Skip to main content
International Arbitration Forum

Air Canada v. Bolivarian Republic of Venezuela

Case summary

At a glance

Parties
Air Canada Inc. (Canada) v. the Bolivarian Republic of Venezuela
Case no.
ICSID Case No. ARB(AF)/17/1; enforcement: Civil Action No. 24-2249 (JDB), U.S. District Court for the District of Columbia
Forum and rules
ICSID Additional Facility arbitration (Arbitration (Additional Facility) Rules of 10 April 2006); seat Paris, France
Treaty
Canada–Venezuela BIT, signed 1 July 1996, in force 28 January 1998
Tribunal
Prof. Pierre Tercier (President), Dr. Charles Poncet, Ms. Deva Villanúa
Sector
Aviation; airline ticket revenues; foreign exchange controls
Outcome
Unanimous award of 13 September 2021: jurisdiction upheld; Venezuela breached the free transfer of funds clause (Art. VIII) and fair and equitable treatment (Art. II(2)); the expropriation claim was dismissed. The D.C. District Court confirmed the award.
Amount
Claimed: USD 213,140,023 including compound interest to 29 February 2020 (alternatively USD 72,118,369). Awarded: USD 20,790,574 plus simple interest from 26 May 2014. Venezuela bears 75% of the costs of the proceeding (USD 693,791.59) and pays Air Canada USD 4,834,129.39 (75%) of its legal fees and expenses.
Court
U.S. District Court for the District of Columbia (Judge John D. Bates)
Underlying award(s)
Award of 13 September 2021, as corrected on 27 October 2021

The dispute

Air Canada operated a non-stop Toronto–Caracas–Toronto route from 1 July 2004. Under Venezuela's exchange control regime it had to obtain authorizations (AADs) from CADIVI to convert its bolívar ticket revenues into U.S. dollars and repatriate them. CADIVI approved all 91 earlier requests (about USD 91 million). It never decided on 15 requests filed between September 2013 and January 2014, worth about USD 50 million. Air Canada suspended its Caracas flights on 17 March 2014, and in 2014 Venezuela settled the pending requests of other airlines at 6.3 bolívars per dollar. Air Canada claimed breach of the BIT's free transfer of funds (Art. VIII), fair and equitable treatment (Art. II(2)) and expropriation (Art. VII) provisions. Venezuela argued that the Canada–Venezuela Air Transport Agreement (ATA) displaced the BIT as lex specialis, that the waiver and three-year time-bar conditions were not met, that there was no protected investment, that currency approvals were subject to availability of foreign currency, and that Air Canada had contributed to its own loss.

Key holdings

  1. The ATA does not displace the BIT. The two treaties differ in subject matter and in the actors they regulate, there is no conflict between them, and the parties showed no intention to exclude aviation investments, so the lex specialis principle does not apply. Award ¶¶ 190–204
  2. The waiver condition of Article XII(3)(b) was met. 'Dispute settlement procedure of any kind' does not cover negotiations, the IATA antitrust application or ALAV meetings with the government. The other jurisdictional objections also failed, and the dispute is within jurisdiction and admissible. Award ¶¶ 228–235; operative part, item 1
  3. Venezuela breached Article VIII. CADIVI's failure to decide the 15 properly filed requests, which stayed 'under analysis' until at least 2018, deprived Air Canada of its right to transfer its funds. Lack of dollar reserves was not proved, Air Canada's files were not deficient, Article VIII(6) did not apply, and other exchange channels were not equivalent alternatives. Award ¶¶ 378–398
  4. Venezuela breached fair and equitable treatment, read as an autonomous treaty standard rather than the customary minimum standard. Its handling of the requests frustrated Air Canada's legitimate expectations, lacked transparency, and discriminated against Air Canada compared with other airlines whose requests were settled in 2014. Award ¶¶ 447–471
  5. No direct or indirect expropriation. The right to free transfer is not a property right capable of being taken, nothing was appropriated, and the impact did not reach the level of an indirect expropriation, given that Air Canada intended to return and kept its property. Award ¶¶ 525–533
  6. Damages of USD 20,790,574, with no failure to mitigate and no contributory fault. The Tribunal deducted SOTI ticket revenue above the 10% limit (VEF 7,787,081.79) and interest revenue (VEF 739,672). It converted the remaining VEF 310,367,111.79 at 6.3 per dollar (USD 49,264,621) and set off the March 2014 dollar value of those bolívars at the SICAD 1 rate of 10.9 (USD 28,474,047). Award ¶¶ 608–651
  7. Simple interest runs from 26 May 2014, the date other airlines were paid. In the body of the award the rate is 'Canada's effective interest rate for businesses'; compound interest was refused. The operative part instead refers to 'Claimant's cost of debt' and gave 17 March 2014; the Decision on Correction changed only the date, to 26 May 2014. Costs were allocated 75%/25% in Air Canada's favour. Award ¶¶ 696–704, 724; Decision on Correction ¶ 15
  8. The District Court confirmed the award under the New York Convention. Enforcement does not offend U.S. public policy on recognition of the 2015 National Assembly. Article V(1)(a) concerns capacity to make the arbitration agreement. The tribunal could decide the representation question, and the 2015 National Assembly had notice and a meaningful opportunity to be heard. Memorandum Opinion, pp. 6–18

Procedural history

  1. 16 December 2016Request for Access to the Additional Facility and Request for Arbitration filed.
  2. 13 January 2017ICSID Secretary-General approves access to the Additional Facility and registers the request.
  3. 26 September 2017Tribunal constituted.
  4. 10 July 2018Procedural Order No. 2 rejects Venezuela's application for bifurcation.
  5. 28 May 2019Procedural Order No. 7: after submissions from both parties and from José Ignacio Hernández G. for the 2015 National Assembly, the proceedings continue with Venezuela's representatives on record.
  6. 10–12 March 2020Hearing at the World Bank premises in Paris.
  7. 13 September 2021Award: breaches of Articles VIII and II(2) found; USD 20,790,574 awarded.
  8. 27 October 2021Decision on Correction: the interest start date in the operative part is corrected to 26 May 2014.
  9. 26 September 2023According to Air Canada's petition, the Paris Court of Appeal rejected Venezuela's application to set the award aside.
  10. 31 July 2024Air Canada petitions the U.S. District Court for the District of Columbia to confirm the award.
  11. 14 August 2026District Court denies Venezuela's motion to dismiss and confirms the award.

Tribunal, counsel and experts

Decided by
For the claimant
King & Spalding LLP
For the respondent
Procuraduría General de la República · De Jesús & De Jesús, S.A. · Alfredo De Jesús O. – Transnational Arbitration & Litigation
For other participants
Procurador Especial de la República (2015 National Assembly)
Experts
Howard Rosen (claimant)

Run a conflict check on these names →

Keywords

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

Case ID
ICSID Case No. ARB(AF)/17/1
Country
Economic sector
Section