Caracas, March 18, 2015 (Venezuelanalysis.com) – The International Center for Settlement of Investment Disputes (ICSID) of the World Bank ruled in favor of Venezuela on Monday, rejecting the "exorbitant compensation" demanded by Tidewater. The U.S.-based energy shipping firm was awarded US$46 million in compensation for eleven vessels expropriated by the Bolivarian government of late President Hugo Chavez in 2009.
According to the Venezuelan Ministry of Petroleum, the ICSID decision confirms that the government's nationalization of Tidewater's assets in Venezuela was "totally legal in all aspects".
"The much higher amounts claimed were rejected because the tribunal found that the nationalization was lawful," stated lawyer George Kahale, who represented Venezuela in the case.
In 2007, the Chavez government issued a law-decree nationalizing all remaining oil production sites under foreign control and mandating that all oil extraction in Venezuela be undertaken in the context of joint ventures, in which the state oil company PDVSA retains the majority stake.
This move subsequently triggered a wave of lawsuits by foreign transnationals in international arbitration bodies demanding compensation for nationalized assets. Last year, ICSID ordered Venezuela to pay Exxon Mobil US$1.6 billion, which represented only 13% of the amount demanded by the transnational firm and was consequently claimed as a victory for the Bolivarian Republic.
For Kahale, the Tidewater case marks an important landmark, setting a precedent for future cases.
"Venezuela's positions on the central issues of the legality of the nationalization, the appropriate valuation date for determining compensation, and the appropriate discount rate for calculating compensation were all accepted by the tribunal in what is likely to be an important precedent for other cases."
The Bolivarian government has yet to declare if it will seek revisions or annulment of the US$46 million award, but Kahale added that the decision was being "carefully reviewed".
Venezuela announced its decision to leave the ICSID in 2012, citing institutional bias in favor of transnational corporations on the part of the Washington-based body. Venezuela's departure from the international arbitrations organization does not, however, affect the status of the 27 pending cases against the Bolivarian nation.