
The Comisario Report: In accordance with Venezuelan law, FertiNitro was required to obtain annual audit reports from a Comisario. The Parties agree that "[a] Comisario" is an "auditor that is required under Venezuelan law to review audits conducted by private auditors."215
5.100.
In accordance with the Venezuelan Code of Commerce, the Comisarios are appointed by the company’s shareholders; and they have to report to the audited company’s shareholders. Along with the report in which they explain the results of their examination of the balance sheets and management practices, the Comisarios may include proposals, suggestions and observations. Such recommendations are not binding on the audited company.
5.101.
On 7 September 2006, the Comisario for FertiNitro issued its report containing certain recommendations and criticisms (the "Comisario Report").216 It is a document of some four pages, with additional appendices. The Claimants contend that this Comisario had a prior relationship with Pequiven and therefore the Comisario Report is biased in Pequiven’s favour.217 The Tribunal does not accept this criticism as affecting the relevant contents of the report (to which it returns later in this Award).

PART VI: JURISDICTION ISSUES

(1) Introduction

6.1.
The Respondent objects to the jurisdiction of ICSID and the competence of the Tribunal ratione materiae, alleging that the Offtake Agreement does not constitute an "investment" under both the Treaty and the ICSID Convention; and that the Tribunal has therefore no competence, or jurisdiction, to decide KNI’s claims against the Respondent in this arbitratio