ICSID Tribunal Terminates Arbitration Proceedings against Venezuela for Non-Payment of Advance Costs under ICSID Administrative and Financial Regulations 

By Diego Luis Alonso Massa, 8 December 2021

Pursuant to ICSID Administrative and Financial Regulation 14(3)(d), the Tribunal terminated the proceedings on 3 December 2021 after the lapse of the six-month notice period provided for the payment of the requested advances.

The arbitration proceedings were instituted by Barbados-based Saint Patrick Properties Corporation  in 2016.

According to the information provided by UNCTAD, Saint Patrick Properties Corporation owned several companies in Venezuela that provided oil support and related services in the Lake Maracaibo area of Venezuela.  

From 2007 onwards, the Bolivarian Republic of Venezuela made decisive moves towards full state control of the oil industry. Thus, on 7 May 2009, the National Assembly of the Bolivarian Republic of Venezuela passed the "Organic Law that reserves to the State goods and services related to primary hydrocarbon activities", published in the Official Gazette No. 39.173 of the same day. 

By virtue of this law, goods and services related to the performance of the primary activities provided for in the Organic Hydrocarbons Law were reserved to the State. Previously, they were performed either by Petróleos de Venezuela, S.A., (PDVSA) and its subsidiaries, or were outsourced.

The law, however, allowed the state to take back control and totally or partially manage the oil services companies (water, steam or gas injection, gas compression and those linked to activities in Lake Maracaibo) granted to third parties.

In the framework of this law, in 2009 the government nationalised all companies belonging to Saint Patrick Properties Corporation and transferred its assets and operations to the national oil company PDVSA.

As a result, in December 2016, Saint Patrick Properties commenced arbitration proceedings against the Bolivarian Republic of Venezuela before the International Center for Settlement of Investment Disputes (Saint Patrick Properties Corporation v. Bolivarian Republic of Venezuela (Case No. ARB/16/40) alleging violation of the Agreement between the Government of Barbados and the Government of the Republic of Venezuela for the promotion and protection of investments, signed in Bridgetown on 15 July 1994.

The tribunal, composed of Laurence Shore (British-American), as President; Elliot Polebaum (American), appointed by the Claimant; and Howard Mann (Canadian), appointed by the Respondent, was formally constituted in January 2018. However, following the resignation of Chairman Laurence Shore in July 2019, he was replaced by Doug Jones (Australian-Irish).

As for the proceeding, it should be mentioned that after the first hearing was conducted by telephone conference, the tribunal's jurisdiction was subsequently questioned as a preliminary measure. On 24 October 2018, the Tribunal issued a Procedural Order No. 2 concerning the request to deal with the objections to jurisdiction as a preliminary question. Consequently, the proceeding on the merits was suspended.

It should be highlighted that series of procedural orders were issued up to 1 June 2020, and with no further procedural steps being taken in the proceedings thereafter, the Secretary-General requested the Tribunal, in December 2020, to stay the proceedings for non-payment of the requested advances pursuant to ICSID Administrative and Financial Regulation 14(3)(d). 

The relevant parts of Rule 14 reads as follows: “…[…]each party shall pay one half of each advance or supplemental charge, without prejudice to the final decision on the payment of the cost of an arbitration proceeding to be made by the Tribunal pursuant to Article 61(2) of the Convention. […] If any proceeding is stayed for non-payment for a consecutive period in excess of six months, the Secretary-General may, after notice to and as far as possible in consultation with the parties, move that the competent body discontinue the proceeding”.

The tribunal granted the Secretary-General's request and ordered the stay of the arbitration proceedings.

Finally, on 3 December 2021, the Tribunal terminated the proceedings after the lapse of the six-month period provided for in the abovementioned rule without payment having been made.

Saint Patrick Properties was represented by Steptoe & Johnson, Washington, while the Bolivarian Republic of Venezuela was represented by De Jesús & De Jesús and the Procuraduría General de la República.

URL: https://taobserver.com/news/74/icsid-tribunal-terminates-arbitration-proceedings-against-venezuela-for-non-payment-of-advance-costs-under-icsid-administrative-and-financial-regulations