ICSID Case No ARB/10/5: Tidewater v Venezuela, decision on jurisdiction.

• Author: Yilmaz, Anil

I Introduction

On 8 February 2013, an arbitration tribunal constituted under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1) delivered its decision on jurisdiction in a case filed against the Bolivarian Republic of Venezuela ('Venezuela') by eight corporate entities ('Claimants'). (2) The decision focused on whether Venezuela consented to submit disputes with the Claimants to ICSID. The bases of consent invoked by the Claimants were: (a) art 22 of the Venezuelan Law on the Promotion and Protection of Investments ('Investment Laid); (3) and (b) the bilateral investment treaty between Venezuela and Barbados ("Venezuela-Barbados BIT'). (4) Venezuela argued that neither of the instruments invoked by the Claimants could constitute valid consent under the ICSID Convention. In considering Venezuela's objections, the tribunal addressed two main questions. The first question was whether art 22 of the Investment Caw constituted a standing offer to arbitrate under the ICSID Convention. The second question was whether insertion of an entity incorporated in Barbados into the upstream ownership structure of the Claimants' investment in Venezuela, allegedly in anticipation of the dispute, constituted abuse of the Venezuela-Barbados BIT.

A fundamental question arising from this decision is the tribunal's avoidance of the 'nationality' requirement found in art 25 of the ICSID Convention. Throughout the decision, there was no discussion of the 'nationality' of the investor, even though nationality is an objective jurisdictional requirement that must be satisfied in order to file a claim under the ICSID Convention. (5) The tribunal's failure to mention the nationality of the Claimant while analysing the 'abuse of treaty' argument is particularly striking. The tribunal appears to have assumed jurisdiction under the ICSID Convention on the grounds that the investor was a national of Barbados, without explicitly determining the nationality of the investor, and that therefore, the Venezuela-Barbados BIT constituted the consent of the parties. However, had the tribunal assessed the nationality of the investor under art 25 of the ICSID Convention, it would have found that the investor was a national of the United States. This being the case, the tribunal would not have had jurisdiction to settle the dispute, since the US and Venezuela have not signed an investment treaty that would constitute the basis of consent for ICSID's jurisdiction.

II Factual Background

The dispute related to the business of the lidewater Group (6) in Venezuela, which provided marine support services in Venezuela's oil industry from 1958 until 2009. (7) Services were provided to the national oil company of Venezuela (Petroleos de Venezuela, SA or 'PDVSA') and two other national and semi-national companies through a company established in Venezuela, Tidewater Marine Service, CA ('SEMARCA'). (8) SEMARCA was not included in this case as a claimant by the Tidewater Group, although it was the host state entity carrying out Tidewater Group's investment in Venezuela, a direct party to the contracts with the national Venezuelan companies and the entity whose operations were expropriated. (9) SEMARCA's shares were owned by Tidewater Caribe, which in turn was owned by Tidewater Marine International, Inc (a company incorporated in the Cayman Islands) until February 2009. This Cayman Islands entity was, in turn, owned by Tidewater, Inc, the parent company. In February 2009, the Cayman Islands entity incorporated Tidewater Barbados and transferred to it the whole shareholding in Tidewater Caribe. Tidewater Barbados itself was wholly owned by Tidewater Marine International Inc. In the words of the tribunal, 'Tidewater Barbados was inserted into the chain of ownership and became the owner, through Tidewater Caribe, of SEMARCA'. (10)

During 2008 and 2009, when the PDVSA failed to make payments to its service providers, including SEMARCA, a contractual dispute emerged between the parties. Amid lack of payment, SEMARCA continued to provide services to PDVSA. However, in order to maintain service provision, SEMARCA regularly requested funds from its parent company, Tidewater Inc, during that period. (11) In addition, the parent company was directly involved in the negotiations to settle the contractual dispute between SEMARCA and PDVSA. (12) In March 2009, PDVSA went into negotiations with its service suppliers to reduce its debt. (13) On 7 May 2009 the...