Back in 2005, then-dictator Hugo Chavez started to expropriate assets in Venezuela’s energy, mining and telecommunications industries under the pretext of development and sovereignty.
Energy companies were given until late-2007 to accept proposed contract and compensation terms from Chavez’s government or risk having their assets seized.
Exxon and ConocoPhillips rejected the terms, and Exxon took Venezuela to the World Bank’s International Center for Settlement of Investment Disputes, or ICSID. The ICSID ruled for Exxon, which Chavez promptly, and predictably, rejected. At the time there were 20 other cases against Venezuela at the World Bank’s tribunal, all triggered by the wave of state takeovers.
The ICSID award includes $1.4 billion for expropriation of the Cerro Negro project, $179.3 million for expropriation of the smaller La Ceiba project and $9 million in compensation for production and export curtailments, ICSID said. It will incur compound interest of 3.25 percent dating back to June 2007.
In a similar complaint, the ICSID ruled Sept. 23 that Venezuela must pay $740 million to Spokane, Washington-based Gold Reserve Inc. (GRZ) for taking its Brisas gold and copper project in 2008. Gold Reserve said on July 23 that it was seeking $2.1 billion for the nationalization.
About 28 cases filed by mining and oil companies remain unresolved at the ICSID, including those filed by Phillips 66 and Highbury International AVV.
Venezuela calls it “a favorable end for the republic,” (h/t Caracas Chronicles)
Statement from Venezuela on ICSID's Exxon ruling pic.twitter.com/gQ3TNFRDcq
— Nathan Crooks (@nmcrooks) October 10, 2014
Which tells you Venezuela has no intention to pay Exxon. The thing is, the country must honor ICSID rulings to avoid default of sovereign bonds. The only certain outcome in the short term is that a lot of lawyers are going to make a lot of money.
Just don’t expect any payments any time soon.