Clorox Spain S.L. v. Bolivarian Republic of Venezuela
PCA · Investment (ICSID and treaty) · Venezuela · 20 May 2019
Why it matters
This case is significant for its strict interpretation of the 'investment' requirement under the Spain-Venezuela BIT. The tribunal held that a mere transfer of shares within a corporate group, without a genuine contribution of capital or assets by the claimant, does not qualify as a protected investment. It reinforces the principle that treaty protection requires a real economic contribution by the investor, not just corporate restructuring.
Summary
Clorox Spain S.L., a Spanish company, initiated arbitration against Venezuela under the Spain-Venezuela BIT, claiming expropriation and unfair treatment of its investment in Clorox Venezuela. Clorox Spain had acquired 100% of Clorox Venezuela's shares from its US parent, The Clorox International Company, in exchange for issuing its own shares. Venezuela objected to jurisdiction, arguing that Clorox Spain was not a genuine investor because it had not made a real investment; the shares were merely transferred within the corporate group. The tribunal agreed, finding that Clorox Spain's acquisition of shares did not involve a contribution of capital or assets from Clorox Spain. The tribunal emphasized that the BIT requires an 'action of investing' by the claimant, and here the transfer was a condition of Clorox Spain's existence, not an investment. The tribunal also noted that Clorox Spain failed to show any subsequent investment in Clorox Venezuela. Consequently, the tribunal declined jurisdiction and ordered Clorox Spain to pay Venezuela's costs of US$4,661,965.
The detail
Parties: Clorox Spain S.L. v. Bolivarian Republic of Venezuela
Case number: PCA Case No. No
Outcome: The tribunal declined jurisdiction, finding that Clorox Spain did not make a protected investment under the Spain-Venezuela BIT. Clorox Spain was ordered to pay Venezuela's costs of US$4,661,965.
Applicable law: Spain-Venezuela BIT (1995); UNCITRAL Arbitration Rules (2010); seat: Geneva, Switzerland
Issues in play: The key issue was whether Clorox Spain's acquisition of shares in Clorox Venezuela through a corporate restructuring constituted an 'investment' under the BIT. The tribunal applied the BIT's definition of investment and investor, requiring a real contribution by the investor.
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