INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES In the arbitration ...

286 Pages·2017·1.61 MB·English

by  Ayling Kocchiu

INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES

In the arbitration proceeding between

KOCH MINERALS SÁRL
First Claimant
(“KOMSA”)

KOCH NITROGEN INTERNATIONAL SÁRL
Second Claimant
(“KNI”)

and

THE BOLIVARIAN REPUBLIC OF VENEZUELA
Respondent

ICSID CASE No. ARB/11/19

_____________________________________________________________________________________

AWARD
______________________________________________________________________________

Members of the Tribunal:
V.V. Veeder, President, QC
Hon. Marc Lalonde PC, OC, QC
Professor Zachary Douglas QC

Secretary to the Arbitration Tribunal:
Mairée Uran Bidegain

Date of dispatch to the Parties: 30 October 2017
TABLE OF CONTENTS

PART I: THE ARBITRATION ............................................................................................ 1
PART II: THE PARTIES’ DISPUTE ................................................................................. 21
PART III: THE PRINCIPAL ISSUES ................................................................................. 37
PART IV: THE PRINCIPAL LEGAL TEXTS .................................................................... 52
PART V: THE PRINCIPAL FACTS .................................................................................. 66
PART VI: JURISDICTION ISSUES ................................................................................. 106
PART VII: EXPROPIATION ISSUES ................................................................................ 133
PART VIII: NON-EXPROPRIATION ISSUES ................................................................... 152
PART IX: COMPENSATION ISSUES .............................................................................. 172
PART X: SUMMARY AND CONCLUSIONS .................................................................. 262
PART XI: INTEREST AND COSTS .................................................................................. 263
PART XII: THE OPERATIVE PART ................................................................................. 272

i
ABBREVIATED TERMS
Organic Law for the Development of Petrochemical Activities (16
2009 Petrochemical Law
June 2009) (C-8)
Arbitration Rules ICSID Rules of Procedure for Arbitration Proceedings of 2006
Barrientos WS1 Witness Statement of Victor D. Barrientos (28 February 2013)
Second Witness Statement of Victor D. Barrientos (30 December
Barrientos WS2
2013)
Offering Circular - Bond Offering of $250,000,000 between
Bond Offering Circular
FertiNitro Finance Inc and FertiNitro (8 April 1998) (C-115)
C-[#] Claimants’ Exhibit
Special Certificates of Tax Refunds (Certificados Especiales de
CERTs
Reembolso Tributario)
CLA-[#] Claimants’ Legal Authority
Cls. Mem. Claimants’ Memorial (4 June 2012)
Cls. PHB Claimants’ Post-Hearing Brief (30 January 2015)
Cls. Rej. Claimants’ Rejoinder on Jurisdiction (14 March 2014)
Claimants’ Reply on the Merits and Counter-Memorial on
Cls. Reply
Jurisdiction (2 September 2013)
FertiNitro Report from the Statutory Auditor and Consolidated
Comisario Report
Financial Statements (7 September 2006) (C-63)
Engineering, Procurement and Construction Contract by and
EPC Contract
between FertiNitro and Snamprogetti (8 April 1998) (C-24)
Esty ER1 Expert Report of Benjamin C. Esty (23 August 2013)
Esty ER2 Second Expert Report of Benjamin C. Esty (14 March 2014)
Decree 7,713 (10 October 2010) (Official Gazette No. 380,113 of
Expropriation Decree
11 October 2010) (C-9)
Expropriation Law for Public or Social Benefit (1 July 2002)
Expropriation Law (Official Gazette of the Republic No. 37,475 of 1 July 2002) (R-
9, R-53, C-140)
ii
Joint venture companies Fertilizantes Nitrogenados de Oriente,
SA; Fertilizantes Nitrogenados de Oriente, CEC; Fertilizantes
FertiNitro
Nitrogenados de Venezuela, SRL, and Fertilizantes Nitrogenados
de Venezuela, FertiNitro, CEC
Hearing on Jurisdiction, Merits, and examination of Fact
First (September) Hearing Witnesses, held on 8 September 2014 and from 10 to 12
September 2014
Advantis Report entitled “Valoracíon de FertiNitro” (May 2011)
First Advantis Report
(R-86)
Flores ER1 Expert Report of Daniel Flores (28 February 2013)
Flores ER2 Second Expert Report of Daniel Flores (3 March 2014)
Flórez WS1 Witness Statement of Edgar A. Flórez (28 February 2013)
Giles ER1 Expert Report of Tim Giles (2 June 2012)
Giles ER2 Second Expert Report of Tim Giles (30 August 2013)
Gwaltney WS1 Witness Statement of Brent W. Gwaltney (30 May 2012)
Second Witness Statement of Brent W. Gwaltney (20 August
Gwaltney WS2
2013)
Historical Claims KOMSA’s claims regarding tax related measures and VAT credits
ICSID Convention Convention on the Settlement of Investment Disputes Between
States and Nationals of Other States (18 March 1965)
ICSID or the Centre International Centre for Settlement of Investment Disputes
Joint Investors Agreement by and among Pequiven, Koch Oil SA,
JIA Snamprogetti Netherlands BV, and Polar Uno, CA (8 April 1998)
(C-18)
KNI Koch Nitrogen International Sàrl
KOMSA Koch Minerals Sàrl
KOMSA Draft Memorandum of Understanding (non-dated) (C-
KOMSA Draft MOU
92)
Municipal Decree Decree D.A.M.S.B.-042-A-2006 (14 November 2006) (C-48)
Ordinance for Taxes on Industrial, Commercial, Service or
Municipal Ordinance
Similar Economic Activities (29 December 2005) (C-45)
iii
Nunez WS1 Witness Statement of Carolina Nuñez (28 February 2013)
Offtake Agreement by and among Pequiven, IPSL and Koch Oil
Offtake Agreement
SA as Buyers and FertiNitro as Seller (8 April 1998) (C-19).
Parra WS1 Witness Statement of Melquíades A. Parra (29 May 2012)
PDVSA Petróleos de Venezuela, S.A.
Pequiven Draft Memorandum of Understanding (non-dated) (C-
Pequiven Draft MOU
93)
R-[#] Respondent’s Exhibit
Counter-Memorial of the Bolivarian Republic of Venezuela
Resp. C-Mem.
(Merits) (28 February 2013)
Post-Hearing Brief of the Bolivarian Republic of Venezuela (30
Resp. PHB
January 2015)
Resp. Preliminary Preliminary Objections of the Bolivarian Republic of Venezuela
Objections to the Jurisdiction of the Arbitral Tribunal (28 February 2013)
Rejoinder of the Bolivarian Republic of Venezuela (Merits) (3
Resp. Rej.
March 2014)
Reply on Jurisdictional Objections of the Bolivarian Republic of
Resp. Reply on Jurisdiction
Venezuela (3 March 2014)
RfA Claimants’ Request for Arbitration (28 June 2011)
RLA-[#] Respondent’s Legal Authority
Sanders ER1 Expert Report of Richard Sanders (30 May 2012)
Sanders ER2 Second Expert Report of Richard Sanders (27 August 2013)
Organic Law on Science, Technology and Innovation (effective as
Science and Technology Law
of 1 January 2006) (C-43)
Hearing on Merits and Quantum and examination of Expert
Second (November) Hearing
Witnesses, held on 23 to 26 November 2014
Advantis Report entitled “Valoracíon de FertiNitro” (July 2011)
Second Advantis Report
(C-157)
Sorlie WS2 Second Witness Statement of Jim Sorlie (26 July 2013)
Third (June) Hearing Reconstitution Hearing held on 9 to 10 June 2016
iv
Tr. Day. [#page. line(s)]
Transcripts of Hearings
(Speaker(s))
Tribunal or Arbitral
Arbitral Tribunal constituted on 8 November 2011
Tribunal
Urea Decree Decree 5,218 (26 February 2007) (C-80)
Joint Resolution by the Ministry of the People’s Power for
Agriculture and Land, the Ministry of the People’s Power for
Urea Resolution Light Industry and Trade, and the Ministry of the People’s Power
for Energy and Petroleum (Official Gazette No. 38,674) (3 May
2007) (C-82)
Law of Partial Reform of the Law on Value Added Tax (11 August
VAT Law
2004) (C-55)
Second Witness Statement of Aníbal Villarroel (30 December
Villarroel WS2
2013)

v
LEGAL MATERIALS
Asian Agricultural Products Limited v. Democratic Socialist
AAPL v. Sri Lanka Republic of Sri Lanka, ICSID Case No ARB/87/3, Award (27 June
1990) (RLA-42)
Abaclat and others (formerly Giovanna A. Beccara and others) v.
Abaclat v. Argentina The Argentine Republic, ICSID Case No. ARB/07/5, Decision on
Jurisdiction and Admissibility (4 August 2011) (RLA-31)
ADC Affiliate Limited and ADC & ADMC Management Limited
ADC Affiliate v. Hungary v. Republic of Hungary, ICSID Case No. ARB/03/16, Award (27
September 2006) (CLA-16)
Ambiente Ufficio S.p.A. and others v. Argentine Republic, ICSID
Ambiente Ufficio v. Case No. ARB/08/9 (formerly Giordano Alpi and others v.
Argentina Argentine Republic), Decision on Jurisdiction and Admissibility
(8 February 2013) (CLA-90)
Autopista Concesionada de Venezuela, C.A. v. Bolivarian
Autopista v. Venezuela Republic of Venezuela, ICSID Case No. ARB/00/5, Award (23
September 2003) (RLA-60)
Azurix Corp. v. Argentine Republic, ICSID Case No. ARB/01/12,
Azurix v. Argentina
Award (14 July 2006) (CLA-43)
Bayindir Insaat Turizm Ticaret Ve Sanayi A.Ş. v. Islamic Republic
Bayindir v. Pakistan of Pakistan, ICSID Case No. ARB/03/29, Decision on Jurisdiction
(14 November 2005) (CLA-11)
BG Group Plc. v. Republic of Argentina UNCITRAL, Final
BG Group v. Argentina
Award, (24 December 2007) (CLA-37)
Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania,
Biwater v. Tanzania
ICSID Case No. ARB/05/22, Award (18 July 2008) (CLA-24)
Burlington Resources, Inc. v. Republic of Ecuador, ICSID Case
Burlington v. Ecuador No. ARB/08/5, Decision on Reconsideration and Award (7
February 2017)
Caratube International Oil Company LLP v. The Republic of
Caratube v. Kazakhstan Kazakhstan, ICSID Case No. ARB/08/12, Award (5 June 2012)
(RLA-107)
Chevron Corporation and Texaco Petroleum Corporation v. The
Chevron v. Ecuador Republic of Ecuador, UNCITRAL, Final Award (31 August 2011)
(CLA-63)
vi
Chorzów Factory Case (Germany v Poland), PCIJ Series A, No.
Chorzów Factory Case
17, Decision on Merits (13 September 1928) (CLA-49)
CME Czech Republic B.V. v. Czech Republic, UNCITRAL, Partial
CME v. Czech Republic
Award (13 September 2001) (CLA-14)
CMS Gas Transmission Company v. Argentine Republic, ICSID
CMS v. Argentina
Case No. ARB/01/8, Award (12 May 2005) (CLA-36) (CLA-130)
ConocoPhillips Petrozuata B.V., ConocoPhillips Hamaca B.V.
and ConocoPhillips Gulf of Paria B.V. v. Bolivarian Republic of
ConocoPhillips v. Venezuela
Venezuela, ICSID Case No. ARB/07/30, Decision on Jurisdiction
and the Merits (3 September 2013) (CLA-155)
Československá Obchodní Banka, A.S. v. Slovak Republic, ICSID
CSOB v. Slovak Republic Case No. ARB/97/4, Decision on Objections to Jurisdiction (24
May 1999) (RLA-5)
Daimler Financial Services A.G. v. Argentine Republic, ICSID
Daimler v. Argentina
Case No. ARB/05/1, Decision on Annulment (7 January 2015)
G. R. Delaume, ICSID and the Transnational Financial
Delaume, ICSID Arbitration
Community (1986) (CLA-96)
Deutsche Bank AG v. The Democratic Socialist Republic of Sri
Deutsche Bank v. Sri Lanka Lanka, ICSID Case No. ARB/09/02, Award (31 October 2012)
(CLA-100)
EDF (Services) Ltd. v. Romania, ICSID Case No. ARB/05/13,
EDF v. Romania
Award (8 October 2009) (RLA-85)
El Paso Energy International Company v. The Argentine
El Paso v. Argentina Republic, ICSID Case No. ARB/03/15, Award (31 October 2011)
(CLA-52)
Electrabel S.A. v. The Republic of Hungary, ICSID Case No.
Electrabel v. Hungary ARB/07/19, Decision on Jurisdiction, Applicable Law and
Liability (30 November 2012) (RLA-110)
Elettronica Sicula S.p.A. (ELSI) (United States of America v.
ELSI
Italy), ICJ, Judgment, (20 July 1989) (CLA-41)
EnCana Corporation v. Republic of Ecuador, UNCITRAL,
EnCana v. Ecuador
Award (3 February 2006) (RLA-71)
Fedax N.V. v. The Republic of Venezuela, ICSID Case No.
Fedax v. Venezuela
ARB/96/3, Decision on Jurisdiction (11 July 1997) (CLA-142)
vii
Flughafen Zürich A.G. and Gestión e Ingeniería IDC S.A. v.
Flughafen v. Venezuela Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/19,
Award (18 November 2014) (RLA-154)
GAMI Investments, Inc. v. United Mexican States, UNCITRAL,
GAMI v. Mexico
Award (15 November 2004) (RLA-64)
GEA Group Aktiengesellschaft v. Ukraine, ICSID Case No.
GEA Group v. Ukraine
ARB/08/16, Award (31 March 2011) (RLA-30)
Gemplus S.A., SLP, S.A. and Gemplus Industrial, S.A. de C.V. v.
Gemplus v. Mexico United Mexican States, ICSID Cases Nos. ARB(AF)/04/3 and
ARB(AF)/04/4, Award (16 June 2010) (CLA-54)
Glamis Gold, Ltd. v. United States of America, UNCITRAL,
Glamis v. USA
Award, (8 June 2009) (RLA-83)
Global Trading Res. Corp. and Globex Int’l v. Ukraine, ICSID
Global Trading v. Ukraine
Case No. ARB/09/11, Award (1 December 2010) (RLA-27)
Gold Reserve Inc. v. Bolivarian Republic of Venezuela, ICSID
Gold Reserve v. Venezuela
Case No. ARB(AF)/09/1, Award (22 September 2014) (CLA-156)
Gotanda – Compound John Yukio Gotanda, Compound Interest in International Disputes
Interest (2003) (CLA-61)
HICEE B.V. v. Slovak Republic, UNCITRAL, Partial Award (23
HICEE v. Slovakia
May 2011)
Hulley Enterprises Limited (Cyprus) v. The Russian Federation,
Hulley v. Russia
PCA Case No. AA 226, Final Award (18 July 2014) (CLA-152)
ICSID, Convention on the Settlement of Investment Disputes
between States and Nationals of Other States: Documents
ICSID Convention History
Concerning the Origin and the Formulation of the Convention,
Volume II, Part 1 (1968) (RLA-6)
ICSID Convention: A Christoph H. Schreuer et al., The ICSID Convention: A
Commentary Commentary (2d ed. 2009) (RLA-21) (RLA-106) (CLA-3)
Inmaris Perestroika Sailing Maritime Services GmbH and others
Inmaris v. Ukraine v. Ukraine, ICSID Case No. ARB/08/8, Decision on Jurisdiction
(8 March 2010) (CLA-91)
Joy Mining Machinery Limited v. Arab Republic of Egypt, ICSID
Joy Mining v. Egypt Case No. ARB/03/11, Award on Jurisdiction (6 August 2004)
(RLA-10)
viii
Kardassopoulos v. Republic of Georgia, ICSID Case No.
Kardassopolous v. Georgia ARB/05/18 and ARB/07/15, Award (28 February 2010) (CLA-
20)
Ronald S. Lauder v. Czech Republic, UNCITRAL, Final Award
Lauder v. Czech Republic
(3 September 2001) (CLA-45)
Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB/06/18,
Lemire Award
Award (28 March 2011) (RLA-89)
Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB/06/18,
Lemire v. Ukraine Decision on Jurisdiction and Liability (14 January 2010) (CLA-
89)
Renée Rose Levy de Levi v. The Republic of Peru, ICSID Case No.
Levi v. Peru
ARB/10/17, Award (26 February 2014) (CLA-150)
LG&E Energy Corp., LG&E Capital Corp. and LG&E
International Inc. v. Argentine Republic, ICSID Case No.
LG&E v. Argentina
ARB/02/1, Decision on Liability (3 October 2006) (CLA-39)
(RLA-123)
Libyan American Oil Company (LIAMCO) v. Libyan Arab
LIAMCO v. Libya
Republic, Award, 20 I.L.M. 1 (12 April 1977) (RLA-37)
F.A. Mann, British Treaties for the Promotion and Protection of
Mann – British Treaties Investments, 52 British Yearbook of International Law 241 (1981)
(CLA-86)
F. A. Mann, Further Studies in International Law - Compound
Mann - Further Studies
Interest as an Item of Damage (1990) (CLA-60)
Mann – Legal Aspect of
F.A. Mann, The Legal Aspect of Money (4th ed, 1982)
Money
Marboe - Calculation of Irmgard Marboe, Calculation of Compensation and Damages in
Compensation International Investment Law, (2009) (CLA-137)
Methanex Corporation v. United States of America, UNCITRAL,
Methanex v. USA Final Award of the Tribunal on Jurisdiction and Merits (3 August
2005)
Malaysian Historical Salvors Sdn Bhd v. Malaysia, ICSID Case
MHS v. Malaysia No. ARB/05/10, Decision on Application for Annulment (16
April 2009) (RLA-23)
ix