Banco Bilbao Vizcaya Argentaria S.A. v. Plurinational State of Bolivia
ICSID · Investment (ICSID and treaty) · Bolivia · 12 Jul 2022
Why it matters
This award is significant as it clarifies the scope of FET protection in the context of a state's nationalization of a pension system. The tribunal held that Bolivia's chaotic transition process, coupled with targeted regulatory harassment and failure to provide a clear exit mechanism, violated the BIT. It also addressed the valuation of a going concern in a nationalization context, applying a discounted cash flow method. The case underscores that states must conduct nationalizations in a transparent, non-arbitrary manner and provide prompt, adequate, and effective compensation.
Summary
Banco Bilbao Vizcaya Argentaria S.A. (BBVA), a Spanish bank, invested in Bolivia's pension system through its subsidiary Previsión BBVA – AFP S.A. following the 1996 privatization. In 2010, Bolivia enacted Law No. 65 nationalizing the pension system and creating a state entity, Gestora, to take over. BBVA alleged that Bolivia's transition process was chaotic and that it faced a campaign of harassment, including excessive regulatory scrutiny, sanctions, and demands for payment of uncollected debts (Stock de Deuda). BBVA claimed violations of the fair and equitable treatment (FET) standard and the prohibition of arbitrary measures under the Spain-Bolivia BIT. Bolivia objected to jurisdiction, arguing that the parties' contract excluded certain matters from arbitration. The tribunal rejected the jurisdictional objection, finding that the claims arose under the BIT, not the contract. On the merits, the tribunal found that Bolivia's conduct, including delays in the data migration process, imposition of a large fine for alleged overpricing, and failure to provide a clear mechanism for BBVA to exit, violated FET and constituted arbitrary measures. The tribunal awarded BBVA US$94.8 million in damages based on the fair market value of its shares in Previsión, calculated using a discounted cash flow method, plus compound interest. The award also ordered Bolivia to accept transfer of BBVA's shares within one year. The decision is notable for its detailed analysis of the FET standard in a nationalization context and its rejection of Bolivia's defense that the transition delays were caused by BBVA.
The detail
Parties: Banco Bilbao Vizcaya Argentaria S.A. v. Plurinational State of Bolivia
Case number: ICSID Case No. ARB(AF)/18/5
Outcome: Tribunal found Bolivia violated fair and equitable treatment and prohibition of arbitrary measures under the Spain-Bolivia BIT; ordered Bolivia to pay US$94.8 million in damages plus interest, and to accept transfer of BBVA's shares in Previsión within one year.
Quantum: US$94.8 million
Applicable law: Agreement for the Promotion and Reciprocal Protection of Investments between the Kingdom of Spain and the Republic of Bolivia (BIT); ICSID Additional Facility Rules; Bolivian law (Ley de Pensiones No. 65, Ley No. 1.732).
Issues in play: The case involved the fair and equitable treatment standard (FET) and the prohibition of arbitrary measures under the Spain-Bolivia BIT, colliding with Bolivia's sovereign right to nationalize its pension system and regulate the transition. The tribunal assessed whether Bolivia's conduct during the nationalization process, including delays, harassment, and sanctions, breached the BIT's protections.
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