On 3 September 2013, the Tribunal issued a Decision on Jurisdiction and the Merits, concluding as follows:
(...) For the foregoing reasons, the Tribunal decides as follows:
a. It does not have jurisdiction under Article 22 of the Investment Law and accordingly the claims by ConocoPhillips Company are dismissed; and
b. It has jurisdiction under Article 9 of the Bilateral Investment Treaty over:
i. the claims brought by ConocoPhillips Petrozuata BV, ConocoPhilips Hamaca BV and ConocoPhillips Gulf of Paria BV in respect of (1) the increase in the income tax rate which came into effect on 1 January 2007 and (2) the expropriation or migration; and
ii. the claims brought by ConocoPhillips Petrozuata BV and ConocoPhillips Gulf of Paria BV in respect of the increase in the extraction tax in effect from 24 May 2006.
c. All claims based on a breach of Article 3 of the BIT are rejected.
d. The Respondent breached its obligation to negotiate in good faith for compensation for its taking of the ConocoPhillips assets in the three projects on the basis of market value as required by Article 6(c) of the BIT.
e. The date of valuation of the ConocoPhillips assets is the date of the Award.
f. All other claims based on a breach of Article 6(c) of the BIT are rejected.
g. All other questions, including those concerning the costs and expenses of the Tribunal and the costs of the parties' determination are reserved for future determination.
Items (a), (b)(i), (b)(ii), (c), (f) and (g) above have been decided unanimously by the Tribunal. Items (d) and (e) have been decided by majority, with Arbitrator Georges Abi-Saab, dissenting.1
Decision on Jurisdiction and the Merits, 3 September 2013, para. 404.
On 8 September 2013, counsel for Respondent submitted a letter requesting a clarification and further explanations from the Tribunal regarding certain findings in the Decision on Jurisdiction and the Merits ("the September 8 letter"). In its letter, counsel for Respondent also requested "a limited and focused hearing" to address the specific issues raised.
The Tribunal stated in its Decision of 10 March 2014 that so far as the matter set out in paragraph 7 is concerned "this decision is limited to answering the question whether the Tribunal has the power which the Respondent would have it exercise. The decision does not address the grounds the Respondent invokes for reconsidering the part of the Decision which it challenges and the evidence which it sees as supporting those grounds. The power must be shown to exist before it can be exercised".2
Decision of 10 March 2014 on Respondent's First Request for Reconsideration ("Decision of 10 March 2014"), para. 9.
On that same day, 10 August 2015, the Respondent submitted an "Application for Reconsideration of the Tribunal's Decision of March 10, 2014 (the Majority Reconsideration Decision), which denied Respondent's Request for Reconsideration of the Tribunal's [September 3, 2013 Jurisdiction and Merits Decision]".3 The Respondent recalled that it had, immediately following that Majority Merits Decision, applied for reconsideration, pointing out
certain obvious factual, legal and logical errors the correction of any one of which would require a change in the majority's conclusions on the issue of good faith negotiations. Of particular relevance to this Application, Respondent pointed out that cables from the U.S. Embassy released after the hearing in this case in 2010, which reported on the briefings made by the chief ConocoPhillips negotiators to the U.S. Embassy in Caracas, left no doubt that the representations made by ConocoPhillips to the Tribunal regarding Respondent's supposed unwillingness to negotiate fair market value had been completely false, and that it was in fact ConocoPhillips which was seeking compensation ‘on top of the fair market value of the assets.' Since the majority had relied on Claimants' misrepresentations in reaching its conclusion on bad faith negotiation, Respondent assumed that the Tribunal would want to reconsider the Majority Merits Decision to avoid an obvious gross miscarriage of justice. That assumption was based on the premise that every tribunal has the power to correct its own decision while the case is still pending before it and should exercise that power if its decision were indeed based on patently false representations. (footnote omitted)4
Respondents' Application for Reconsideration of the Tribunal's Decision of March 10, 2014 ("Respondent's Second Application for Reconsideration"), pp 1-2.
Respondent’s Second Application for Reconsideration, pp. 2-3.
The Respondent sets out the conclusion of the Tribunal and quotes four paragraphs from Professor Abi-Saab's dissent.5 It concludes the substance of its submission as follows:
In making this Application, Respondent stresses that the issue for decision at this stage is a narrow one. It is not necessary for this Tribunal now to revisit the merits of the Majority Merits Decision. What is necessary is for this Tribunal to determine whether, assuming that Claimants did make material misrepresentations to the Tribunal as to Respondent's willingness to negotiate fair market value, the Tribunal did, and still does, have the power to reconsider the Majority Merits Decision. A negative answer to this question would mean that there are no circumstances under which a tribunal can reconsider its own decision in a case still pending before it, irrespective of material misrepresentations made to it and, indeed, presumably irrespective of any other egregious conduct. That is a principle that cannot be sustained under any legal system.6
It requested a hearing on the application.
See Prof. Abi-Saab ’s Dissenting Opinion to the Decision on the Respondent’s Re quest for Reconsideration, paras 64-67.
Respondent’s Second Application for Reconsideration, p. 6.
On 12 August 2015, the Claimants responded in these terms:
The application is frivolous and dilatory. Venezuela has not even attempted to articulate a legal basis for the admissibility of a request to reconsider a reconsideration decision - because there is none. The Tribunal’s 10 March Decision considered and rejected the same arguments that Venezuela now raises. It has res judicata effect and may not be revisited or reviewed in any way prior to the rendering of the final Award.7
The Claimants requested that the Tribunal dismiss the Respondent's application forthwith and promptly reschedule the final hearing.
Claimants' letter of 12 August 2015, p. 1.
Later that same day, the Respondent commented by recalling its earlier letter:
...no system of justice can tolerate a rule that a tribunal cannot correct its own decision, no matter how egregious the circumstances, in a case still pending before it. Surely one cannot argue that an interim decision proven to be based upon corruption, intimidation or coercion cannot be reconsidered. The same is true for a decision shown to be based upon material misrepresentations.8
In support of its contention that res judicata did not apply here - there is no final award and the same proceeding continues - it quoted from the Sabotage Cases:
The petition, in short, avers the Commission has been misled by fraud and collusion on the part of witnesses and suppression of evidence on the part of some of them. The Commission is not functus officio. It still sits as a court. To it in that capacity are brought charges that it has been defrauded and misled by perjury, collusion, and suppression. No tribunal worthy of its name or of any respect may allow its decision to stand if such allegations are well-founded. Every tribunal has inherent power to reopen and to revise a decision induced by fraud. If it may correct its own errors and mistakes, a fortiori it may, while it still has jurisdiction of a cause, correct errors into which it has been led by fraud and collusion.9
Respondent's letter of 12 August 2015, para. 1.
VIII United Nations Reports of International Arbitral Awards 160 (2006), pp. 189-190.
Any arbitration proceeding shall be conducted in accordance with the provisions of this Section and, except as the parties otherwise agree, in accordance with the Arbitration Rules in effect on the date on which the parties consented to arbitration. If any question of procedure arises which is not covered by this Section or the Arbitration Rules or any rules agreed by the parties, the Tribunal shall decide the question.
The Convention contains a carefully constructed set of provisions for the interpretation, revision and annulment of the Award - Articles 50-52, constituting Section 5 of Chapter IV - Arbitration. Those provisions are followed by Article 53, the first provision of Section 6, headed Recognition and Enforcement of the Award:
(1) The award shall be binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in this Convention. Each party shall abide by and comply with the terms of the award except to the extent that enforcement shall have been stayed pursuant to the relevant provisions of this Convention.
(2) For the purposes of this Section, "award" shall include any decision interpreting, revising or annulling such award pursuant to Article 50, 51 or 52.
It is convenient to mention at this stage Article 48(3) of the Convention:
(3) The award shall deal with every question submitted to the Tribunal, and shall state the reasons upon which it is based.
In the 2014 Decision, the Tribunal said that the decisions included in the 2013 Decision in accordance with practice are to be incorporated in the Award.21 This is required, as Article 48(3) recognizes, since the Award given at the end of the process must deal with every question submitted to the Tribunal. The required reasons are also to be incorporated, at least by reference.22 The Tribunal notes that in the process of the drafting of what became Article 48(3) the text was amended to emphasise that the tribunal in its award was to deal with every issue presented.23
Decision of 10 March 2014, para. 21.
See also Schreuer, op. cit, pp. 538 and 829-30 - to the extent that preliminary decisions are decisive for the outcome they must be reflected in the award.
History of the ICSID Convention, vol II, pp 610, 632-633 and 849.
It is convenient to consider at this point the arguments based on the inherent powers or jurisdiction of the Tribunal. As indicated, Article 44 may be seen as reflecting those powers, while making them express. The Tribunal has already noted practical instances of the exercise of such powers which fall within the scope of Article 44 in any event.24 They are of a quite different order from the broad power of substantive reconsideration which the Respondent invokes in this case. It is true that in three cases the International Court of Justice has spoken in general terms about its duty to safeguard its judicial function and to maintain its judicial character.25 Those cases, however, are not directly on point since they were decided on the basis that there was no live dispute in issue before the Court which accordingly had nothing before it to decide in terms of its function of deciding disputes; in one case circumstances had arisen which rendered any adjudication devoid of purpose26 and in the other two the disputes between the parties no longer existed.27 Further, the judgments of the Court were final and binding and, in the circumstances of each case, the post judgment processes of interpretation and revision appear not to have been available.
See para. 23 above.
Case concerning the Northern Cameroons (Cameroon v United Kingdom) Preliminary Objections, Judgment of 2 December 1963 ; ICJ Reports 1963, pp. 15, 29, 31, 38; Nuclear Tests (Australia v France), Judgment, 1974 ICJ Reports, pp. 253, 259 and Nuclear Tests (New Zealand v France) Judgment, 1974 ICJ Reports, pp. 457, 463.
1963 ICJ Reports, pp. 33-34
1974 ICJ Reports, pp. 270-272 and 475-477.
In its 2014 Decision, the Tribunal in support of its proposition that the 2013 Decision had the character of res judicata quoted from an earlier decision. It now takes the opportunity to quote the relevant passage accurately and in full; in the Electrabel S.A. v Republic of Hungary Decision on Jurisdiction, Applicable Law and Liability, the tribunal noted:
This Decision is made in regard only to the first phase of these arbitration proceedings, relating to extant issues of jurisdiction and liability; and it is not made in regard to any issue of quantum (including interest). Although necessarily described as a ‘Decision' and not an ‘Award' under the ICSID Convention and ICSID Arbitration Rules, the several decisions and reasons contained in this Decision are intended by the Tribunal to be final and not to be revised by the Parties or the Tribunal in any later phase of these arbitration proceedings.32
To the same or similar effect are two other ICSID cases cited by the Perenco Ecuador tribunal along with the relevant passage of the Tribunal's 2014 Decision in support of its proposition that
There is ample prior authority in support of the view [that] once the tribunal decides with finality any of the factual or legal questions put to it by the parties, as was the case in the Decision on Remaining Issues of Jurisdiction and Liability, such a decision becomes res judicata [citing CMS Gas Transmission v Argentine Republic ICSID ARB 01/8, May 12 2005, para 126 and Waste Management Inc v United Mexican States (Waste Management II) ICSID Case No. ARB (AF)/00/3, para 45.]33
Perenco Ecuador Decision, para. 43.
Only the allegation of an illegality that was unknown to [the Respondent] during the jurisdictional phase may justify reopening the matter at the merit stage (emphasis added).36
The tribunal then stated that the Respondent had all the necessary elements at the jurisdictional phase to advance the arguments in issue but had not done so. "As such, the objection could be rejected outright."37 But due to the gravity of the accusation the tribunal considered it and the related evidence and found that it was inconclusive. Accordingly it dismissed that argument.38 That ruling does not in any way question the binding character of the earlier rulings or their res judicata effect. Later in its award the tribunal turns to other objections to jurisdiction, objections which the Respondent had not made at the jurisdictional phase. The tribunal dealt with these objections in this way:
The jurisdictional phase concluded with the Decision on Jurisdiction, in which the Tribunal established that it had jurisdiction over the claims of Quiborax and NMM. The Tribunal finds that there is no reason that can justify reopening the jurisdictional issues at this stage, assuming this were at all possible. It therefore denies the Respondent's new jurisdictional objections (emphasis added).39
Again, the tribunal gives no support at all to the proposition that there may be limits to the binding force of earlier jurisdictional decisions or their res judicata effect.
Ibid, para. 132.
Ibid, paras 132-134.
Ibid, paras 538-541.
In its comment of 22 January 2016 and in support of its argument that res judicata does not override "the search for truth and substantive justice", the Respondent quotes a "key passage" from the Article to which it had referred the Tribunal.40 That passage begins as follows:
[W]hen tribunals have attributed res judicata effect to a decision they previously issued in the same proceedings, they have also considered themselves to possess what Professor Abi-Saab calls a "specific power" to revisit such decision under certain limited and exigent circumstances, such as where new material evidence emerges calling into question the correctness of their prior findings. As such, it may not be right to suggest, as the majority in ConocoPhillips v Venezuela did, that the question of a tribunal's power to revisit its own findings can be considered in isolation from the context of that very request (…)41
The Tribunal notes however that the cases to which the authors refer42 do not support that proposition; in each case, even if the tribunals did consider the asserted grounds, they do not identify any power to reconsider the issues and all applications failed.
See para. 18 above.
Article on Res Judicata, pp. 68-69.
See Article on Res Judicata, pp. 68-69, ftns 73 and 76. The Article cites Tokios Tokelès v. Ukraine, ICSID Case No. ARB/02/18, Award, 26 July 2007, paras 5 and 98; CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/01/8, Award, 12 May 2005, para. 126; Jan de Nul N.V. and Dredging International N.V. v. Arab Republic of Egypt, ICSID Case No. ARB/04/13, Award, 6 November 2008, paras. 121-130; and Saipem S.p.A. v. People's Republic of Bangladesh, ICSID Case No. ARB/05/7, Award, 30 June 2009, para. 94.
We also need to make it clear that we do not interpret the 2013 Decision in the way Arbitrator Bucher does. Nor indeed do the Parties, as he indeed recognises (paras 17-19 of his opinion). The Tribunal ruled that the Respondent had acted unlawfully by reference to Article 6(c) of the BIT. That requires that the measures be taken against just compensation. The Tribunal said this about that provision:
The requirements [in Article 6(c)] for prompt payment and for interest recognise, in accordance with the general understanding of such standard provisions, that payment is not required at the precise moment of expropriation. But it is also commonly accepted that the Parties must engage in good faith negotiations to fix the compensation in terms of the standard set, in this case, in the BIT, if a payment satisfactory to the investor is not proposed at the outset. (para 362)
Having reviewed the evidence and the Parties' submissions, the Tribunal concluded that the Respondent had breached its obligation to negotiate in good faith for compensation for its taking of the assets on the basis of market value as required by the BIT (para 401). It included that conclusion in its Decision (para 404(d)).
With respect, Arbitrator Bucher errs when he writes in paragraph 11 of his dissenting opinion that the Claimants made no claim in their Request for Relief for a declaration that
Respondent breached its obligation to negotiate in good faith for compensation based on market value. In their Request for Relief, the Claimants asked the Tribunal for a declaration "that Venezuela has breached... Article 6 of the Treaty by unlawfully [emphasis added] expropriating..." their investments in Venezuela. This is precisely what the majority found in paragraph 404(d) of the Decision.
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