ConocoPhillips Gulf of Paria B.V. v. Corporación Venezolana de Petróleo, S.A., Petróleos de Venezuela, S.A.
ICC · Investment (ICSID and treaty) · Venezuela · 29 Jul 2019
Why it matters
This ICC award is significant for its detailed analysis of risk-allocation clauses in long-term oil and gas contracts, particularly the interpretation of 'not of general applicability' in the context of nationalization decrees. It also addresses the survival of contractual obligations after termination, the standard for unjust enrichment under Venezuelan law, and the allocation of costs in complex commercial arbitrations. The case is part of the broader ConocoPhillips v. Venezuela dispute, which includes parallel ICSID proceedings.
Summary
ConocoPhillips Gulf of Paria B.V. (Conoco) entered into an Association Agreement (AA) with CVP in 1996 to explore and produce oil in the Corocoro field. The AA included a risk-allocation clause (Clause 28.1) that required the parties to continue performing unless a discriminatory act occurred. In 2007, Venezuela issued a nationalization decree that forced the migration of association agreements into mixed companies. Conoco did not migrate and claimed that the decree was a discriminatory act under Clause 28.1, excusing further performance and entitling it to damages. Conoco also claimed that CVP and PDVSA breached surviving obligations (e.g., repayment of a loan) and committed tort (hecho ilícito) and unjust enrichment. The Tribunal held that the 2007 decree was an act of general applicability, not discriminatory under Clause 28.1, so Conoco was not excused from performance. However, the Tribunal found that CVP and PDVSA breached their obligation to repay a loan of USD 33.7 million that Conoco had extended to CVP to acquire its participation. The Tribunal dismissed all other claims, including those for breach of management structure and the CVP-Eni conversion contract. Conoco was ordered to pay USD 2.5 million towards Respondents' legal fees and bear 75% of arbitration costs. The award is part of a larger dispute between ConocoPhillips and Venezuela, with parallel ICSID proceedings.
The detail
Parties: ConocoPhillips Gulf of Paria B.V. v. Corporación Venezolana de Petróleo, S.A., Petróleos de Venezuela, S.A.
Case number: ICC Case No. 22527/ASM/JPA
Outcome: The Tribunal granted Conoco's claim for repayment of a loan of USD 33,700,000 plus interest, but dismissed all other contractual and non-contractual claims. Conoco was ordered to pay USD 2,500,000 towards Respondents' legal fees and bear 75% of arbitration costs.
Quantum: USD 33,700,000
Applicable law: Corocoro Association Agreement, Corocoro Guarantee, Corocoro Consortium Agreement; Venezuelan law; ICC Rules of Arbitration (1988)
Issues in play: The case involved interpretation of Clause 28.1 of the Association Agreement, which allocated risk of discriminatory state actions. The key issue was whether Venezuela's 2007 nationalization decree was an act 'not of general applicability' under that clause, and whether the Respondents breached surviving obligations and committed hecho ilícito or unjust enrichment.
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