Air Canada v. Bolivarian Republic of Venezuela
ICSID · Investment (ICSID and treaty) · Venezuela · 13 Sep 2021
Why it matters
This award is significant for clarifying the relationship between bilateral investment treaties and bilateral air transport agreements, holding that the BIT's protections for investments (including airline ticket revenues) are not superseded by the ATA unless the ATA expressly and specifically conflicts. It also confirms that currency exchange controls can violate free transfer and fair and equitable treatment obligations when applied arbitrarily or discriminatorily.
Summary
Air Canada, a Canadian airline, operated flights to Venezuela until 2014. Under Venezuelan currency controls, airlines had to apply for authorization to convert bolivars into US dollars. Air Canada filed 15 applications between September 2013 and January 2014 for about US$50 million in ticket sales, but Venezuela never processed them. Air Canada suspended flights in 2014 and initiated ICSID arbitration under the Canada-Venezuela BIT. Venezuela objected to jurisdiction, arguing the Air Transport Agreement (ATA) between Canada and Venezuela was a lex specialis that excluded BIT claims, and that Air Canada failed to comply with BIT procedural requirements (waiver of local remedies and time bar). The tribunal rejected all jurisdictional objections, finding the ATA did not supersede the BIT because it did not specifically and expressly exclude BIT protections. On the merits, the tribunal found Venezuela breached Article VIII (free transfer of funds) by failing to process the applications without justification, and Article II(2) (fair and equitable treatment) by creating a discriminatory and arbitrary exchange regime. The expropriation claim was dismissed because Air Canada retained control over its funds. The tribunal awarded Air Canada US$20,790,574 in damages plus interest and 75% of its legal costs.
The detail
Parties: Air Canada v. Bolivarian Republic of Venezuela
Case number: ICSID Case No. ARB(AF)/17/1
Outcome: Air Canada prevailed; Venezuela ordered to pay US$20,790,574 plus simple interest at Air Canada's cost of debt rate from 17 March 2014 until payment in full, and 75% of Air Canada's legal fees and costs.
Quantum: US$20,790,574
Applicable law: Agreement between Canada and Venezuela for the Promotion and Protection of Investments (BIT) signed 1 July 1996; ICSID Additional Facility Rules; Air Transport Agreement between Canada and Venezuela (ATA) signed 26 June 1990; Venezuelan law.
Issues in play: The BIT's free transfer of funds provision (Article VIII) and fair and equitable treatment (Article II(2)) collided with Venezuela's currency exchange controls and the ATA's lex specialis status. The tribunal determined the BIT applied despite the ATA, and Venezuela's failure to process Air Canada's foreign currency requests breached the BIT.
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