Ghella v. Venezuela and Metro de Valencia

Case summary

At a glance

Parties: Ghella S.p.A. (Italy) v. the Bolivarian Republic of Venezuela and C.A. Metro de Valencia (Venezuela)
Case no.: ICC Case No. 24776/JPA
Forum and rules: ICC International Court of Arbitration; ICC Rules of Arbitration in force from 1 March 2017
Treaty: Italy–Venezuela Framework Agreement on Economic, Industrial, Infrastructure and Development Cooperation of 14 February 2001 (Article XV)
Tribunal: Dyalá Jiménez (President), Eduardo Siqueiros Twomey, José Emilio Nunes Pinto
Sector: Construction; urban metro infrastructure
Outcome: The Tribunal found it had no jurisdiction because neither respondent had consented to arbitration.
Amount: Claimed: USD 96,000,000 plus an amount in bolívars still to be fixed, plus interest. Costs: Ghella bears all administrative costs (fixed by the ICC Court at EUR 483,000) and pays up to USD 600,000 of the respondents' defence costs. The respondents had claimed USD 1,662,236.18 (Venezuela) and USD 1,223,138.82 (Metro de Valencia).

The dispute

Ghella S.p.A., an Italian construction company, worked on Lines 1, 2 and 3 of the Valencia metro in Venezuela. It did so through a consortium (COMEVA) with its Venezuelan subsidiary, Ghella Sogene C.A., under contracts with C.A. Metro de Valencia dated 2001, 2008 and 2012. Each contract gave exclusive jurisdiction to the Venezuelan courts. Ghella claimed that Venezuela and Metro de Valencia breached international law and the 2001 Italy–Venezuela Framework Agreement. It relied on non-payment and lack of funding, the refusal to accept suspension of the works, laws that raised costs, exchange-rate manipulation, and protests, vandalism and theft at the sites. Ghella invoked Article XV of the Framework Agreement, which refers disputes "between Venezuelan and Italian companies" to the ICC. The respondents objected that Article XV is not an offer to arbitrate, that the claims are contractual and belong in the Venezuelan courts, and that the later 2009 Infrastructure Agreement provides only for diplomatic settlement. Metro de Valencia also argued that Ghella had no standing and that it could not itself be sued under the treaty.

Key holdings

Ghella has standing as a preliminary matter. Prima facie, its claims arise under international law and the Framework Agreement, not the contracts. A contract with a State does not prevent claims for breach of international obligations. Ghella is an Italian company within Article XV. ¶¶ 95–102
The 2009 Infrastructure Agreement did not terminate or replace the Framework Agreement. Nothing in it shows an intention to do so, no conflict between the two treaties was shown (VCLT Articles 30.3 and 59.1), and Venezuelan authorities continued to treat the Framework Agreement as in force. ¶¶ 104–107
The Framework Agreement is a multi-purpose cooperation treaty. Its object and purpose are not the promotion and protection of investments. Article V's promise of 'equitable and impartial treatment' is vague, is tied to national law, and is not a substantive protection standard. ¶¶ 121–131
Article XV is not a unilateral offer to arbitrate by either State. It covers disputes between Venezuelan and Italian companies and only allows them to go to ICC arbitration if they wish. Only Article XVII (diplomatic consultations) records the State's direct consent to dispute settlement. ¶¶ 150–161
The doctrine of attribution establishes State responsibility. It cannot be used to establish a State's consent to jurisdiction. Venezuela therefore did not consent through the conduct of Metro de Valencia. ¶¶ 162–172
Metro de Valencia did not consent either. It is not a party to the Framework Agreement and not a subject of international law. It showed no unequivocal will to arbitrate and agreed to the exclusive jurisdiction of the Venezuelan courts. Ghella's argument that it would otherwise lack an impartial forum cannot replace consent. ¶¶ 173–184
Costs: the respondents prevailed. However, Ghella's conduct was cooperative, and the respondents' defence costs were far higher than its own. Ghella therefore pays all administrative costs (EUR 483,000) and up to USD 600,000 of the respondents' defence costs. ¶¶ 196–205

Procedural history

21 December 2018Ghella sent a letter to the Venezuelan authorities, which it treated as the written request for consultations under Article XV.
20 September 2019Request for Arbitration filed.
23 April 2020The ICC Court confirmed the co-arbitrators and decided that the case could proceed prima facie, leaving jurisdiction to the Tribunal.
5 November 2020Carlos de los Santos resigned as President. The ICC Court appointed Dyalá Jiménez Figueres in his place.
15 April 2021Terms of Reference issued. On 16 April 2021, Procedural Order No. 1 bifurcated the proceeding into jurisdiction and merits.
22 November 2021Remote hearing on jurisdiction.
17 February 2022Proceedings closed by Procedural Order No. 4.
16 March 2022Final Award: no jurisdiction; costs decision against Ghella.

Tribunal, counsel and experts

Decided by: Dyalá Jiménez President — appointed by the institution (replaced Carlos de los Santos on 5 November 2020)
Eduardo Siqueiros Twomey Co-arbitrator — appointed by the claimant
José Emilio Nunes Pinto Co-arbitrator — appointed by the respondent
Carlos de los Santos President — appointed by the institution (appointed 1 October 2020; resigned, resignation accepted 5 November 2020)
For the claimant: Herbert Smith Freehills New York LLP
For the respondent: De Jesús & De Jesús, S.A. · Alfredo De Jesús O. – Transnational Arbitration & Litigation