Tenaris S.A. and Talta - Trading e Marketing Sociedade Unipessoal Lda. v. Bolivarian Republic of Venezuela

Case summary

At a glance

Parties: Tenaris S.A. (Luxembourg) and Talta - Trading e Marketing Sociedade Unipessoal Lda. (Portugal) v. Bolivarian Republic of Venezuela
Case no.: ICSID Case No. ARB/12/23
Forum and rules: ICSID Convention arbitration; ICSID Arbitration Rules (April 2006)
Treaty: Belgium-Luxembourg Economic Union–Venezuela BIT (17 March 1998) and Portugal–Venezuela BIT (17 June 1994)
Tribunal: Juan Fernández-Armesto (President), Enrique Gómez Pinzón, Brigitte Stern
Annulment Committee: Rolf Knieper (President), José Antonio Moreno Rodríguez, N. Fernando Piérola Castro
Court: US District Court for the District of Columbia (Judge Carl J. Nichols)
Sector: Steel; seamless steel pipes; hot briquetted iron
Outcome: Unanimous award of 12 December 2016 upheld jurisdiction and found unlawful expropriation. Annulment rejected on 28 December 2018. The US District Court recognised the award on 24 February 2021.
Amount: Claimed: USD 243.7 million plus interest. Awarded: USD 112,345,530 to Tenaris (Tavsa) and USD 24,672,357 to Talta (Comsigua), net of Venezuelan taxes, with interest from 30 April 2008 at one-year USD LIBOR + 4%, compounded annually. Costs: Venezuela reimburses Tenaris USD 525,000 + USD 1,256,500 and Talta USD 525,000 + USD 983,500.

The dispute

Tenaris, a Luxembourg holding company in the Techint group, owned 70% of Tubos de Acero de Venezuela S.A. (Tavsa) through its Mexican subsidiary Tamsa. Tavsa made seamless steel pipes. Through its Portuguese subsidiary Talta, Tenaris also held 7.58% of Complejo Siderúrgico de Guayana C.A. (Comsigua), which produced hot briquetted iron. Venezuela nationalised the Guayana steel sector by Decree 6058 of 30 April 2008 and Decree 6796 of 14 July 2009. It took over Tavsa on 16 November 2009 and Comsigua on 17 June 2011, and paid no compensation. The claimants alleged expropriation in breach of Article 4 of the Luxembourg BIT and Article IV of the Portugal BIT, and in the alternative unfair and inequitable treatment and discrimination. Venezuela had denounced the ICSID Convention on 24 January 2012. It objected that consent had not been perfected before the denunciation, that the claimants had no effective seat in Luxembourg or Portugal, and that the Tavsa notice of dispute was defective. On the merits it denied that Comsigua had been expropriated and argued that non-payment did not make the expropriation unlawful.

Key holdings

Consent was perfected before the denunciation. Tenaris accepted Venezuela's offer in its Tavsa notice of 20 November 2009, and more than six months of negotiations had passed by 24 January 2012. Its reservation of rights did not substantially modify the offer. Talta accepted in the Comsigua notice of 2 December 2011, after negotiations that had begun on 28 June 2010. Award ¶¶ 81–97
Article 9 of the Luxembourg BIT allows an investor to give its consent and choose ICSID arbitration in the notice of dispute itself. The six-month negotiation period limits only when the claim may be filed. Tenaris's consent concerning Comsigua was therefore also perfected on 2 December 2011. Award ¶¶ 122–143, 868
The BITs require an effective seat, not only a registered seat. On the evidence, the effective seats of Tenaris and Talta are in Luxembourg and Portugal, not Argentina. The ratione personae objection failed. The objection about the notice of dispute was not decided, because the fair and equitable treatment claim was only an alternative claim. Award ¶¶ 869–873
Venezuela indirectly expropriated Tavsa and Comsigua by taking control of their assets and business. It had paid no compensation after more than seven years, which is not the 'immediate' payment the BITs require. The delay could not be blamed on the claimants. Venezuela breached Article 4 of the Luxembourg BIT and Article IV of the Portugal BIT. Award ¶¶ 874–877, 892
The valuation date was 30 April 2008, the date of the Nationalisation Decree. Using a DCF valuation with a WACC of 21.7%, the Tribunal valued Tenaris's 70% of Tavsa at USD 112,345,530. A DCF of Comsigua at a WACC of 20.47% gave USD 22.3 million, which the Tribunal found too low. It weighted four other indicators and fixed Talta's stake at USD 24,672,357. Award ¶¶ 603, 754, 879–884
Interest runs at one-year USD LIBOR + 4%, compounded annually, from 30 April 2008 until payment. The award is net of Venezuelan taxes. Venezuela is not liable for taxes levied in Luxembourg or Portugal. Costs follow the event: Venezuela bears all costs of the proceeding, and the Tribunal fixed reasonable legal costs at USD 2.8 million, allocated according to the claimants' success. Award ¶¶ 775, 792–794, 846–856
The ad hoc Committee rejected annulment on all grounds: manifest excess of powers, serious departure from a fundamental rule of procedure and failure to state reasons. Each party bears its own legal costs. Venezuela bears the costs of the annulment proceeding. Decision on Annulment ¶ 491
The US District Court denied default judgment because Venezuela had appeared, but recognised and enforced the award. Post-judgment interest runs at the statutory rate in 28 U.S.C. § 1961(a). The Court refused attorneys' fees and refused Venezuela's request for a stay based on the OFAC sanctions. Memorandum Opinion, pp. 3–8

Procedural history

20 July 2012ICSID receives the Request for Arbitration. It registers it on 21 August 2012.
18 July 2013Tribunal constituted.
15 January 2014The Tribunal bifurcates the ratione temporis objection. In July 2014, at the parties' joint request, jurisdiction is joined to the merits.
15–22 June 2015Hearing on jurisdiction and merits.
12 December 2016Award: jurisdiction upheld, unlawful expropriation found, USD 137,017,887 awarded plus interest and costs.
11 April 2017Venezuela applies for annulment. ICSID registers the application on 18 April 2017 and stays enforcement provisionally.
23 February 2018The ad hoc Committee lifts the stay of enforcement.
8 June 2018Petition to recognise and enforce the award filed in the US District Court for the District of Columbia.
28 December 2018Decision on Annulment: application rejected.
24 February 2021District Court Memorandum Opinion: default judgment denied, petition granted in part.

Tribunal, counsel and experts

Decided by: Juan Fernández-Armesto President — appointed by the parties jointly
Enrique Gómez Pinzón Co-arbitrator — appointed by the claimant
Brigitte Stern Co-arbitrator — appointed by the respondent
Rolf Knieper Committee president — appointed by the institution
José Antonio Moreno Rodríguez Committee member — appointed by the institution
Fernando Piérola-Castro Committee member — appointed by the institution (replaced Dyalá Jiménez Figueres on 7 May 2018)
Dyalá Jiménez Figueres Committee member — appointed by the institution (resigned; vacancy notified 25 April 2018)
Carl J. Nichols Judge, US District Court for the District of Columbia
For the claimant: Freshfields Bruckhaus Deringer · D'Empaire Reyna Abogados
For the respondent: Foley Hoag LLP · Procuraduría General de la República · GST LLP
Experts: Manuel A. Abdala (claimant) · Pablo López Zadicoff (claimant) · Timothy Hart (respondent) · Christoph Schreuer (claimant) · August Reinisch (respondent) · André Prüm (claimant) · Dário Moura Vicente (claimant) · Alain Steichen (respondent) · Pedro Maia (respondent) · Tiago Duarte (respondent)