Serafín García Armas and Karina García Gruber v. The Bolivarian Republic of Venezuela

At a glance

Parties

Serafín García Armas and Karina García Gruber (father and daughter; Spanish and Venezuelan nationals) v. the Bolivarian Republic of Venezuela

Case no.

PCA Case No. 2013-3

Forum and rules

Ad hoc arbitration under the UNCITRAL Arbitration Rules 1976, administered by the PCA; seat Paris

Treaty

Spain–Venezuela BIT, signed in Caracas on 2 November 1995, in force since 10 September 1997

Tribunal

Prof. Eduardo Grebler (President), Prof. Guido Santiago Tawil, Mr. Rodrigo Oreamuno Blanco

Sector

Food import and distribution

Outcome

Jurisdiction upheld (2014). Final Award (2019): Venezuela unlawfully expropriated the investments and breached fair and equitable treatment and the bar on arbitrary measures. The Paris courts later annulled the jurisdiction decision (2020) and annulled the part of the Final Award on supplier guarantees (2023).

Amount

Awarded: USD 99,677,396.88 to García Armas and USD 38,896,584.20 to García Gruber for their shares, plus USD 75,677,393.94 to García Armas for guarantees given to suppliers. Interest at 12-month LIBOR + 4.5%, compounded annually from 20 May 2010. Costs: USD 7,267,953.06 and EUR 44,893, plus EUR 2,273,111.85 paid to the PCA. In 2023 the Paris Court of Appeal annulled the USD 75,677,393.94 award and the USD 50,637,156.71 of interest on it.

The dispute

Serafín García Armas and his daughter Karina García Gruber held shares in two Venezuelan family companies, Alimentos Frisa, C.A. and Transporte Dole, C.A. The companies imported and distributed food from the Frigorífico de Tazón near Caracas. In May and June 2010, the food agency SADA, the consumer agency INDEPABIS and other Venezuelan authorities inspected the companies, confiscated goods and placed them under a temporary administration board (Providencia Administrativa No. 181 of 21 May 2010). The claimants said these measures were an indirect expropriation without compensation and also breached fair and equitable treatment and the bar on arbitrary measures under the Spain–Venezuela BIT. Venezuela objected that dual Spanish–Venezuelan nationals are not protected by the BIT, and that the claimants were not Spanish when they invested. It later alleged that the share-transfer documents were forged and that the claimants had committed fraud.

Key holdings

1. Dual nationals are covered. Article I of the BIT protects natural persons who hold the nationality of 'one' of the Contracting Parties. The word does not exclude persons who also hold the other Party's nationality. Rules of diplomatic protection on effective or dominant nationality, and Article 25(2) of the ICSID Convention, do not apply. Decision on Jurisdiction ¶¶174, 193–200
2. By majority, nationality is tested at the date of the alleged breach and at the start of the arbitration, not at the date of investment. Jurisdiction ratione materiae is therefore upheld. Rodrigo Oreamuno dissented on this point. Decision on Jurisdiction ¶¶214–219
3. The Tribunal held unanimously that Venezuela unlawfully expropriated the claimants' investments (Article V), denied them fair and equitable treatment (Article IV) and took arbitrary measures (Article III). It awarded USD 99,677,396.88 and USD 38,896,584.20 for the shares, and USD 75,677,393.94 to García Armas for guarantees given to Alimentos Frisa's suppliers. Final Award ¶571
4. Interest runs from the date of expropriation, 20 May 2010, at 12-month LIBOR plus 4.5% a year, compounded annually. The Tribunal rejected the claimants' 12.7% rate and Venezuela's US Treasury rate. Final Award ¶¶537–541
5. Venezuela bears all arbitration costs and the claimants' legal and expert costs. The Tribunal relied on the claimants' substantial success and on Venezuela's conduct: unpaid deposits, failure to produce documents, four challenges, repeated requests for suspension, and revision requests. Final Award ¶¶559–565
6. Venezuela's two requests for revision of the jurisdiction decision for fraud are inadmissible. The Act of Constitution barred new jurisdictional objections based on facts already known. The requests were also out of time under Article 596 of the French Code of Civil Procedure. The fraud issue was already pending before the French courts, and the jurisdiction decision did not rest on the impugned documents. Revision Decision ¶¶96, 99, 105, 108, 116
7. Set-aside of the jurisdiction decision. The Paris Court of Appeal first annulled it only in part (2017). The Court of Cassation quashed that judgment because the BIT's conditions on nationality and investment cannot be split (2019). On remand, the Court of Appeal annulled the whole decision: an investment is protected only if the investor held the other Party's nationality when making it, and in 2001 the claimants were only Venezuelan (2020). Paris CA 3 June 2020, ¶¶51–57

Procedural history

1. 9 October 2012Notice of Arbitration served; Venezuela receives it on 15 October 2012.
2. 8 May 2013The PCA Secretary-General rejects Venezuela's first challenge to Guido Santiago Tawil.
3. 30 August 2013The PCA Secretary-General appoints Eduardo Grebler as presiding arbitrator, completing the Tribunal.
4. 15 December 2014Decision on Jurisdiction: Venezuela's objections are rejected; Oreamuno dissents on one point.
5. 25 April 2017The Paris Court of Appeal annuls the jurisdiction decision only as to investments made before the investors held Spanish nationality, and grants exequatur for the rest.
6. 5 July 2017The PCA Secretary-General, Hugo Hans Siblesz, rejects Venezuela's challenge to all three arbitrators. A further challenge to Tawil follows, decided on 12 February 2018.
7. 13 February 2019The French Court of Cassation quashes the 2017 judgment in full and remits the case to the Paris Court of Appeal.
8. 25 March 2019Second challenge to all arbitrators rejected.
9. 26 April 2019Final Award in the claimants' favour. The same day, the Revision Decision rejects Venezuela's two revision requests as inadmissible.
10. 3 June 2020On remand, the Paris Court of Appeal annuls the jurisdiction decision in its entirety.
11. 2 July 2024The Paris Court of Appeal refuses the claimants' request to rectify or interpret its judgment of 24 October 2023. That judgment had annulled the Final Award's guarantee damages and interest for breach of international public policy (tax evasion) and dismissed the annulment action for the rest. The court corrects one clerical error.

Tribunal, counsel and experts

Decided by

• Eduardo Grebler President — appointed by the appointing authority
• Guido Santiago Tawil Co-arbitrator — appointed by the claimant (challenges rejected)
• Rodrigo Oreamuno Co-arbitrator — appointed by the respondent (dissented on one point in the Decision on Jurisdiction)
• Hugo Hans Siblesz PCA Secretary-General (appointing authority), PCA Secretary-General (appointing authority) — appointed by the parties jointly
• Dominique Guihal Judge, Paris Court of Appeal
• Anne Beauvois Judge, Paris Court of Appeal
• Fabienne Schaller Judge, Paris Court of Appeal
• Laure Aldebert Judge, Paris Court of Appeal
• Daniel Barlow Judge, Paris Court of Appeal

For the claimant

Freshfields Bruckhaus Deringer · Dechamps International Law · D'Empaire Reyna Abogados · SELARL Lexavoue Paris-Versailles · Three Crowns LLP · SARL Ortscheidt · Elie Kleiman · Shaparak Saleh · Christophe Seraglini · Hermann Prodel

For the respondent

Procuraduría General de la República Bolivariana de Venezuela · Hogan Lovells US LLP · De Jesús & De Jesús, S.A. · Alfredo De Jesús O. – Transnational Arbitration, Litigation & Business Law · SELARL Pellerin - De Maria - Guerre · SCP Foussard et Froger

Experts

José Alberro (claimant) · Michael Seelhof (claimant) · Pierre Mayer (claimant) · Andrea Pinna (claimant) · Pedro Miguel Lollet Rivero (other)

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Keywords

• Spain–Venezuela BIT
• dual nationality
• effective nationality
• ratione personae
• ratione materiae
• nationality at time of investment
• indirect expropriation
• fair and equitable treatment
• arbitrary measures
• Alimentos Frisa
• food distribution
• arbitrator challenge
• revision for fraud
• set-aside
• Paris Court of Appeal
• Court of Cassation
• international public policy
• tax evasion

Summary generated with AI from the published documents — refer to the award for the authoritative text.