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International Arbitration Forum

Saint-Gobain Performance Plastics Europe v. Bolivarian Republic of Venezuela

Case summary

At a glance

Parties
Saint-Gobain Performance Plastics Europe (France) v. Bolivarian Republic of Venezuela
Case no.
ICSID Case No. ARB/12/13
Forum and rules
ICSID Convention arbitration; ICSID Arbitration Rules
Treaty
France–Venezuela BIT (in force 15 April 2004)
Tribunal
Prof. Dr. Klaus M. Sachs (President), Judge Charles N. Brower, Mr. Gabriel Bottini
Annulment Committee
Prof. Ricardo Ramírez Hernández (President), Ms. Olufunke Adekoya, Prof. Lawrence Boo
Courts
US District Court for the District of Delaware; US District Court for the District of Columbia; US Court of Appeals for the D.C. Circuit
Sector
Ceramic proppants for oil and gas (hydraulic fracturing)
Outcome
Venezuela was held liable for failing to specify and pay prompt compensation for the expropriation of Norpro Venezuela (Decision of 30 December 2016; Award of 3 November 2017). The bauxite-price claims were dismissed. Brower dissented in part on quantum, and Bottini disagreed with the costs decision.
Amount
Claimed: USD 99.5 million plus pre-award interest. Awarded: USD 29.6 million principal plus USD 4.8 million pre-award interest to 31 March 2017, with further interest at 2% over the 6-month US Treasury bill rate, compounded annually. Costs: Venezuela pays all arbitration costs (USD 1,303,189.99) and two thirds of the claimant's costs (USD 4,634,532.05).

The dispute

Saint-Gobain Performance Plastics Europe, a French company in the Compagnie de Saint-Gobain group, owned 99.99% of Norpro Venezuela C.A. Norpro Venezuela ran a plant in Puerto Ordaz, Bolívar State, that made ceramic proppants from bauxite supplied by the State-owned company CVG Bauxilum. Venezuela took over the plant after a televised speech by President Hugo Chávez on 15 May 2010 and issued Expropriation Decree No. 8,133 on 29 March 2011, but it paid no compensation. Saint-Gobain claimed that Venezuela breached Article 5(1) of the France–Venezuela BIT by expropriating without compensation. It also claimed that Venezuela breached fair and equitable treatment and full protection and security (Article 3(1) and (2)) by sanctioning, or failing to stop, a 2008 increase in the bauxite price under the Bauxite Contract. Venezuela pointed to its domestic expropriation procedures, which the claimant had declined to use, and argued for a much lower valuation (USD 9.5 million).

Key holdings

  1. Challenge to arbitrator rejected. Mr Bottini's former post as National Director of International Matters and Disputes in Argentina's Treasury Attorney General's Office, which he left on 31 December 2012, did not show a manifest lack of independence or impartiality. Having argued similar issues for Argentina was not an 'issue conflict' that disqualified him. The rejection was conditional on Mr Bottini filing a new Rule 6 declaration within 10 days. Decision on Disqualification ¶¶ 78–88
  2. Liability: Venezuela breached Article 5(1), subparagraphs 2 and 3, of the BIT by failing to specify the amount of compensation and to pay prompt compensation for the expropriation. The bauxite claims failed because the claimant did not prove that the September 2008 price increase breached the Bauxite Contract. No compensation is due for the higher price paid before 15 May 2010. Decision on Liability ¶¶ 846–848, 908
  3. Valuation: a DCF valuation of Norpro Venezuela as of 15 May 2010, using a discount rate of 19.88% that includes a Venezuela country risk premium of 10.26%. By majority, 25% of export-sales profits is deducted because Norpro had no marketing and distribution network of its own. VAT credits are treated as part of working capital and have no separate value. Decision on Liability ¶¶ 754–758, 787–790, 849–850
  4. Interest and taxes: pre-award and post-award interest run at 2% over the average 6-month US Treasury bill rate, compounded annually. The award is net of Venezuelan taxes. The claim for indemnity against double taxation outside Venezuela was rejected as speculative. Decision on Liability ¶¶ 880–882, 896, 902–905
  5. Judge Brower dissented on two points. He objected to including the risk of uncompensated expropriation in the country risk premium, and to the 25% deduction from export profits based on intercompany transfer pricing. Brower Concurring and Dissenting Opinion ¶¶ 1–5
  6. Award: on the parties' agreement, compensation was fixed at USD 34.4 million (USD 29.6 million principal plus USD 4.8 million interest to 31 March 2017). Venezuela must bear all costs of the arbitration (USD 1,303,189.99), noting that it never paid its share of the advances. It must also pay two thirds of the claimant's costs (USD 4,634,532.05), reflecting the dismissed bauxite claims and the claimant's three unsuccessful incidental applications. Bottini disagreed with the costs decision. Award ¶¶ 52, 58–69, 72 and n. 35
  7. Enforcement and service: the D.C. Circuit reversed the summary judgment for Saint-Gobain. Service under the Hague Service Convention was not complete because Venezuelan law requires suits against the Republic to be served on the Attorney General, and the Attorney General was never served. Delivery of the papers to the Central Authority was not enough. The case was remanded so that Saint-Gobain could effect service. D.C. Cir. Opinion pp. 6–10

Procedural history

  1. 25 May 2012Request for Arbitration filed. ICSID registered it on 15 June 2012.
  2. 26 November 2012Tribunal constituted. The claimant had already proposed the disqualification of Mr Bottini on 29 October 2012.
  3. 27 February 2013Sachs and Brower rejected the challenge to Bottini, on condition that he file a new declaration.
  4. 9 September 2014Procedural Order No. 3 gave the reasons for denying, by majority, the claimant's request for provisional measures. Judge Brower dissented.
  5. 2–6 February 2015Hearing in Washington, D.C.
  6. 30 December 2016Decision on Liability and the Principles of Quantum, with Brower's concurring and dissenting opinion. The claimant's requests for reconsideration and correction were rejected on 28 June 2017.
  7. 3 November 2017Award: USD 29.6 million principal plus interest, and costs.
  8. 24 October 2018Venezuela had applied for annulment on 5 March 2018. In Procedural Order No. 2 the ad hoc Committee lifted the stay of enforcement, fixed Washington, D.C. as the place of the proceeding, and suspended the proceeding because Venezuela had not paid the advance on costs. The published documents do not show the outcome of the annulment proceeding.
  9. 12 December 2019The District of Delaware denied default judgment and vacated the default. It transferred the case against Venezuela to the District of Columbia because Delaware was an improper venue, and dismissed the case against PDVSA for lack of service. Saint-Gobain had filed its petition there on 12 December 2018.
  10. 25 January 2022The D.C. Circuit reversed the D.C. District Court's summary judgment for Saint-Gobain for lack of proper service and remanded.

Tribunal, counsel and experts

Decided by
For the claimant
Freshfields Bruckhaus Deringer · Hughes Hubbard & Reed LLP · Alston & Bird LLP · Pachulski, Stang, Ziehl & Jones, LLP
For the respondent
Procuraduría General de la República · Curtis, Mallet-Prevost, Colt & Mosle LLP · Arnold & Porter Kaye Scholer LLP · Abrams & Bayliss LLP
For other participants
Hogan Lovells US LLP · Department of Justice
Experts
Pablo T. Spiller (claimant) · Allan Brewer-Carías (claimant) · Vladimir Brailovsky (respondent) · Daniel Flores (respondent)

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Keywords

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

Case ID
ICSID Case No. ARB/12/13
Country
Claimant
Saint-Gobain Performance Plastics Europe
Respondent
Venezuela
Documents
Section