An arbitral tribunal has dismissed a gold and diamond mining claim worth over US$633 million brought against Venezuela by Dutch investor Highbury International and Panamanian investor Ramstein Trading. In a unanimous decision, the tribunal constituted under the auspices of the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID) dismissed the case on the basis that it lacked ratione personae and temporis jurisdiction over the claims.
Claimants sought damages for the alleged expropriation by Venezuela of gold and diamond mining concessions, referred to as the Alfa and Delta concessions, located in the Caroní River in order to build a hydroelectric plant in the area surrounding the concessions. The ICSID proceeding marked the second time that the alleged owners of the Alfa and Delta concessions attempted to sue Venezuela in a foreign forum for allegedly expropriating their concession rights. In 2007, Compañia del Bajo Caromín (CAROMIN) and VMC Mining (VMC), Venezuelan companies allegedly owned by Highbury and Ramstein, sought compensation from Venezuela in the United States District Court for the Southern District of New York (“U.S. District Court”). In that case, the companies claimed that the U.S. District Court had jurisdiction over their claims because Minister Rafael Ramírez, of Venezuela’s Ministry for the Popular Power of Energy and Petroleum had allegedly signed a waiver pursuant to which Venezuela allegedly submitted itself to the jurisdiction of U.S. courts. The case was dismissed by the U.S. District Court on the basis that Venezuela had succeeded in establishing “compelling evidence of fraud.” That decision was later affirmed by the U.S. Court of Appeals for the Second Circuit.
Having been rejected in U.S. federal courts, the alleged owners of the Alfa and Delta concessions, CAROMIN and VMC, attempted to reassert their claims before an ICSID tribunal by claiming they were owned by Dutch investor, Highbury, and thus protected under the Venezuela-Dutch bilateral investment treaty. Claimants also alleged that VMC was allegedly owned by Ramstein (a subsidiary of Highbury), and this was also protected under the Venezuela-Panamanian bilateral investment treaty. The tribunal, composed of Enrique Barros (Chile), Guido Tawil (Argentina) and Claus von Wobeser (Mexico), dismissed the case on the basis that the claimants had failed to prove that Highbury had acquired CAROMIN, the holder of the Alfa concessions, prior to the date on which the dispute arose. The tribunal also held that Venezuela had successfully established that neither VMC nor Ramstein nor Highbury ever acquired title to the Delta concessions.
Foley Hoag LLP represented Venezuela in both the New York proceeding and the ICSID proceeding.
Ron Goodman, co-chair of Foley Hoag’s International Litigation and Arbitration Department, notes that “this is yet another important victory for Venezuela that should send a warning signal to investors with baseless claims.”
Alberto Wray, who led the Foley Hoag team that represented Venezuela in this case, observed, “At the end, the effort we made to show the flaws of an elaborate corporate scheme, yielded fruits. It was successful team work.”
In addition to Dr. Goodman and Dr. Wray, the Foley Hoag attorneys who represented Venezuela in this case include Paul Reichler, Kenneth Juan Figueroa, Ignacio Torterola, Tafadzwa Pasipanodya, Cicely Ott Parseghian, Analía Gonzalez, Diego Cadena, Clara Brillembourg and Vivek Krishnamurthy. Carlos Arrué Montenegro, who is no longer with the firm, also formed part of the team.
This case is the latest in a series of representations by Foley Hoag of sovereign states before international tribunals and is the second complete victory this year won on behalf of Venezuela in ICSID proceedings. In January 2013, Foley Hoag won a dismissal of an ICSID Additional Facility claim asserted by Canadian company Vannessa Ventures. In addition to Venezuela, Foley Hoag is also representing Bangladesh, Belgium, Croatia, Djibouti, Ecuador, El Salvador, Mauritius, Nicaragua, the Philippines, Slovakia, Uruguay, and others, in ongoing proceedings.