Venoklim Holding B.V. v. Bolivarian Republic of Venezuela

Case summary

At a glance

Parties: Venoklim Holding B.V. (Netherlands) v. the Bolivarian Republic of Venezuela
Case no.: ICSID Case No. ARB(AF)/17/4
Forum and rules: ICSID Additional Facility; Arbitration (Additional Facility) Rules 2006; seat Madrid, Spain
Treaty: Netherlands–Venezuela BIT (Agreement on Encouragement and Reciprocal Protection of Investments)
Tribunal: Dr. Eduardo Damião Gonçalves (President), Dr. Gabriel Bottini, Dr. Juan Pablo Cárdenas Mejía
Sector: Lubricants and chemicals; shareholdings in Venezuelan companies
Outcome: Award of 17 October 2024: the Tribunal upheld all three of Venezuela's jurisdictional objections (ratione voluntatis, personae and materiae) and declined jurisdiction.
Amount: No damages awarded. Venoklim must pay USD 2,900,000.00 of Venezuela's legal fees (Venezuela claimed USD 5,035,125.00) and EUR 10,163.40 in expenses within 30 days, with interest at six-month SOFR after that. Venoklim also bears all costs of the proceeding (USD 623,871.25). Venoklim had claimed costs of USD 2,072,688.00.

The dispute

Venoklim, a company incorporated in the Netherlands on 25 July 2006, held shares in Venezuelan companies of the Venoco group, including Lubricantes Venoco Internacional C.A., C.A. Nacional de Grasas Lubricantes (CANGL), Química Venoco, C.A. and Aditivos Orinoco de Venezuela Adinoven, C.A. Their assets were expropriated by Venezuela in 2010. An earlier ICSID arbitration under Venezuela's Investment Law (Case No. ARB/12/22) had failed for lack of jurisdiction. After Venezuela denounced the ICSID Convention, Venoklim brought new claims under Article 9(2) of the Netherlands–Venezuela BIT through the Additional Facility. Venezuela objected that it had given no valid offer to arbitrate under the Additional Facility, that Venoklim was a shell company controlled by Venezuelan nationals, and that Venoklim had made no contribution and so had no investment. It also asked the Tribunal to find an abuse of process.

Key holdings

No consent (ratione voluntatis). The unconditional consent in Article 9(4) applies only to ICSID Convention arbitration under Article 9(1). The Additional Facility offer in Article 9(2) ("as long as the Republic of Venezuela has not become a Contracting State") covered only the period before Venezuela joined the ICSID Convention on 1 June 1995. It did not revive when Venezuela denounced the Convention. The English text prevails under paragraph 3 of the BIT's Protocol, and the conclusion matches Heemsen, Venezuela US and Kimberly-Clark. ¶¶ 147–186
The award in the first arbitration is not res judicata on the nationality objection. That tribunal applied the Investment Law and Article 25 of the ICSID Convention, while this case rests on the BIT and the Additional Facility Rules, so the legal basis differs. ¶¶ 194–198
No foreign investor (ratione personae). Read in good faith and in light of their object and purpose, the BIT and the Additional Facility Rules do not protect Venoklim. It was set up about 20 days before acquiring the shares, had no employees and EUR 18,000 paid-in capital, showed no active relationship with the investment, and was ultimately controlled by Venezuelan nationals. Treating it as a foreign investor would let formalism prevail over reality. ¶¶ 205–225
No investment (ratione materiae). The asset list in Article 1(a) of the BIT is not enough; an investment requires a contribution, duration and risk. Venoklim bought the shares with a loan from the seller, Industrias Venoco C.A. The debt was then assigned within the group and converted into share premium. Venoklim proved no contribution and bore no risk, and the Tribunal noted doubts that the transactions may have been simulated. ¶¶ 240–264
Venezuela's alternative request for a finding of abuse of process was not examined, because jurisdiction had already been declined. ¶ 270
Costs follow the event, with a cap. Venoklim bears all costs of the proceeding. Venezuela's recoverable legal fees are limited to twice Venoklim's own fees (USD 2,900,000.00), plus EUR 10,163.40 in expenses. The Tribunal referred to Venoklim's opposition to bifurcation and its failure to post the ordered security for costs. Venezuela's request to terminate the proceeding became moot. ¶¶ 283–293

Procedural history

23 July 2012Venoklim files its first ICSID arbitration (Case No. ARB/12/22) under Venezuela's Investment Law.
3 April 2015Award in the first arbitration: by majority, no jurisdiction. Annulment application dismissed on 2 February 2018, with Venoklim ordered to pay USD 738,156.57 of Venezuela's costs plus interest.
26 September 2016ICSID Secretary-General approves access to the Additional Facility (requested on 4 December 2015).
19 July 2017Request for Arbitration filed under the Netherlands–Venezuela BIT; registered on 25 September 2017.
19 March 2018Tribunal constituted; the President is appointed by the Chairman of the ICSID Administrative Council.
3 February 2020Procedural Order No. 3 bifurcates the proceeding into a jurisdictional phase (the award's list of defined terms dates this order 3 February 2021).
5–6 May 2022Hearing on jurisdiction in Madrid.
15 July 2022Procedural Order No. 5 orders Venoklim to post security for costs of USD 3,000,000.00; Venoklim does not comply.
8 September 2023Venezuela requests termination of the proceeding for failure to post the security.
17 October 2024Award: jurisdiction declined; costs against Venoklim.