The Venezuela Awards: Dealing with Expropriation Risk
Kluwer Arbitration Blog, October 9, 2019
In a post on the Kluwer Arbitration Blog, Managing Principal Samuel Weglein, Manager Todor Stoyanov, and Associate Ellie Liu compared a series of ICSID arbitration awards in 2014 and 2015 against Venezuela to more recent arbitrations in order to shed light on the ways that tribunals deal with the risk of expropriation in calculating quantum of damages. Specifically, the authors examined how tribunals have dealt with economic issues, as distinct from legal ones, in their decisions.
The authors analyzed expropriations in Venezuela that had been deemed either lawful (Venezuela Holdings and Tidewater) or unlawful (Gold Reserve, Flughafen, and OI European), and compared the tribunals’ rationales to the 2018 awards in Saint Gobain and ConocoPhillips. Contrary to some prior studies on this topic, the Analysis Group team found that the tribunals in all of the Venezuelan awards consistently focused on the economics underlying the decision of whether to include or exclude expropriation risk in the country risk premium. The appropriate separation of economic questions from legal questions is critical to ensuring that host states do not benefit from their own wrongful conduct and that investors do not receive “insurance” against risks they considered at the time of their investment.