ICSID COMMITTEE Lifts Stay of Enforcement Issued in CONOCOPHILLIPS v. VENEZUELA

By Diego Luis Alonso Massa, 6 October 2021

Recognising the sufficiency of the award creditors’ assurances, and the good reputation of the entity with which segregated bank accounts had been opened, the ICSID Committee lifted the stay of enforcement in favour of the ConocoPhillips entities – despite Venezuela’s concerns regarding restrictions imposed by the United Kingdom on its ability to recover the funds and longstanding controversy regarding the standing of Venezuela's legal representatives.

In a decision dated 29 September 2021, the ICSID ad hoc Committee hearing the annulment proceedings of the Award rendered in 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) lifted the provisional stay of enforcement of the award granted by the ICSID Secretary-General at Venezuela’s request on 16 December 2019.

The Award, rendered on 8 March 2019, ordered Venezuela to pay the claimants approximately USD 8.7 billion as compensation for the expropriation enforced on 26 June 2007 in breach of Article 6 of the Agreement on Encouragement and Reciprocal Protection of Investments between the Kingdom of the Netherlands and the Republic of Venezuela. Subsequently, in a Decision on the Rectification of the Award of 29 August 2019, this figure was reduced by approximately USD 227 million.

The lifting of the stay followed the ad hoc Committee’s decision of 2 November 2020, in which the Committee – composed of Judge Dominique Hascher, as President, Professor Diego Fernández Arroyo and Mr. Kap-You (Kevin) Kim, as members – having regard to the sanctions imposed by the United States on Venezuela, determined to lift the stay of enforcement of the Award provided that the Claimants gave sufficient assurances that, if the Award were enforced and then annulled, all sums collected under the enforcement would be reimbursed to Venezuela. 

In this regard, the Committee imposed three conditions on the Claimants:

  1. they should submit an authorisation from the Office of Foreign Assets Control ("OFAC") of the US Department of the Treasure to pay any sums recovered into a segregated account and to reimburse such sums in the event of a reversal,
  2. they should provide details of the conditions for the opening of one or more segregated accounts for the deposit of sums recovered outside the United States, and
  3. they should provide a guarantee that any sums recovered under the award would be returnable to Venezuela.

On 30 July 2021, the Applicants informed the Committee of the opening of six segregated accounts at Bank of America’s London branch, specifying the number of each account and the procedure followed for their opening.

In its response to the Committee, Venezuela, expressed concerns regarding restrictions imposed by the United Kingdom, where the Applicants' nominated bank was located, and the United States, which would hinder its ability to recover the funds paid under the Award. It pointed to the example of the English courts that hindered the right of the Banco Central de Venezuela to recover its gold reserves in England.

In its decision of 29 September 2021, the Committee found that the segregated accounts opened by the Applicants complied with the Committee's requests, as such accounts were reserved exclusively for the deposit of the amounts to be collected during the pendency of the application for annulment. This would allow Venezuela to identify these accounts in full transparency and thus avoid the risk of dissipation of the funds collected outside the United States in connection with the enforcement of the award.  

Furthermore, the Committee acknowledged that the entity with which the accounts had been opened was a sound international bank in a recognised banking centre. The Committee considered that the Claimants had given sufficient assurances that the accounts could only be opened after the completion of a compliance process, thus fulfilling the second condition imposed for the lifting of the stay. Accordingly, the Committee ordered the lifting of the stay on the enforcement proceedings.

Interestingly, a curious and controversial situation occurred during the annulment proceedings. In this regard two similar "Requests for Annulment" of the award were filed on behalf of the Bolivarian Republic of Venezuela: one by Mr. George Kahale from the law firm Curtis, Mallet-Prevost, Colt & Mosle LLP, as representative of the government of Juan Guaidó, and another by Dr. Alfredo De Jesús O. from the law firm De Jesús & De Jesús, signed by Mr. Reinaldo Enrique Muñoz Pedroza, Acting Attorney General of the Bolivarian Republic of Venezuela "on behalf of the Bolivarian Republic of Venezuela by the Attorney General's Office of the Republic of Venezuela, of the government of Nicolás Maduro." 

The Secretary-General registered a Request for Annulment of the Award rendered on 8 March 2019 and neither Curtis nor De Jesús addressed the issue of Venezuela's representation at that first stage or identified the legal standing on the basis of which they purported to act on behalf of Venezuela. 

However, on 15 March 2020, De Jesús asked the Committee to "exclude the participation" of Curtis in the proceedings by virtue of acting on the basis of a power of attorney delivered by "a person who does not exercise any authority or power within the Venezuelan legal system." Curtis and De Jesús had acted as Venezuela's representatives in the underlying arbitration proceedings. De Jesús was instructed by the Acting Attorney General by a power of attorney dated 6 March 2019 while Curtis, upon revocation of its power of attorney on 6 March 2019 by the Acting Attorney General, was instructed by Venezuela's Special Attorney General from the commencement of the subsequent proceedings by a power of attorney dated 5 April 2019.

In issuing the Order on the Applicant’s Representation, the Committee recalled that a similar issue had already been raised during the arbitral proceedings, when both representatives filed an Application for Rectification of the Award. On that occasion, in the framework of the above-mentioned Decision on Rectification of 24 August 2019, the tribunal held that the issue related to the correct appointment of the Respondent's representatives was not relevant and did not require any decision on its part.

Therefore, finding that there were no conflicting positions or representations, and that both representatives were seeking annulment of the award, the Committee decided to maintain the status quo, allowing both Curtis and De Jesús, who had been the lawyers in the arbitration phase and in the annulment proceedings, to remain as representatives of Bolivarian Republic of Venezuela.

* See Jus Mundi website.

URL: https://taobserver.com/news/47/icsid-committee-lifts-stay-of-enforcement-issued-in-conocophillips-v-venezuela

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