Blue Bank International & Trust (Barbados) Ltd. v. Bolivarian Republic of Venezuela

Case summary

At a glance

Parties: Blue Bank International & Trust (Barbados) Ltd. v. Bolivarian Republic of Venezuela
Case no.: ICSID Case No. ARB/12/20
Forum and rules: ICSID Convention arbitration; ICSID Arbitration Rules 2006
Treaty: Barbados–Venezuela BIT of 15 July 1994 (in force 31 October 1995)
Tribunal: Christer Söderlund (President), George Bermann, Loretta Malintoppi. Originally José María Alonso (disqualified) and Santiago Torres Bernárdez (resigned).
Committee: Álvaro Castellanos Howell (President), Felipe Bulnes Serrano, Carlos Urrutia Valenzuela
Sector: Tourism and hospitality; trusts
Outcome: Jurisdiction declined unanimously (26 April 2017) because Blue Bank, as trustee, had not made an investment itself. The application for annulment was dismissed in full (22 June 2020).
Amount: Damages not reached. Award: Blue Bank bears the arbitration costs (USD 792,902.24) and pays Venezuela USD 1,709,295.00 in legal costs, with 5% simple annual interest from 30 days after the Award. Annulment: Blue Bank bears the proceeding costs (USD 467,852.04) and pays 80% of Venezuela's legal costs (USD 983,885.79), with interest at six-month LIBOR + 2%.

The dispute

Blue Bank, a Barbados company, brought the claim as trustee of the Qatar International Authorised Purpose Trust, a Barbados trust. The trust held shares in two BVI companies, bought in April 2005 for USD 156 million. Through them it indirectly held the Venezuelan companies Inversora Turística Caracas S.A. (ITC) and Corporación Hotelera Hemesa S.A. These companies had interests in the Teleférico, the Hotel Humboldt, the Hotel Puerto La Cruz and related concession contracts. Blue Bank alleged expropriation and other breaches of the BIT that destroyed the companies' business. Venezuela objected only to jurisdiction. Its main objections were: (i) its denunciation of the ICSID Convention on 24 January 2012 had ended its consent; (ii) Blue Bank was not the investor, because the assets belonged to the trust, which has no legal personality; (iii) the real investors were Venezuelan nationals; (iv) the trust had been restructured as an abuse of process; and (v) the BIT does not protect indirect investments.

Key holdings

The ICSID Chairman upheld Venezuela's challenge to José María Alonso. Alonso was a partner at Baker & McKenzie Madrid, and other Baker & McKenzie offices represented the claimant in Longreef v. Venezuela, a parallel case likely to raise similar issues. A reasonable third party would see an evident appearance of lack of impartiality. The claimant's challenge to Santiago Torres Bernárdez was dismissed because he had resigned. Decision on Disqualification ¶¶ 66–71
Venezuela's consent remained in effect when the claim was filed. Under Article 71 of the ICSID Convention, a denunciation takes effect only six months after the depositary receives the notice. The Request was filed on 25 June 2012, before the denunciation took effect on 24/25 July 2012. The later date of registration does not matter. The majority did not need to decide the Article 72 issue. President Söderlund concurred separately: in his view, Article 72 does not apply at all where consent is given in a BIT that remains in force. Award ¶¶ 114–120; Separate Opinion
No jurisdiction. Articles 1(a) and 8(1) of the BIT require that the claimant itself have invested the assets. As trustee, Blue Bank does not own the trust assets. It committed no assets in its own right, bore no risk and received only a fixed annual fee of USD 100,000. It therefore made no investment. The Qatar Trust lacks personality and is neither a 'national' nor a 'company' under the BIT. Award ¶¶ 163–165, 172–173
In obiter, the Tribunal held that the Qatar Trust is a beneficiary trust for Hampton Latin American Holdings (the Eligible Person and Protector), not a purpose trust. The majority added that Hampton had full control over Blue Bank's management of the trust. The President agreed with that finding of fact but considered control irrelevant to jurisdiction. The abuse-of-process objection was not addressed. Award ¶¶ 190–199
Costs follow the event. Blue Bank bears all arbitration costs and its own legal costs. It must pay Venezuela's legal costs of USD 1,709,295.00, with 5% simple annual interest from the 30th day after the Award. Award ¶¶ 209–215
The two unchallenged committee members rejected Venezuela's challenge to Álvaro Castellanos Howell. His newspaper column about a Guatemalan constitutional debate did not show bias against Venezuela. His repeated appointments by the ICSID Chairman in annulment cases involving Venezuela, and his acceptance of the appointment despite Venezuela's objection, did not show a manifest lack of independence or impartiality. Decision on Castellanos Challenge ¶¶ 85–113
Annulment dismissed in full. There was no manifest excess of powers: the Tribunal identified the BIT as the applicable law and endeavoured to apply it, and turned to Barbados law reasonably to decide whether Blue Bank had invested the assets. The Award states its reasons, including on interest on costs. The Tribunal did not seriously depart from a fundamental rule of procedure: its reference to Renta 4 v. Russia was obiter, and it had weighed the expert evidence. Blue Bank was ordered to pay all costs of the proceeding and 80% of Venezuela's legal costs. The committee reduced the share to 80% because Venezuela had raised procedural incidents that caused delay. Decision on Annulment, pp. 58, 63, 120–122, 128–130

Procedural history

24 January 2012Venezuela gives notice denouncing the ICSID Convention.
22 June 2012Request for Arbitration dated (received by ICSID on 25 June 2012; registered on 7 August 2012).
16 August 2013Tribunal constituted with Christer Söderlund as President; the proceeding is suspended pending the challenges.
12 November 2013ICSID Chairman disqualifies José María Alonso and dismisses the challenge to Santiago Torres Bernárdez, who had resigned. The Tribunal is reconstituted on 9 December 2013 with George Bermann and Loretta Malintoppi.
13 January 2015Procedural Order No. 2 bifurcates the proceeding; jurisdiction is to be heard first. Hearing on jurisdiction held 15–18 February 2016 in Washington, D.C.
26 April 2017Award: the Centre lacks jurisdiction. President Söderlund attaches a separate opinion on the denunciation issue.
11 August 2017Blue Bank applies for annulment (registered 16 August 2017). The ad hoc Committee is constituted on 4 January 2018.
2 March 2018Two members of the Committee reject Venezuela's challenge to Committee President Álvaro Castellanos Howell.
27 June 2018Committee continues the stay of enforcement of the Award. Hearing on annulment held 12–13 March 2019.
22 June 2020Decision on Annulment: application dismissed, costs ordered against Blue Bank, stay of enforcement lifted.

Tribunal, counsel and experts

Decided by: Christer Söderlund President — appointed by the institution (separate opinion on denunciation; differed from majority on relevance of control)
George A. Bermann Co-arbitrator — appointed by the claimant (appointed 13 November 2013, replacing José María Alonso)
Loretta Malintoppi Co-arbitrator — appointed by the respondent (appointed 29 November 2013, replacing Santiago Torres Bernárdez)
José María Alonso Co-arbitrator — appointed by the claimant (disqualified 12 November 2013)
Santiago Torres Bernárdez Co-arbitrator — appointed by the respondent (resigned 2 September 2013 after challenge; challenge dismissed as moot)
Jim Yong Kim Chairman of the ICSID Administrative Council, Chairman of the ICSID Administrative Council (decided the disqualification proposals)
Álvaro Castellanos Howell Committee president — appointed by the institution (challenge rejected)
Felipe Bulnes Serrano Committee member — appointed by the institution
Carlos Urrutia Valenzuela Committee member — appointed by the institution
For the claimant: DLA Piper LLP (US) · Bryan Cave LLP · B. Cremades y Asociados · WDA Legal
For the respondent: Procuraduría General de la República · Guglielmino & Asociados / Guglielmino Derecho Internacional · Quinn Smith
Experts: David John Brownbill (respondent) · Peter David Hutson Williams (claimant)