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Gold Reserve Inc. v. Bolivarian Republic of Venezuela (I) (ICSID)

Why it matters

This award is significant for its detailed analysis of fair and equitable treatment in the context of mining concessions, and for awarding substantial damages based on the fair market value of the investment. It also addressed the shift towards compound interest in investment treaty cases and applied the 'loser pays' principle for costs.

Summary

Gold Reserve Inc., a Canadian mining company, held mining concessions in Venezuela for the Brisas gold-copper project. After years of delays and regulatory hurdles, Venezuela revoked the concessions and failed to issue necessary permits, effectively destroying the value of the investment. Gold Reserve initiated arbitration under the Canada-Venezuela BIT. The tribunal found that Venezuela breached the fair and equitable treatment standard by failing to provide a stable and predictable legal framework, and by acting arbitrarily and in bad faith. However, it rejected claims of expropriation, as the concessions were not formally taken. The tribunal awarded US$ 713 million in damages, calculated as the fair market value of the investment as of the date of breach, plus compound interest. It also ordered Venezuela to pay US$ 5 million of Gold Reserve's legal costs. The award is notable for its detailed valuation analysis and its application of compound interest.

The detail

Parties: Gold Reserve Inc. v. Bolivarian Republic of Venezuela (I)

Case number: ICSID Case No. ARB(AF)/09/1

Outcome: Venezuela breached the fair and equitable treatment standard; ordered to pay US$ 713,032,000 plus pre- and post-award interest and US$ 5 million in costs.

Quantum: US$ 713,032,000

Applicable law: Canada-Venezuela BIT (1996); ICSID Additional Facility Rules

Issues in play: The fair and equitable treatment standard under the BIT was applied; the tribunal found that Venezuela's revocation of mining concessions and failure to issue necessary permits violated FET, but did not constitute expropriation.

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