Flughafen Zürich A.G. and Gestión e Ingenería IDC S.A. v. Bolivarian Republic of Venezuela
ICSID · Investment (ICSID and treaty) · Venezuela · 18 Nov 2014
Why it matters
This award is significant for its detailed analysis of denial of justice in the context of a Supreme Court decision that effectively overturned a contractual arrangement. It also addresses the jurisdictional requirements of investment treaty arbitration, including the definition of investment and the application of the 'in accordance with host state law' clause. The tribunal's approach to quantum, using DCF valuation and rejecting the state's arguments on illegality, provides guidance on compensation for expropriation.
Summary
The case arose from a strategic alliance contract between the Venezuelan state of Nueva Esparta and a consortium formed by Swiss company Flughafen Zürich A.G. and Chilean company Gestión e Ingeniería IDC S.A. to operate and manage the Santiago Mariño International Airport on Margarita Island. After a change in governor, the state issued a decree rescinding the contract and took control of the airport. The claimants initiated ICSID arbitration under the Switzerland-Venezuela and Chile-Venezuela BITs. Venezuela raised numerous jurisdictional objections, including that the investment violated Venezuelan public law, that the claimants were not investors, and that the claims were purely contractual. The tribunal rejected all objections, finding that the investment was made in accordance with Venezuelan law and that the claimants had made a qualifying investment. On the merits, the tribunal found that Venezuela had expropriated the investment through a series of measures culminating in the rescission decree and the subsequent Supreme Court decision that ordered the transfer of airport control to the national executive. The tribunal also found a denial of justice because the Supreme Court's decision was arbitrary and manifestly unjust, but rejected the fair and equitable treatment claim as duplicative. The tribunal awarded compensation based on the fair market value of the investment, calculated using a discounted cash flow method, totaling USD 19,428,261, plus interest and costs.
The detail
Parties: Flughafen Zürich A.G. and Gestión e Ingenería IDC S.A. v. Bolivarian Republic of Venezuela
Case number: ICSID Case No. ARB/10/19
Outcome: The Tribunal found Venezuela expropriated the investment and denied justice; ordered Venezuela to pay USD 19,428,261 in compensation plus interest and costs.
Quantum: USD 19,428,261
Applicable law: Switzerland-Venezuela BIT and Chile-Venezuela BIT; ICSID Convention; Venezuelan law
Issues in play: The case involved the interaction between investment treaty protections (expropriation, fair and equitable treatment, denial of justice) and Venezuelan public law, including the validity of a state contract and the role of the Supreme Court.
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