Valores Mundiales, S.L. and Consorcio Andino S.L. v. Bolivarian Republic of Venezuela

Case summary

At a glance

Parties: Valores Mundiales, S.L. and Consorcio Andino, S.L. (Spain; controlled by Gruma S.A.B. de C.V., Mexico) v. Bolivarian Republic of Venezuela
Case no.: ICSID Case No. ARB/13/11
Forum and rules: ICSID Convention arbitration; ICSID Arbitration Rules in force from 10 April 2006; place of proceeding Washington, D.C.; language Spanish
Treaty: Spain–Venezuela BIT, signed 2 November 1995, in force 10 September 1997
Tribunal: Eduardo Zuleta (President), Horacio A. Grigera-Naón, Yves Derains
Sector: Food processing; corn and wheat flour milling
Outcome: Award of 25 July 2017 (unanimous): jurisdiction upheld; no indirect expropriation; breaches of fair and equitable treatment, the bar on arbitrary measures and the free-transfer clause; damages awarded. The annulment committee lifted the stay of enforcement on 6 September 2018. The U.S. District Court for D.C. confirmed the award on 15 May 2023.
Amount: Claimed: USD 629.7 million plus interest. Awarded: USD 430.4 million plus compound interest at LIBOR + 2% from 22 January 2013, and USD 5,925,705.14 in costs (60% of the arbitration costs and of the claimants' legal costs).

The dispute

Valores Mundiales and Consorcio Andino are Spanish holding companies controlled by the Mexican group Gruma. They own all the shares of Molinos Nacionales, C.A. (Monaca) and Derivados de Maíz Seleccionado, Demaseca, C.A., two Venezuelan producers of corn and wheat flour. From late 2009, in a criminal case against businessman Ricardo Fernández Barrueco, who was alleged to hold an indirect stake, Venezuelan courts and agencies imposed asset-protection measures on the companies. These included special administrators, frozen bank accounts and a ban on registering corporate acts. In May 2010 Decree No. 7.394 ordered the forced acquisition of Monaca's assets. A "Liaison Commission" of officials then moved into the companies. The expropriation procedure was suspended in August 2010 for negotiations that never concluded, and Administrative Order No. 004-13 of 22 January 2013 gave the special administrators broad powers of administration. The claimants alleged indirect expropriation, unfair and inequitable treatment, arbitrary and discriminatory measures and restrictions on transfers (Articles V, IV, III and VII of the BIT). Venezuela raised four jurisdictional objections, three based on its denunciation of the ICSID Convention and one arguing that Gruma, a Mexican company, was the real investor. It also denied liability and damages.

Key holdings

First objection rejected. Venezuela gave its consent in Article XI of the BIT. The claimants validly accepted it in their Notice of Dispute, received on 9 November 2011, before Venezuela notified its denunciation of the Convention on 24 January 2012. The six-month negotiation period limits only when a dispute may be submitted; it does not delay the investor's consent. Article 72 of the Convention therefore preserved jurisdiction. Award ¶¶ 211–224
The other objections were also rejected. The expropriation dispute had already been notified in November 2011, and the later Administrative Order formed part of the same dispute. Article XI(2)(b) requires only that both States have acceded to the Convention, not that they remain parties when the claim is filed. Because the BIT uses an incorporation test, incorporation in Spain was enough, and the Tribunal did not look into Gruma's control. Award ¶¶ 241–244, 249–262, 275–284
No indirect expropriation. The claimants did not lose total or substantial control of the companies, and the value of their shares was not destroyed. The Tribunal relied in particular on Gruma's December 2012 purchase of ADM's 3% stake for USD 8 million and on Gruma's own financial reports. Award ¶¶ 458, 470–479
Breach of fair and equitable treatment (Article IV). The breach arose from several things taken together. The criminal-case measures were kept in place indefinitely, and the claimants' appeal had not even been admitted after more than six years. The expropriation was suspended for almost ten years while the Decree's restrictions were still applied. The functions of the Liaison Commission and the special administrators were confused, which showed a lack of coherence and transparency. Award ¶¶ 556–563, 583–588
Breach of Article III(1). Three acts were arbitrary and obstructed the investments: the foreign-investment registry's (SIEX) unexplained refusal to process registration updates, the imposition of the Liaison Commission, and the 2012 order to redirect the companies' corn. Breach of Article VII: Venezuela blocked the transfer of a USD 31.9 million share-subscription premium. The claim for USD 163.5 million in retained dividends failed because no dividends had been declared. Award ¶¶ 612–619, 636–640
Damages follow the full-reparation (Chorzów Factory) standard, measured as the difference between an actual scenario and a counterfactual one. The actual value was USD 192.6 million, taken from the ADM transaction less royalty debt. The counterfactual value was USD 572.8 million, calculated by discounted cash flow with a WACC of 10.2% (4% country risk, no size premium). Adding USD 50.2 million for the corn redirection gives USD 430.4 million. Award ¶¶ 697–700, 722–726, 805–813
Compound interest runs at LIBOR + 2% from 22 January 2013 until payment. Venezuela may not tax the compensation. Venezuela bears its own costs and pays 60% of the arbitration costs and of the claimants' legal costs, a total of USD 5,925,705.14. Award ¶¶ 817–823, 832, 834
The ad hoc Committee lifted the provisional stay of enforcement. It relied on the difficulty of securing compliance with ICSID awards against Venezuela and on Venezuela's officially declared policy of opposing compliance. Stay Decision ¶¶ 107–108, 113
The U.S. District Court confirmed the award and the annulment committee's award of about USD 2.3 million in costs. Venezuela argued that refusing to recognize the Guaidó government's counsel in the annulment proceeding denied it due process. The court rejected this: Venezuela was represented and heard throughout, and the court cannot second-guess the committee's choice of representative. Memorandum Opinion, pp. 10–15

Procedural history

9 November 2011Venezuela receives the claimants' Notice of Dispute, which also accepts ICSID arbitration.
24 January 2012Venezuela notifies its denunciation of the ICSID Convention; the denunciation takes effect on 25 July 2012.
10 May 2013Request for Arbitration filed. ICSID registers it on 6 June 2013 over Venezuela's objection.
9 January 2014Tribunal constituted. The first session follows on 5 February 2014; Venezuela does not attend.
1 October 2014Tribunal rejects Venezuela's request to bifurcate the proceeding.
8–12 February 2016Hearing on jurisdiction and merits in Washington, D.C.
25 July 2017Award: USD 430.4 million plus interest and costs.
27 July 2017Gruma issues a press release on the award.
6 September 2018The ad hoc Committee lifts the provisional stay of enforcement.
21 December 2021Annulment decision upholds the award and orders Venezuela to pay about USD 2.3 million in costs (as reported by the D.C. court).
3 August 2022Magistrate Judge Meriweather recommends that the U.S. District Court confirm the award.
15 May 2023U.S. District Court for D.C. grants the claimants summary judgment and confirms the award.