• Copy the reference
  • Tutorial video

Decision on Jurisdiction

I. PROCEDURE

1.
On 6 September 2007, the International Centre for Settlement of Investment Disputes ("ICSID" or "the Centre") received from (i) three U.S. (Delaware) companies, Mobil Corporation ("Mobil"), Mobil Cerro Negro Holding, Ltd. ("Mobil CN Holding"), and Mobil Venezolana de Petróleos Holdings, Inc. ("Mobil Venezolana Holdings"); (ii) two Bahamian companies, namely Mobil Cerro Negro, Ltd. ("Mobil CN"), and, Mobil Venezolana de Petróleos, Inc. ("Mobil Venezolana"); and (iii) one Dutch company, Venezuela Holdings, B.V. ("Venezuela Holdings"), a request for arbitration, dated 6 September 2007, against the Bolivarian Republic of Venezuela ("Venezuela" or the "Respondent").
2.
On the same day, the Centre, in accordance with Rule 5 of the ICSID Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings ("the Institution Rules") acknowledged receipt of the request and on the same day transmitted a copy to Venezuela and to its Embassy in Washington, D.C.
3.
The Request for Arbitration, as supplemented by the Claimants’ letters of 28 September 2007, was registered by the Centre on 10 October 2007, pursuant to Article 36(3) of the ICSID Convention. On the same day, the Secretary-General of ICSID, in accordance with Rule 7 of the Institution Rules, notified the parties of the registration and invited them to proceed to constitute an Arbitral Tribunal as soon as possible.
4.
By letter of January 7, 2008, the Claimants confirmed the parties’ agreement on the number and method for the constitution of the Arbitral Tribunal, according to which the Tribunal shall be composed of three arbitrators, one appointed by each party and the third one, who shall serve as the President of the Tribunal, to be appointed by agreement of the parties with the assistance of the first two appointed arbitrators.
5.
On 7 January 2008, the Claimants appointed Professor Gabrielle Kaufmann-Kohler, a national of Switzerland, as arbitrator. On 31 January 2008, the Respondent appointed Dr. Ahmed S. El-Kosheri, a national of Egypt, as arbitrator.
6.
The parties having failed to appoint a presiding arbitrator, and more than 90 days having elapsed since the registration of the request for arbitration, the Claimants, by letter of 16 May 2008, requested the Chairman of the ICSID Administrative Council to appoint the presiding arbitrator, pursuant to Article 38 of the ICSID Convention and ICSID Arbitration Rule 4. On 25 July 2008, the Chairman of the ICSID Administrative Council, in consultation with the Parties, appointed H.E. Judge Gilbert Guillaume, a national of France, as the presiding arbitrator.
7.
All three arbitrators having accepted their appointments, the Acting Secretary-General of ICSID, by letter of 8 August 2008, informed the Parties of the constitution of the Tribunal, consisting of H.E. Judge Gilbert Guillaume, Professor Gabrielle Kaufmann-Kohler and Dr. Ahmed S. El-Kosheri, and that the proceeding was deemed to have begun on that day, pursuant to Rule 6(1) of the ICSID Arbitration Rules.
8.
The first session of the Tribunal was, with the agreement of the parties, held on 7 November 2008, at the World Bank’s Paris Conference Center. Present at the session were:

Members of the Tribunal:

1. H. E. Judge Gilbert Guillaume, President of the Tribunal

2. Professor Gabrielle Kaufmann-Kohler, Arbitrator

3. Dr. Ahmed S. El-Kosheri, Arbitrator

ICSID Secretariat:

4. Ms. Katia Yannaca-Small, Secretary of the Tribunal

For the Claimants:

5. Mr. Oscar M. Garibaldi, Covington & Burling LLP

6. Mr. Eugene D. Gulland, Covington & Burling LLP

7. Mr. Toni D. Hennike, Law Department, ExxonMobil Corporation

8. Mr. Charles A. Beach, Law Department, ExxonMobil Corporation

9. Mr. Luis Marulanda del Valle, Law Department, ExxonMobil Corporation

For the Respondent:

10. Mr. George Kahale, III, Curtis Mallet-Prevost, Colt & Mosle LLP

11. Ms. Gabriela Álvarez Avila, Curtis, Mallet-Prevost, Colt & Mosle, S.C

12. Ms. Miriam K. Harwood, Curtis Mallet-Prevost, Colt & Mosle LLP

13. Mr. Peter M. Wolrich, Curtis Mallet-Prevost, Colt & Mosle LLP

14. Dr. Bernard Mommer, Bolivarian Republic of Venezuela

15. Ms. Hildegard Rondón de Sansó, Bolivarian Republic of Venezuela

16. Dra. Beatrice Sansó de Ramirez, Bolivarian Republic of Venezuela

17. Ms. Mari el Pérez, Bolivarian Republic of Venezuela

18. Ms. Irama Mommer, Bolivarian Republic of Venezuela

9.
Various aspects of procedure were determined at the session, including a schedule for the submission of written pleadings.
10.
The Respondent’s Memorial on Jurisdiction was filed on 15 January 2009, followed by the Claimants’ Counter-Memorial on Jurisdiction on 16 April 2009, the Respondent’s Reply on Jurisdiction on 15 June 2009 and the Claimants’ Rejoinder on Jurisdiction on 17 August 2009.
11.
On 9 September 2009, the Tribunal held a procedural conference with the parties by telephone.
12.
An oral Hearing on Jurisdiction was held at the offices of the World Bank’s Paris Conference Center, on 23-24 September 2009. Present at the hearing were:

Members of the Tribunal:

1. H.E. Judge Gilbert Guillaume, President of the Tribunal

2. Professor Gabrielle Kaufmann-Kohler, Arbitrator

3. Dr. Ahmed S. El-Kosheri, Arbitrator

ICSID Secretariat:

4. Ms. Katia Yannaca-Small, Secretary of the Tribunal

Attending on behalf of the Claimants:

5. Mr. Oscar Garibaldi, Covington & Burling LLP

6. Mr. Eugene Gulland, Covington & Burling LLP

7. Mr. Thomas Cubbage, Covington & Burling LLP

8. Mr. Miguel López Forastier, Covington & Burling LLP

9. Mr. David Shuford, Covington & Burling LLP

10. Ms. Luisa Torres, Covington & Burling LLP

11. Ms. Mary Hernandez, Covington & Burling LLP

12. Mr. Andres Barrera, Covington & Burling LLP

13. Mr. Andrés A. Mezgravis, Travieso Evans Arria Rengel & Paz

14. Mr. Theodore Frois, ExxonMobil Corporation

15. Ms. Toni D. Hennike, ExxonMobil Corporation

16. Mr. Charles A. Beach, ExxonMobil Corporation

17. Mr. Eugene Silva, ExxonMobil Corporation

18. Mr. Alberto Ravell, ExxonMobil Corporation

19. Mrs. Anna Knull, Exxon Mobil Corporation

20. Mr. James R. Massey, witness

21. Professor Alan Brewer-Carías, expert

22. Professor Christoph Schreuer, expert

Attending on behalf of the Respondent:

19. Mr. George Kahale III, Curtis, Mallet-Prevost, Colt & Mosle LLP

20. Mr. Mark O'Donoghue, Curtis, Mallet-Prevost, Colt & Mosle LLP

21. Mr. Miriam Harwood, Curtis, Mallet-Prevost, Colt & Mosle LLP

22. Mr. Peter Wolrich, Curtis, Mallet-Prevost, Colt & Mosle LLP

23. Ms. Gloria Diaz, Curtis, Mallet-Prevost, Colt & Mosle LLP

24. Mr. Christopher Grech, Curtis, Mallet-Prevost, Colt & Mosle LLP

25. Mr. Joaquin Parra, Bolivarian Republic of Venezuela

26. Dr. Bernard Mommer, Bolivarian Republic of Venezuela

27. Mr. Armando Giraud, Bolivarian Republic of Venezuela

28. Ms. Moreeliec Peña, Bolivarian Republic of Venezuela

13.
Following the hearing, Members of the Tribunal deliberated by various means of communication, including a meeting for deliberations in Paris on 2 December 2009.
14.
The Tribunal has taken into account all the pleadings, documents and testimonies that were submitted in this case.

II. SUMMARY OF THE PARTIES’ SUBMISSIONS

A - THE RESPONDENT’S MEMORIAL ON JURISDICTION

15.
On 15 January 2009, the Bolivarian Republic of Venezuela submitted a Memorial containing its Objections to Jurisdiction (the "Memorial").

1- Background of the case

16.
Such Memorial first reviews the background of the case. In this respect it stresses the strategic nature of the oil industry in Venezuela under article 302 of the Constitution. It recalls that in 1975, the oil industry was nationalized through the Organic Law that Reserves to the State the Industry and Trade of Hydrocarbons (the "1975 Nationalization Law"). In fact, the Law "permitted only two means of private participation in the oil industry: (i) operating agreements, which were to be simple service contracts; and (ii) association agreements, which were permitted only in "special cases". "The latter were valid only if a State company had a participation that guarantied control by the State and only if the agreement was approved by Congress"1 In this context, a State-owned petroleum company, Petróleos de Venezuela (PDVSA) was then created.
17.
The 1990’s marked a change of policy known as Apertura Petrolera. Foreign investors returned to the Venezuelan oil industry through "progressively more strained interpretations of the 1975 Nationalization Law"2. In this framework, an agreement was entered into on 28 October 1997 by Lagoven Cerro Negro S.A. (now PDVSA Cerro Negro S.A., hereinafter referred to as Lagoven or "PDVSA CN", a subsidiary of PDVSA with Veba Oel Venezuela Orinoco GmBH (Veba), a German corporation, and Mobil Producción e Industrialización de Venezuela, Inc. (MPIV), a Delaware corporation, for the production and upgrading of extra-heavy crude oil in the Orinoco Oil Belt. The agreement (the "Cerro Negro Agreement") did not create any "contractual relationship with the Republic and imposed no restriction on the right of the Government to exercise its authority over the petroleum industry"3. It only provided for compensation of the contracting private parties by Lagoven in the event that certain governmental actions defined in the contract as "Discriminatory Measures" would result in a "Material Adverse Impact", subject to a ceiling on compensation. Disputes between the Parties related to the Cerro Negro Project would be governed by Venezuelan law and submitted to arbitration within the International Chamber of Commerce (ICC).
18.
Moreover Profit Sharing Agreements were authorized by the Congress of Venezuela in 1995 to permit private investors "to explore for oil with no participation by a State owned entity"4 In this framework, the La Ceiba Agreement was concluded on 10 July 1996. As of June 2007, Mobil Venezolana (Bahamas) was one of the parties to that Agreement. Here again, the contract "imposed no limitations whatsoever on the sovereign rights" of Venezuela5.
19.
A new Hydrocarbon Law was adopted in 20016 and from October 2004, a number of measures were taken by the Government of Venezuela to regulate the petroleum industry. The royalty rates were increased in October 2004. Then "the Minister of Energy and Mines issued an Instruction on April 12, 2005, declaring that the operating service agreements were illegal and setting in motion an orderly process of "migration" of those agreements to the new form of mixed companies required under the 2001 Hydrocarbons Law"7. In May 2006, an extraction tax of 33 1/3 % was enacted. In August 2006, the income tax rate was increased to 50 % and "term sheets were prepared for all companies involved in the associations, outlining the proposed conditions for conversion into mixed companies consistent with the 2001 Hydrocarbons Law. Discussions regarding migration failed to reach fruition, and on 8 January, 2007, the President of the Republic announced that all the projects that had been operating outside the framework of the 2001 Hydrocarbons Law, including the Cerro Negro and La Ceiba Projects would be nationalized"8. A decree of 26 February 2007 called for the transformation (called "migración") of the oil associations (including both Projects) into mixed companies approved by the National Assembly (the "Nationalization Decree"). Amicable settlements were arrived at in most cases. However for the Cerro Negro and La Ceiba Projects, "Exxon Mobil has insisted on demands for grossly exaggerated compensation that made settlement with it impossible"9.
20.
In the midst of the changes in the Venezuelan petroleum industry thus described, the Claimants in October 2005 created a new entity under the laws of the Netherlands, Venezuela Holdings, and inserted it into the corporate chains for the Cerro Negro and La Ceiba Projects in February 2006 and November 2006 respectively.
21.
A sa result of this restructuring, Mobil (Delaware) owns 100% of Venezuela Holdings (Netherlands), which owns 100% of Mobil CN Holding (Delaware), which owns 100 % of Mobil CN (Bahamas), which finally owns a 41 2/3 % interest in the Cerro Negro Association.
22.
Venezuela Holdings (Netherlands) also owns 100 % of Mobil Venezolana Holdings (Delaware), which owns 100 % of Mobil Venezolana (Bahamas), which finally owns a 50 % interest in the La Ceiba Association.
23.
As a consequence, according to Venezuela, the claims addressed to the Tribunal fall into three general categories:

"(a) claims deriving from Mobil CN’s interest in the Cerro Negro Project;

(b) claims deriving from Mobil Venezolana’s interest in the La Ceiba Project;

(c) claims deriving from Mobil’s investment in the capital of the two operators, OCN and Agenda Operadora La Ceiba"10.

24.
The jurisdictional grounds alleged for the first two categories are:

a. The 1999 Venezuelan Law on the promotion and protection of investments (the "Investment Law");

b. The 1993 bilateral investment treaty between the Netherlands and Venezuela (the "BIT" or the "Treaty").

25.
The sole alleged basis for jurisdiction over the last of Mobil’s claims is the "Investment Law".

2- Objections to Jurisdiction

26.
Venezuela first contends that Article 22 of the Investment Law does not provide the requisite clear and unambiguous consent to arbitration of this dispute. In this respect, it refers to the text itself of the law, to Venezuelan legal principles and to a decision rendered on 17 October 2008 by the Venezuelan Supreme Court. It moreover stresses that a comparison of Article 22 with other national investment laws leads to the same conclusion. It adds that a comparison with the language of consent in ICSID’s model clauses also makes clear that consent to ICSID jurisdiction does not exist in the present case. Finally it submits that in any case, Claimants Venezuela Holding, Mobil CN Holding and Mobil Venezolana Holdings are not "the owners" of the direct investments in Venezuela or "the one who actually controlled" them11. Therefore they do not qualify as "international investors" under the Investment Law.
27.
Venezuela contends that the BIT does not provide a basis for ICSID jurisdiction over the dispute. It submits that Venezuela Holdings is a "corporation of convenience" created in anticipation of litigation against the Republic of Venezuela for the sole purpose of gaining access to ICSID jurisdiction. It concludes that "this abuse of the corporate form and blatant treaty-shopping should not be condoned"12 In support of this argument, it invokes ICSID case law in Autopista v. Venezuela, Tokios Tokelés v. Ukraine and Aguas del Tunari v. Bolivia. It moreover submits that Claimants Mobil CN, Mobil CN Holding, Mobil Venezolana and Mobil Venezolana Holdings cannot obtain jurisdiction under the Dutch treaty, because of their nationality. It finally contends that indirect investments, as those cited by the Claimants, do not qualify for protection under that treaty.
28.
Venezuela concludes that "for the reasons set forth above, the claims set forth in the Request should be dismissed in their entirety"13.

B - THE CLAIMANT’S COUNTER MEMORIAL ON JURISDICTION

29.
On 16 April 2009, the Claimants submitted a Counter-Memorial on Jurisdiction (the "Counter-memorial").

1- Statement of facts

30.
The Claimants first state that "there is no genuine dispute about the main events giving rise to this arbitration"14. They stress in particular that Venezuela "has admitted that it ‘nationalized’ the Cerro Negro and La Ceiba Projects in 2007"15.
31.
The Claimants however submit that "the Respondent’s chronology of relevant events is misleading"16. They contend that the Venezuelan Government gave repeated assurances after 2001 that it would honor contracts signed during the oil opening. In particular, the Government entered on 16 January 2002 into a Royalty Procedures Agreement accepting that the royalty rate for the Cerro Negro Project would remain at the reduced rate of 1% and would not for the life of the Cerro Negro Project exceed 16 2/3 % (instead of the 30 % provided for in the 2001 Law)17. Moreover, the Claimants submit that, contrary to the allegations of the Government of Venezuela, the Government was not willing in 2006 to negotiate the terms of a "migración" of the Project to a mixed enterprise. Then, as a follow up to a speech by President Chávez of 8 January 2007, the National Assembly enacted on 1st February 2007 an Enabling Law under which a Nationalization Decree was taken on 26 February 2007. As ordered by that decree and under threat of military force, Operadora La Ceiba’s and Operadora Cerro Negro’s assets and operation were transferred to PDVSA in April 2007 "with full reservation of rights". In June 2007, Venezuela fully and finally expropriated the entire investments.
32.
The Claimants then explain how their investments were restructured in 2004-2006 through a holding company in the Netherlands. This process "began in late 2004, immediately after the Respondent increased the royalty rate for Orinoco Oil Belt projects from 1 % to 16 2/3 %"18' [It] "was completed in 2006, well before the Republic of Venezuela made announcements that it intended to nationalize the Orinoco Oil Belt and profit-sharing projects"19. During that period, new and important investments were projected and made. The restructuring "was not intended, nor could it have been intended to ‘position’ the Claimants for disputes that ‘had arisen,’ as alleged by the Respondent"20.
33.
The Claimants add that the Cerro Negro Association Agreement does not curtail their rights to prosecute this case. On the contrary, it requires Mobil Cerro Negro to commence and pursue legal claims against Venezuela parallel to the proceedings in the ICC case against PDVSA and PDVSA-CN. Moreover, the agreement "does not limit the recovery to which the Claimants are entitled in this arbitration"21. They do not contest the right of Venezuela to expropriate their investments as long as the Respondent complies with the requirements under the Treaty, general international law and Venezuela's own law, "including the payment of full compensation"22. They assert that this obligation is referred to in the Offering Memorandum and the Common Security Agreement entered for the financing of the Cerro Negro Project, also mentioned by the Respondent.
34.
The Claimants further submit that they engaged in good faith negotiations with the Government of Venezuela. The negotiation on the terms of the "migración" open before the nationalization was completed, failed "over non-economic terms imposed by the Government, including ‘elimination of arbitration’"23. The negotiation failed because Venezuela was not prepared to pay compensation based on fair market value, as legally required.
35.
The Claimants then contend that PDVSA purchased bonds related to the Cerro Negro Project to avoid a default resulting from the Respondent’s expropriation.
36.
They finally contend that Mobil Cerro Negro has not engaged in any campaign of harassment against PDVSA or PDVSA-CN, as the Respondent alleged. It only sought conservatory measures in various jurisdictions to ensure that the award to be rendered in the ICC arbitration would not become illusory.

2- Legal basis for jurisdiction

37.
Turning to jurisdiction, the Claimants contend that the requirements for ICSID jurisdiction are met ratione materias, ratione personae, and ratione voluntatis.
38.
They first submit that Venezuela consented to that jurisdiction through Article 22 of the Investment Law. This text must be interpreted objectively and in good faith under the ICSID Convention and the relevant principles of international law, as recognized by ICSID case law. It must, in particular, take into account the principle of effet utile. The Claimants add that their interpretation is confirmed by the context and purpose of the Investment Law, as well as the legislative intent. Moreover, "the Respondent’s strained comparisons of Article 22 of the Investment Law with consent formulations in other domestic investment statutes and the ICSID Model Clauses are irrelevant"24. They submit that the decision rendered in 2008 by the Supreme Court of Venezuela is "not binding on this Tribunal" and "is not entitled to authority of any kind"25. They contend that "there is no basis under the Investment Law for the proposition that the concepts of "international investment" and "international investor" presuppose direct ownership or direct control over the investment"26. They add that in any case Venezolana Holdings, Mobil Cerro Negro Holding and Mobil Venezolana Holdings are international investors under the Investment Law.
39.
The Claimants then state that Venezuela consented to ICSID jurisdiction under Article 9 of the BIT.
40.
In this respect they first state that Venezuela Holding is not a "corporation of convenience "created" for the sole purpose of gaining access to ICSID jurisdiction"27. According to the Claimants, the objection raised on that basis by Venezuela fails both on factual and legal grounds. There is no legal basis for imposing nationality requirements extraneous to the Treaty or for disregarding the nationality of those holdings. There is no more legal basis for piercing Venezuela Holding’s corporate veil.
41.
The Claimants further submit that not only Venezuela Holdings, but also Mobil Cerro Negro, Mobil Cerro Negro Holding, Mobil Venezolana and Mobil Venezolana Holdings are nationals of the Netherlands protected by the Treaty. Finally they contend that the Treaty protects indirect investments. On all those points, they invoke ICSID case law.
42.
In the light of those arguments, the Claimants "request the following relief in the form of an Award on Jurisdiction:

i. A declaration that the dispute is within the jurisdiction of ICSID and the competence of this Tribunal;

ii. An order dismissing all of the Respondent’s objections to the jurisdiction of ICSID and the competence of the Tribunal;

iii. An order that the Respondent pay all costs of the proceedings on jurisdiction, including the Tribunal’s fees and expenses and the costs of the Claimants’ legal representation, subject to interest; and

iv. Such other relief as might be right and proper"28.

C - THE RESPONDENT’S REPLY ON JURISDICTION

43.
On 15 June 2009, Venezuela submitted its Reply on Jurisdiction (the "Reply").
44.
It first states that the Claimants’ version of the facts omits a few important points. It stresses in particular that Mobil CN "received a very robust return"29 from its investments and that, contrary to the Claimants’ evaluation, the true value of the interest at issue in this case is substantially less than US$ 1 billion30. It adds that the measures complained of by the Claimants were taken in the legitimate exercise of Venezuela’s sovereign rights and were reasonable and non discriminatory.
45.
Venezuela then contends that the language of Article 22 does not support Claimants’ position on jurisdiction. It submits that Venezuelan law is necessarily part of the analysis of that article. Under the law of Venezuela, as well as under international law, consent to arbitrate must be clear and unequivocal. Article 22 does not contain such consent. "The provision constitutes recognition and confirmation by the State that arbitration is a legitimate means of settling investment disputes with the State if and when the State has consented to arbitration under a specific treaty or agreement"31. That interpretation corresponds to the text, is compatible with the principle of effet utile and is supported by ICSID case law, as well as the long standing Venezuelan hostility towards arbitration. A comparison of Article 22 with other examples of true consent further undermines Claimants’ position in this case. Finally, "there is no legislative history militating against the plain language of the statute"32.
46.
Venezuela adds that, in any case, jurisdiction does not exist under the Investment Law and its implementing regulations for indirect investments, such as those of Venezuela Holdings, Mobil CN Holdings and Mobil Venezolana Holdings.
47.
The Respondent then reaffirms that the Treaty does not establish a basis for jurisdiction in the present case. It stresses that ICSID case law provides "a clear set of factors to be taken into account in determining whether there has been an abuse through a ‘corporation of convenience’ for purposes of obtaining ICSID jurisdiction"33. Those conditions are not met here. The restructuring occurred long after the investment. It was took effect only in order to gain access to ICSID. The disputes were not only foreseeable, but they had actually been identified and notified to Respondent before the Dutch company was even created. The restructuring did not create a protected investment under the good faith standards articulated in the Phoenix v. Czech Republic case. There was an abuse of rights.
48.
Venezuela further recalls that Mobil CN and Mobil Venezolana are companies organized under the laws of the Bahamas and that Mobil CN Holding and Mobil Venezolana Holdings are companies organized under the laws of the State of Delaware (USA). It submits that in any event those companies cannot bring claims as "Dutch nationals" in their own right. It contends in particular that this is incompatible with Article 25 of the ICSID Convention.
49.
The Respondent finally submits that the investments of Venezuela Holdings, Mobil Cerro Negro Holding and Mobil Venezolana Holdings consist of equity interests in their immediate subsidiaries organized under the laws of the USA and the Bahamas. As such they are not "investments in the territory" of Venezuela. Those companies thus lack standing to assert jurisdiction under the BIT.
50.
Venezuela finally maintains that the claims should be rejected for lack of jurisdiction.

D - THE CLAIMANT’S REJOINDER ON JURISDICTION

51.
On 17 August 2009, the Claimants submitted their Rejoinder on Jurisdiction (the "Rejoinder").
52.
They first reaffirm that the Respondent consented to ICSID jurisdiction in the Investment Law. According to the Claimants, Venezuela has retreated from its earlier position that its law controls this question, but it continues to distort the international standard of interpretation of consent instruments. They reaffirm that the Respondent’s construction of the words "if it so establishes" in Article 22 is untenable. They stress that other parts of that article and the intent of the drafters confirm the result of the Claimants’ textual analysis. They contest the Respondent’s theory on the purpose of Article 22, as a matter of law and fact.
53.
The Claimants further submit that "nothing in the text of the Investment Law or the Regulation excludes protection of investors that control investments through ownership of shares in holding companies"34. As a consequence, Venezuela Holdings, Mobil Cerro Negro Holding and Mobil Venezolana Holdings are protected by the Investment Law.
54.
The Claimants then recall that Venezuela Holdings is a company incorporated in the Netherlands. It is thus a "national" of the Netherlands as required by the BIT. Its subsidiaries are genuinely and legally controlled by Venezuela Holdings. They are also covered by the BIT. Moreover, the Respondent’s allegations of "treaty abuse" have no legal or factual ground, being observed that the Claimants "are not seeking the protection of the Treaty in respect of acts performed before"35 it became applicable to them.
55.
The Claimants further contend that the BIT does not limit the definition of investment to direct investment. It does not require that the claim be related to an investment "in the territory" of Venezuela. The objections raised by the Respondent on those grounds are without basis.
56.
The Claimants finally maintain their submission as stated in their Counter Memorial.

E - THE HEARING ON JURISDICTION

57.
At the hearing held on 23 and 24 September 2009, Venezuela maintained and developed its objections to the Tribunal’s jurisdiction. It contends that it always had a "reluctant attitude toward arbitration"36, as shown by its Constitution, its 1998 Commercial Arbitration Law and the jurisprudence of its Supreme Court. It submits that under international law and Article 25 of the ICSID Convention, consent to arbitration must be clearly and unequivocally expressed. It adds that this is also the case under Venezuelan law, which "is of some relevance in this case, even if not dispositive"37. It recalls that, under Article 22 of the Venezuelan Investment Law, "Venezuela shall submit to arbitration in accordance with treaties, if they so provide"38. It concludes that "if the treaties do not require the submission of a particular dispute to international arbitration, the provision is obviously inoperable"39. This is the situation in the present case.
58.
Venezuela further contends that the BIT does not provide a basis for ICSID jurisdiction. It recalls that the Claimants had already notified investment disputes in February, May and June 2005 before the Dutch company was inserted into the corporate chain of ownership. Thus the Tribunal has no jurisdiction over the specific disputes that existed at that time. It has no more jurisdiction over the expropriation dispute which arose in 2007 because this dispute was already anticipated in 2005 and the Dutch company never made any bona fide investment in Venezuela. Thus, as in the Phoenix case, the creation of the Dutch company was not nationality planning, but abuse of right.
59.
In answer to a question put by members of the Tribunal with respect to the arbitration pending in the International Chamber of Commerce between the Claimants and PDVSA Cerro Negro, the Claimants and the Respondent agreed that there was no risk of double recovery.
60.
At the hearing, the Claimants reaffirmed that the Tribunal has jurisdiction under Article 22 of the Venezuelan Law. They stress that Article 22 must be interpreted according to the ICSID Convention and to general international law in good faith without bias for or against jurisdiction. They analyse that text in its context, taking account of its object and purpose and conclude that it expresses the consent of Venezuela to arbitration of controversies to which the ICSID Convention may be applicable. They add that Article 3 §4 of the Investment Law covers Venezuela Holdings, Mobil Cerro Negro Holding and Mobil Venezolana Holdings.
61.
The Claimants further submit that, in the present case, the Tribunal has jurisdiction under the BIT both ratione personae and ratione materiae. They analyse the Phoenix award mentioned by Venezuela and stress that, the present situation is completely different, in particular with respect to anticipations and investments.

III. DECISION OF THE TRIBUNAL

62.
Article 25 §1 of the ICSID Convention provides that "[t]he jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre".
63.
According to Article 25, consent by both parties to a dispute is thus an indispensable condition for jurisdiction. The fact that the host State and the investor’s State of nationality are parties to the Convention does not suffice.
65.
In the present case, the Claimants submit that Venezuela consented to the jurisdiction of the Centre through :

a. Article 22 of the Venezuelan Decree with rank and force of law N°356 on the promotion and protection of investments of 3 October 1999 (the "Investment Law").

b. The Agreement on Encouragement and Reciprocal Protection of Investment between the Kingdom of the Netherlands and the Republic of Venezuela signed at Caracas on 22 October 1991 (the "BIT" or the "Treaty").

66.
The Respondent objects to both of these alleged bases for jurisdiction.

A - ARTICLE 22 OF THE INVESTMENT LAW

69.
The Parties disagree on the interpretation to be given to Article 22. The Claimants submit that Venezuela consented to ICSID jurisdiction under that article. Venezuela contends that that text does not provide such consent.
70.
In order to clarify the meaning of Article 22, the Tribunal will first determine the standard of interpretation to be used and then apply that standard to Article 22.

1- Standard of Interpretation

(a) Determination of the standard

(b) Content of the standard

2- Interpretation of Article 22

(a) The text of Article 22

97.
According to Article 22, disputes arising under Venezuela’s BITs or to which the MIGA or ICSID Convention is applicable, "shall be submitted to international arbitration according to the terms of the respective treaty or agreement, if it so provides".
98.
The Parties agree that this provision creates an obligation to go to arbitration subject to certain conditions and in particular subject to the last condition thus incorporated in Article 22. But they disagree on the interpretation to be given to that condition.
99.
For the Claimants, the terms "if it so provides" means "if the respective treaty or agreement establishes (or provides for) international arbitration as a mean of dispute resolution"68. The Claimants then note that the ICSID Convention establishes such a system of dispute resolution. They conclude that, in the case of ICSID, the condition expressed in Article 22 is fulfilled and that Venezuela has thus consented to arbitration of ICSID disputes through that article. The Arbitral Tribunal has jurisdiction in the present case.
100.
By contrast, Venezuela interprets the word "if it so provides" as if "the relevant treaty or agreement requires submission of the particular dispute to international arbitration"69. It notes that there is no such obligation in the ICSID Convention. Thus the condition is not fulfilled in the case of ICSID and the Arbitral Tribunal has no jurisdiction in the present case.
101.
The Tribunal observes that Article 22 consists of one single long sentence of some complexity. As stated by Professor Christoph H. Schreuer in his Commentary to the ICSID Convention, this Article "is drafted in ambiguous terms and is likely to give rise to difficulties of interpretation, notably as to whether it contains an expression of Venezuela’s consent to ICSID arbitration or not"70.
102.
In this respect, the Tribunal notes that the disputes which Article 22 mentions "shall be submitted to international arbitration" subject to certain conditions. Article 22 thus creates a conditional obligation relating to the settlement of those disputes. Disputes covered by the text are:

(i) disputes arising between an international investor whose country of origin has a BIT in effect with Venezuela;

(ii) disputes to which the provisions of the MIGA Convention are applicable;

(iii) disputes to which the ICSID Convention is applicable.

103.
In this compound text, one observes that there is no mention of the Parties to the disputes in question. With respect to BITs, Article 22 refers to disputes arising "between" an international investor. One would have expected that, after the word "between", mention would have made not of one of the Parties, but of the two Parties to the dispute. This is not the case and the text must be completed in the light of BITs. A priori it could be construed as covering disputes between an international investor and Venezuela to which BITs are applicable.
104.
With respect to the MIGA Convention, the Tribunal notes that the only disputes to which Venezuela could be a Party under that Convention are not disputes with investors, but disputes with the Agency itself71.
106.
First, the text specifies that the dispute shall be submitted to arbitration "according to the terms of the respective treaty or agreement". On that point, the Tribunal notes that, at the outset, Article 22 mentions "treaty or agreement" on the promotion and protection of investments and then the MIGA and ICSID Conventions. One could have expected that at the end of the article the text would have referred to the "respective treaty, agreement or convention". It does not do so. In spite of this awkward drafting, the Tribunal considers that the words "treaty and agreement" also cover the two Conventions.
107.
One then reaches the second condition resulting from the words "si así éste lo establece", "if it so provides" or "establishes", on which the Parties disagree.
108.
Grammatically, it is undisputed that the word "it" refers to the preceding words "treaty or agreement", which as stated above include the ICSID Convention.
109.
The difficulty is with the word "lo" ("so"). This word certainly refers to the preceding words "shall be submitted to international arbitration". However it could be interpreted in two ways. It could mean:

(i) If the treaty, agreement or convention provides for international arbitration or

(ii) If the treaty, agreement or convention provides for mandatory submission of disputes to international arbitration.

110.
Both interpretations are grammatically possible. In the first one, the word "lo" (so) refers to international arbitration. In the second one, it refers to the obligation to submit disputes to international arbitration.
111.
In a number of cases concerning unilateral declarations, the International Court of Justice decided that it "cannot base itself on a purely grammatical interpretation of the text"72. Facing an ambiguous and obscure text, the Tribunal is in the same situation in the present case and has to look further.

(b) The principle of effet utile

112.
In this regard, the Claimants invoke the principle of effet utile (ut res magis valeat quam per eat).
113.
They contend that construing "if it so establishes" as "if the ICSID Convention provides consent to arbitration (or requires arbitration)" "would subject the mandate of the ICSID portion of Article 22 to a condition that could never be met"73 Moreover, the final clause of Article 22 referring to the possibility of litigation in Venezuelan courts would in such a case be useless. This would be "in flagrant violation of the principle of effet utile"74.
114.
The Respondent opposes this view. It submits that Article 22 does not contain a general consent to arbitration of international investment disputes. It only constitutes recognition and confirmation by the State that arbitration is a legitimate means of settling investment disputes with investors, if and when the State has consented to arbitration under a specific treaty. In such an interpretation, the clause reserving the competence of Venezuelan courts would still be useful.
115.
In the Rejoinder, the Claimants recognize that it would not "be absurd" for a statute "to recognize and confirm the legitimacy of arbitration as a means of dispute settlement"75. But they submit that such an interpretation cannot be given to Article 22.
116.

The Tribunal recalls that, as recognized by the International Court of Justice, "the principle of effectiveness has an important role in the law of treaties"76. As stated by the Tribunal in the Eureko v. Poland case "[i]t is a cardinal rule of the interpretation of treaties that each and every clause of a treaty is to be interpreted as meaningful rather than meaningless"77. The International Court of Justice78 and ICSID Tribunals79 applied that principle in number of treaty cases.

117.
It remains to be seen whether it is also applicable in the interpretation of State unilateral declarations, such as the legislation invoked in the present case.

(c) The intention of Venezuela

120.
In this regard, Claimants contend first that the provisions of the Investment Law "are in many respects typical of investment treaties"83 which usually includes arbitration clauses. Article 22 must be viewed in that context.
121.
The Tribunal notes that, according to its Article 1, the Investment Law was "intended to provide investments and investors, both domestic and foreign with a stable and predictable legal framework in which the former and the latter may operate in a secure environment, through the regulation of actions by the State, towards these investments and investors, in order to achieve the increase, diversification and harmonious integration of investments to advance the objectives of national development".
122.
Such aims are in general terms comparable to those of the treaties on promotion and reciprocal protection of investments and are reflected in the text of the law itself. Thus, the law contains provisions relating to fair and equitable treatment (Article 7 § 1), nondiscrimination (article 8), confiscations and expropriations (Article 11) which are comparable to those incorporated in BITs. However, the rights thus recognized to international investors are often qualified in order not to affect the application of Venezuelan law84 or the rights of Venezuelan investors85. Moreover Article 24 of the law specifies that its provisions do not prevent the adoption by Venezuela of a number of measures it enumerates, inter alia for national security, the conservation of natural resources and the integrity and stability of the Venezuelan financial system.
123.
The law is thus in some respect different from BITs. Moreover, BITs do not always contain compulsory arbitration clauses. Therefore one cannot draw from the law as a whole the conclusion that Article 22 must be interpreted as establishing consent by Venezuela to submit ICSID disputes to arbitration.
124.
The Parties further seek to interpret the Investment Law in the context of Venezuela's attitude vis-à-vis arbitration. The Respondent stresses that that attitude has always been and remains cautious and restrictive. By contrast, the Claimants contend that a proarbitration environment was prevailing in 1999. For each of the Parties, Article 22 must be interpreted in the light of the attitude thus put forward.
125.
The Tribunal first observes that Venezuela had some experience of arbitration at the end of the 19th and the beginning of 20th century which generated hostility in the country towards this form of settlement of disputes. Its boundaries with Colombia86 and the now Republic of Guyana87 were fixed at that time by two arbitral awards favourable to its neighbours, the validity of which was contested. Moreover in 1902, Venezuela had to face a military intervention by Germany, Italy and the United-Kingdom seeking to collect unpaid debts and had to accept the establishment of Mixed Commissions in charge of fixing the indemnities to be paid to its foreign creditors. Those events led to the formulation of the Drago doctrine and the Drago-Porter Convention of 1907 prohibiting the use of force for the recovery of contractual debts. It also favoured the insertion in concession contracts of the Calvo clause under which the investor commits itself not to ask for diplomatic protection by its State of origin.
126.
The Constitution of Venezuela of 1999 describes in its Articles 253 to 261 "the judicial power and the system of justice" of Venezuela. Article 253 recognizes that "the alternative means of justice" are part of that system and Article 258, after having mentioned "justice of peace", provides that "the law shall promote arbitration, conciliation, mediation and other alternative means of dispute settlement".
127.
However, Article 151 of the 1999 Constitution (which reproduces Article 127 of the 1966 Constitution) provides that:

"In public interest contracts, unless inapplicable by reason of the nature of such contracts, a clause shall be deemed included, even if not expressed, whereby any doubts and controversies which may arise concerning such contracts and which cannot be resolved amicably by the contracting parties, shall be decided by the competent courts of the Republic, in accordance with its laws, and shall not on any grounds or for any reason give rise to foreign claims".

128.
Moreover, Article 4 of the Law on Commercial Arbitration of 7 April 1998 provides that:

"When one party to the arbitration agreement is a company where the Republic, States, Municipalities or Independent Institutions have a capital share of at least fifty per cent (50 %) or a company in which the above mentioned parties have a capital share of at least fifty per cent (50%), such agreement shall require for its validity the approval of the competent statutory body and the written authorization of the Ministry of Legal Protection. The agreement shall specify the type of arbitration and the number of arbitrators, which shall in no event be less than three (3)".

129.
This reluctant attitude explains that, during the preparation of the ICSID Convention, Latin-American countries, including Venezuela, expressed reservations on the proposed text which, they said, contravened their constitutional principles88. It also explains why Venezuela signed the Convention only in 1993, almost thirty years after its adoption.
130.
At that time, the environment in Venezuela had become more favourable to international arbitration. In 1993 and 1994, the Respondent ratified both the ICSID Convention and the New York Convention on the recognition and enforcement of foreign arbitral awards of 10 June 1958, as well as the Convention establishing the Multilateral Investment Guarantee Agency of 1985. From 1991 to 2001, it concluded 25 BITs; 19 of them had entered into force in 2004. Finally it adopted the Investment Law of 1999.
132.
The legislative history of Article 22 could in this respect provide more useful information on the intention of the drafters of the Investment Law89 However, the Investment Law of 1999 was a decree-law and as such was not discussed in Parliament. Moreover it contains no "exposición de motivos". Thus we have no direct information on its preparation.
133.
The Claimants submit that the Investment Law was drafted in 1999 "under the direction of Ambassador Werner Corrales", who in "a contemporaneous publication, acknowledged that it was the intent of the drafters of the Investment Law to provide for consent to ICSID arbitration"90. Respondent doubts that the Investment Law had been drafted under Mr. Corrales’ direction. It adds that even so, "Mr. Corrales’ writings are of no help in the interpreting Article 22"91.
134.
The Tribunal notes that in 1999 Mr. Corrales was Representative of Venezuela to the World Trade Organisation. He recognizes himself that he is "not an attorney", or an "expert in international law" or "investment arbitration". In a communication at a conference on investment arbitration in comparative law organized in April 2009 by the Caracas Centro Empresarial de Conciliación y Arbitraje (Caracas Business Centre of Conciliation and Arbitration), he stated that he advised in 1999 that the President of Venezuela should prepare a law "that would serve as the compulsory framework for all international treaties and negotiations on investments". He said that he was then entrusted with preparing reference terms to write the draft law and direct its preparation. He adds that the "legal drafting" was assigned to a legal consultant of the Institute of Foreign Trade, Mr. Gonzalo Capriles92.
135.
Soon after the publication of the Investment Law, Mr. Corrales in two articles gave "algunas ideas" (some ideas) on the legal regime of promotion and protection of investments in Venezuela. In those articles, he stated that in his "opinion, a regime applicable to foreign investments must leave open the possibility to resort to international arbitration [unilaterally], which today is accepted almost everywhere in the world, whether through the mechanism provided by the ICSID Convention or through the submission of the dispute to an international arbitrator or to an ad hoc arbitral tribunal as the one proposed by UNCITRAL. In any case, it must be clearly established that there may not be a simultaneous resorting to national courts and to the arbitration mechanism or to any other type of procedure of settlement of disputes. In our case, this subject is dealt with in Chapter IV (article 21-23)" of the Investment Law, "where a great part of the principles commented is accepted93.
136.
The Tribunal observes that, in those articles, Mr. Corrales expressed his opinion on the provisions which, according to his judgement, must be incorporated in any regime of international arbitration. He adds that a "great part" of those principles "is accepted in articles 21 to 23 of the Investment Law"94. He did not say that the drafters of Article 22 intended to provide for consent to ICSID arbitration in the absence of any BIT.
137.
Ten years later, at the conference already mentioned organized by the Caracas Centro Empresarial de Conciliación y Arbitraje, Mr. Corrales was invited by the organisers of the conference to inform the audience of the "drafter’s intention" for the law95 He then stated that, as far as he was concerned as co-drafter of the law, such intention was to offer "the possibility of open unilateral arbitration"96
138.
This last statement was made at a time the present proceedings were already engaged. It is not supported by contemporaneous written documents and the Claimants themselves did not ask Mr. Corrales to appear in the proceedings as a witness. They stated at the hearing that they do not rely on Mr. Corrales’ statement "as legislative intent", but only as "confirmation" of their analysis97. Accordingly, the Tribunal concludes that the legislative history of Article 22 does not establish that, in adopting the Investment Law, Venezuela intended to consent in general and in advance to ICSID arbitration.
141.
Finally, the Tribunal notes that, according to the Respondent, Venezuela Holdings, Mobil C.N. Holding and Mobil Venezolana Holdings do not qualify as "international investors" under the Investment Law. The Respondent adds that, even if Article 22 were to be construed as consent to jurisdiction, that article would not provide a basis for such jurisdiction with respect to the claims submitted by those entities. The Claimants conclude the contrary. As the Tribunal has arrived to the conclusion that Article 22 does not constitute consent to jurisdiction with respect to any of the Claimants, it does not have to take a decision on those alternative submissions.

B - ARTICLE 9 OF THE BIT BETWEEN THE NETHERLANDS AND VENEZUELA

142.
On 22 October 1991, the Kingdom of the Netherlands and the Republic of Venezuela concluded an Agreement on encouragement and reciprocal protection of investments, which entered into force on 1st November 1993, after ratification by both Parties. That Agreement was "done in the Spanish, Netherlands and English languages, the three texts being equally authentic". However, under paragraph 3 of a Protocol signed on the same day, "[i]n case of difference of interpretation between the three equally authentic texts of the present Agreement reference shall be made to the English text".
143.
Article 9 of the BIT provides in its paragraph 1 that "[disputes between one Contracting Party and a national of the other Contracting Party concerning an obligation of the former under this Agreement in relation to an investment of the latter, shall at the request of the national concerned be submitted to the International Centre for the settlement of Investment Disputes for settlement by arbitration or conciliation under" the ICSID Convention. Article 9 adds in its paragraph 4 that "[e]ach Contracting Party hereby gives its unconditional consent to the submission of disputes as referred to in paragraph 1 of this Article to international arbitration in accordance with the provisions of this Article".
144.
The Claimants contend that the Tribunal has jurisdiction under the BIT to consider the case. The Respondent denies it. It describes the complex corporate form used by Mobil for its investment and submits that :

(i) Some of the Claimants are not Dutch nationals and that the Dutch Claimant, Venezuela Holdings, has only made indirect investments in Venezuela. Thus, according to the Respondent, the BIT does not cover the present claims.

(ii) Moreover, the Dutch entity is a "corporation of convenience" inserted into the corporate chain solely for the purpose of securing access to ICSID arbitration. Such an "abuse" of right should not be permitted98.

145.
The Tribunal first recalls that the present dispute finds its origin in investments made by Mobil in Venezuela for the exploration of oil in la Ceiba from 1996 and for the production and upgrading of extra-heavy crude oil in Cerro Negro from 1997.
146.
Some difficulties arose with respect to those projects from October 2004 to August 2006, when Venezuela increased royalty rates and income taxes and created a new extraction tax. Then, in February 2007, a decree called for the transformation of the existing Oil Associations (including Cerro Negro and La Ceiba) into mixed companies. No agreement for such transformation was arrived at between Venezuela and the Claimants. Later in 2007, Cerro Negro’s and La Ceiba’s assets and operations were transferred to PDVSA and a decree of expropriation was issued.
147.
In the meantime, the Exxon Mobil investments in Venezuela had been restructured through a holding company incorporated in The Netherlands. As a result of this restructuring, Mobil (Delaware) owns 100 % of Venezuela Holdings (Netherlands) which owns 100 % of Mobil CN Holding (Delaware) which owns 100 % of Mobil CN (Bahamas) which finally owns 41.66 % in the Cerro Negro project.
148.
Venezuela Holdings (Netherlands) also owns 100 % of Mobil Venezolana Holding (Delaware) which owns 100 % of Mobil Venezolana (Bahamas) which finally owns 50 % interest in the La Ceiba Association.
149.
In the light of those facts, the Tribunal will determine:

a. whether the BIT provides a jurisdictional basis in the present case

b. and, if so, whether the Claimants have engaged in treaty abuse, which would exclude such jurisdiction.

1- Jurisdiction under the BIT

(a) Nationality of the Claimants

150.
It is undisputed that Venezuela Holdings (Netherlands) is an entity incorporated in the Netherlands and as such, a Dutch national entitled to prevail itself of the BIT. But Venezuela submits that its subsidiaries, Mobil CN Holding (Delaware), Mobil Venezolana Holding (Delaware), Mobil CN (Bahamas) and Mobil Venezolana (Bahamas) have been incorporated either in the United States of America or in the Bahamas and are not Dutch nationals. According to the Respondent, they cannot prevail themselves of the Dutch - Venezuela BIT.
151.
Claimants contend that subsidiaries of Venezuela Holdings (Netherlands) are controlled by this Dutch Holding and must therefore be deemed to be Dutch entities under the BIT.
152.
Article 1 of the BIT provides that:

"For the purpose of this Agreement

[...]

"(b) The term "nationals" shall comprise with regard to either Contracting Party:

(i) national persons having the nationality of that Contracting Party;

(ii) legal persons constituted under the law of that Contracting Party;

(iii) legal persons not constituted under the law of that Contracting Party, but controlled, directly or indirectly, by natural persons as defined in (i) or by legal persons as defined in (ii) above".

158.
The Respondent further contends that in fact Venezuela Holdings (Netherlands) did not exercise any control on its subsidiaries. In the absence of genuine control, the BIT would not be applicable.
159.
The Tribunal recalls that a Protocol to the BIT was concluded on the same day by the Netherlands and Venezuela. This Protocol, which is an "integral part" of the BIT, provides in its paragraph 1 ad Article 1 (b) (iii) :

"A Contracting Party may require legal persons referred to in Article 1 Paragraph (b) (iii) to submit proof of such control in order to obtain the benefit provided for in the provisions of the Agreement. For example, the following may be considered acceptable proof:

a. that the legal person is an affiliate of a legal person constituted in the territory of the other Contracting Party;

b. that the legal person is economically subordinated to a legal person constituted on the territory of the other Contracting Party

c. that the percentage of its capital owned by national or legal persons of the other Contracting Party makes it possible for them to exercise control".

161.
This first objection to the tribunal jurisdiction based on the text of the BIT cannot be upheld.

(b) Direct and Indirect Investments

2- Abuse of right

168.
The Tribunal will first consider the law applicable to abuse of right before applying it to the present case.

(a) The applicable law

(b) Application of the Law to the Case

186.
Initially, Mobil investments in Venezuela were structured as follows:

(i) Mobil (Delaware) owned 100% of Mobil CN Holding (Delaware), which in turn owned 100 % of Mobil CN Holding (Bahamas), which has a 41 2/3 % participation in the Cerro Negro Association.

(ii) Mobil (Delaware) also owned 100 % of Mobil Venezolana Holding (Delaware), which in turn owned 100 % of Mobil Venezolana (Bahamas), which had a 50 % participation in the La Ceiba Association.

187.
On 27 October 2005, Claimants created a new entity under the law of the Netherlands, called Venezuela Holdings. On 21 February 2006, this entity acquired all the shares of Mobil CN Holding (Delaware). Then on 23 November 2006, it also acquired all the shares of Mobil Venezolana Holding (Delaware). The Dutch holding company was thus inserted into the corporate chain for the Cerro Negro and La Ceiba projects.
188.
Respondent submits that this restructuring occurred long after the investments. It adds that it did not consent to it. It contends that "the disputes were not only foreseeable, but they had actually been identified and notified to Respondent before the Dutch company was even created"129. Thus, according to Venezuela, the only purpose of this restructuring was to gain access to ICSID for existing disputes. This was "an abusive manipulation of the system of international protection under the ICSID Convention and the BITs"130. According to Venezuela it is therefore the duty of the Tribunal not to protect such manipulation and to decline its jurisdiction.
189.
Claimants contest each of those points. They explain that they were "surprised" by Venezuela’s "unilateral imposition of a 16 2/3 % royalty rate in October 2004", which in their opinion was contrary to the existing agreements. They say that Mobil promptly "undertook a review of the extent of the legal protection for its investments in Venezuela". Upon doing so, it concluded in early 2005 that it should restructure its Venezuelan investments through a holding company incorporated in the Netherlands, which had a bilateral investment treaty with Venezuela"131. This choice was considered as "logical", taking into account the double taxation agreements concluded by the Netherlands and the activities that Exxon Mobil already had in that country.
192.
In this respect, the Tribunal first observes that, contrary to the situation in Autopista v. Venezuela, there was no contractual obligation in the present case for Mobil or its subsidiaries to submit the proposed restructuring to the approval of the Venezuelan authorities. Yet, Mobil did not hide this operation. In fact, Mobil Cerro Negro notified the Respondent of Venezuela Holdings’ ownership of the Cerro Negro investment on 16 October 2006. On 7 March 2007, Venezuela Holdings also informed Venezuela of the acquisition of the La Ceiba investments. The Respondent did not raise any objection at the time.
199.
The Tribunal will now turn from the timing of the investment to the timing of the dispute. To that end, it will recall what complaints had already been lodged by the Claimants at the time of the restructuring.
200.
In two letters dated 2 February 2005, and 18 May 2005, drafted in comparable terms, the Claimants first complained of the increase from 1 % to 16 2/3 % of the royalties decided by Venezuela both for the Cerro Negro and the La Ceiba projects. They requested the Government to designate representatives to meet with them in order to discuss an amicable settlement. They added that "as you well know, in accordance with Article 22 of the Investment Law, the Bolivarian Republic of Venezuela has consented to submit to arbitration under the ICSID Convention, investment disputes between the Bolivarian Republic of Venezuela and foreign investors". They went on, consenting "to ICSID’s jurisdiction for arbitration of the investment dispute, and of any further investment dispute with the Bolivarian Republic of Venezuela, so that, should arbitration become necessary, it can be carried out under the ICSID Convention". They finally concluded in requesting "an early meeting to commence consultation" in order "to explore an amicable solution of the matter"139.
201.
Then, on 20 June 2005, Mobil Cerro Negro Holding, Mobil Cerro Negro and Operadora Cerro Negro informed the Venezuelan authorities that the recent ministerial decision to increase the royalties to 30 % "has broadened the investment dispute" previously brought to their attention. They stated that the introduction of a bill that would increase income tax rates from 34 % to 50 % would further broaden that dispute. They contended those decisions were "in breach of the obligations" of Venezuela and requested again consultations "in an effort to reach an amicable resolution of this matter". They recalled Article 22 of the Investment Law and the position they took on this matter in their previous letters. They added that "[o]ut of an abundance of caution, each of the Mobil Parties hereby confirms its consent to ICSID jurisdiction over the broadened dispute described above and any other investment disputes with the Bolivarian Republic of Venezuela existing at the present time or that may arise in the future, including without limitation any dispute arising out of any expropriation or confiscation of all or part of the investment" of the Mobil Parties.
202.
It results from those letters that in June 2005 there were already pending disputes between the Parties relating to the increase of royalties and income taxes decided by Venezuela. Claimants had even accepted to submit those disputes to ICSID arbitration under Article 22 of the Venezuelan Investment Law. "Out of an abundance of caution", they had further indicated that on the same basis they were also consenting to arbitration for any future dispute, including future dispute arising from expropriation or confiscation.
206.

The Tribunal thus:

a. has jurisdiction under the ICSID Convention and the BIT with respect to any dispute born after 21 February 2006 for the Cerro Negro project and after 23 November 2006 for the La Ceiba project, and in particular with respect to the pending dispute relating to the nationalisation of the investments;

b. has no jurisdiction under the ICSID Convention and the BIT with respect to any dispute born before those dates.

207.
Finally, the Tribunal notes that Mobil Corporation has only raised claims on the basis of Article 22 of the Investment Law and not on the basis of the BIT. In § 140 above, the Tribunal has concluded that Article 22 of the Investment Law does not provide a basis for jurisdiction in the present case. As a consequence, the Tribunal has no jurisdiction over the claims of Mobil Corporation, which will thus not be a Party to the continuation of these proceedings.

C - COSTS OF THE PROCEEDINGS

208.
Lastly, the Tribunal makes no order at this stage regarding the costs of the proceeding and reserves it to a later stage of the arbitration.

IV. DISPOSITIVE PART OF THE DECISION

Subsequent citations of this document as a whole:
Subsequent citations of this excerpt:
Click on the text to select an element Click elsewhere to unselect an element
Select a key word :
1 /

Instantly access the most relevant case law, treaties and doctrine.

Start your Free Trial

Already registered ?