Fernando Fraiz Trapote v. Bolivarian Republic of Venezuela
PCA · Investment (ICSID and treaty) · Venezuela · 31 Jan 2022
Why it matters
This case is significant for its application of the 'dominant and effective nationality' principle to dual nationals in investment treaty arbitration. The tribunal held that a dual national cannot bring a claim against a state of which they are a national if that nationality is dominant and effective. It clarifies the interpretation of 'investor' in BITs that do not expressly exclude dual nationals, and reinforces the customary international law rule against diplomatic protection by a state of its own nationals.
Summary
Fernando Fraiz Trapote, a dual Spanish-Venezuelan national, initiated arbitration against Venezuela under the Spain-Venezuela BIT, alleging expropriation of his investments in television, advertising, and education sectors. Venezuela objected to jurisdiction on the ground that Fraiz was a Venezuelan national and thus could not bring a claim against Venezuela under the BIT. The tribunal bifurcated the proceedings to address this objection first. Applying the Vienna Convention on the Law of Treaties, the tribunal interpreted the BIT's definition of 'investor' (Article I.1.a) as requiring a foreign nationality. Since Fraiz held both Spanish and Venezuelan nationality, the tribunal applied the customary international law rule of 'dominant and effective nationality' to determine whether he could be considered a Spanish investor. After examining Fraiz's connections to both countries, including his birth in Spain, residence in Venezuela for decades, business activities, family ties, and political involvement, the tribunal concluded that his Venezuelan nationality was dominant and effective. Therefore, he did not qualify as a protected investor under the BIT, and the tribunal lacked jurisdiction. The claim was dismissed, with each party bearing its own legal costs and Venezuela ordered to reimburse half of the common costs. The award was unanimous.
The detail
Parties: Fernando Fraiz Trapote v. Bolivarian Republic of Venezuela
Case number: PCA Case No. 2019-11
Outcome: The tribunal upheld Venezuela's objection to jurisdiction ratione personae, finding it lacked jurisdiction because the claimant's dominant and effective nationality was Venezuelan, not Spanish. The claim was dismissed, and each party bears its own legal costs, with Venezuela ordered to reimburse the claimant USD 314,143.89 for half of the common costs.
Applicable law: Spain-Venezuela Bilateral Investment Treaty (1995); UNCITRAL Arbitration Rules (1976); Vienna Convention on the Law of Treaties (1969)
Issues in play: The central issue was the interpretation of 'investor' under the BIT, specifically whether a dual national (Spanish and Venezuelan) could bring a claim against Venezuela. The tribunal applied the 'dominant and effective nationality' test from international law, finding that the claimant's ties to Venezuela were stronger than to Spain.
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