Douglas Thomson b” friday, 11 march 2016

One of Venezuelabs ICSID creditors will be able to collect on nearly two-thirds of its award before annulment proceedings conclude, after an ad hoc committee for the first time found it had the power to order a partial stay of enforcement.

Venezuela’s Lake Maracaibo

In a decision dated 29 February, the ICSID committee hearing the challenge to a US$46.4 million award in favour of subsidiaries of US oil services group Tidewater identified US$27.4 million of damages to which it said Venezuelabs arguments for annulment did not apply. It lifted a provisional stay of enforcement over that part of the award while continuing the stay for the rest.

Tidewaterbs counsel, Miguel LC3pez Forastier of Covington & Burling in Washington, DC, calls the ruling the bfirst of its kindb. Venezuelabs counsel has yet to comment.

The committee which made the ground-breaking ruling is one of the more diverse ICSID has seen, composed of Somalian arbitrator Abdulqawi Ahmed Yusuf, Cecil Abraham of Malaysia and Rolf Knieper of Germany.

Two subsidiaries of Tidewater incorporated in Barbados and Venezuela won the award last year, with Venezuela ordered to pay them US$46.4 million in damages for the seizure of the Venezuela subsidiary following the nationalisation of the oil services industry.

Including interest, Tidewater had originally sought US$234 million in damages based on the value of cash flows they would have enjoyed between the date of expropriation and that of the award. However the tribunal rejected this approach as btoo remote or speculative to justify inclusion.b

Venezuela has applied for the annulment of the quantum section of the award, arguing the tribunal failed to state reasons, manifestly exceeded its powers and departed from fundamental rules of procedure. Specifically, it says the tribunal, chaired by New Zealandbs Campbell McLachlan QC, awarded the Tidewater companies US$16 million more than it was owed, on account of a clerical error.

The state argues that the tribunal incorrectly transcribed a valuation figure from Tidewaterbs expert witness Brent Kaczmarek of Navigant Consulting, putting it down as US$31.959 million rather than US$13.917 million. It says had the tribunal calculated damages based on the correct figure, it would have awarded only US$30.401 million in damages.

Last July, the tribunal refused a request by Venezuela that it revise the award on account of the error, ruling that the statebs argument did not constitute a bnew factb which could justify revision. Venezuela filed for annulment within a fortnight, obtaining a provisional stay of the full award.

The Tidewater companies argued there was bno basis at allb to stay the entire award because of a challenge to a part of it and urged the committee to partially lift the stay in exercise of a power they said was bexpressly provided forb in the ICSID Rules.

But Venezuela argued that even though its arguments in favour of annulment only concerned US$16 million of the award, its application was for annulment of the entire quantum section. A partial lifting of the stay of enforcement bnecessarily implies a pre-judgment of the meritsb of its annulment application, it said.

The committee noted that Venezuelabs counsel, from Curtis Mallet-Prevost Colt & Mosle in Washington, DC, had conceded it was bnot the caseb that the state did not bowe even one cent to the claimantsb, accepting (based on its own expertsb valuations) that it owed US$21.407 million. It held that this bunchallenged portion of the damages awarded by the tribunalb should be recoverable now, with the annulment application only applying to the difference between that figure and the total final award.

Tidewater Investment SRL and Tidewater Caribe CA v Venezuela (ICSID Case No ARB/10/5)

In the annulment proceedings

Annulment committee

  • Abdulqawi Ahmed Yusuf (Somalia) (Chair)
  • Cecil Abraham (Malaysia)
  • Rolf Knieper (Germany)

Counsel to Tidewater

  • In-house counsel Bruce Lundstrom in Houston
  • Covington & Burling

Partners Miguel LC3pez Forastier, Thomas Cubbage III and Alexander Berengaut, and associates Mark Herman and Clovis Trevino in Washington, DC

Counsel to Venezuela

  • Attorney General Reinaldo Enrique MuC1oz Pedroza in Caracas
  • Curtis Mallet-Prevost Colt & Mosle

Partners George Kahale III, Miriam Harwood and Ben Preziosi in New York, Gabriela Clvarez Cvila and Eloy BarbarC! de Parres in Mexico City, and Claudia Frutos-Peterson in Washington, DC

In the arbitration

Tribunal

  • Campbell McLachlan QC (New Zealand) (President)
  • AndrC)s Rigo Sureda (Spain) (appointed by Tidewater)
  • Brigitte Stern (France) (appointed by Venezuela)

Tribunal secretary was Marco Tulio MontaC1C)s-Rumayor

Counsel to Tidewater

  • In-house counsel Bruce Lundstrom in Houston
  • Covington & Burling

Partners Miguel LC3pez Forastier and Thomas Cubbage III, and associates Alexander Berengaut, Daniel Matro and Gisselle Bourns in Washington, DC

Counsel to Venezuela

  • Attorney General Reinaldo Enrique MuC1oz Pedroza in Caracas
  • Curtis Mallet-Prevost Colt & Mosle

Partners George Kahale III, Miriam Harwood and Ben Preziosi in New York, Gabriela Clvarez Cvila and Eloy BarbarC! de Parresin Mexico City, and Claudia Frutos-Peterson in Washington, DC

Experts for Tidewater

  • Brent Kaczmarek, Isabel Kunsman, Sarah Sherman* and Matt Shopp of Navigant in Washington, DC

*No longer with the company

Experts for Venezuela

  • Vladmir Brailovsky
  • Louis Wells of Harvard Business School in Cambridge, Massachusetts
  • Daniel Flores, Andrea Cardani and Jordan Heim of Econ One in Washington, DC

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