Nova Scotia Power Incorporated v. Bolivarian Republic of Venezuela
ICSID · Investment (ICSID and treaty) · Venezuela · 30 Apr 2014
Why it matters
This case clarifies the boundary between an investment protected under a BIT and a mere commercial transaction. The tribunal's rigorous application of the Salini criteria and its holding that a coal supply agreement without significant local economic contribution does not qualify as an investment reinforces the importance of the host state's benefit and the investor's risk. It also addresses the interplay between BIT consent and ICSID Additional Facility jurisdiction.
Summary
Nova Scotia Power Incorporated (NSPI), a Canadian company, entered into a coal supply agreement with a Venezuelan state-owned entity to receive coal at fixed prices from a mine in Venezuela. After the supplier suspended shipments due to a government directive, NSPI initiated arbitration under the Canada-Venezuela BIT, claiming expropriation and breach of fair and equitable treatment. Venezuela objected to jurisdiction, arguing that NSPI's rights under the supply agreement did not constitute an 'investment' under the BIT. The tribunal, applying the Salini criteria (contribution, duration, risk), found that NSPI's transaction lacked a significant contribution to Venezuela's economy, had limited duration, and involved minimal risk beyond ordinary commercial risk. The tribunal also held that the dispute did not arise out of an investment 'in the territory' of Venezuela because the economic benefits did not accrue primarily to the host state. Consequently, the tribunal declined jurisdiction, rejecting NSPI's alternative argument under Article 2(b) of the ICSID Additional Facility Rules, which requires an underlying transaction with features distinguishing it from an ordinary commercial transaction. The award was unanimous.
The detail
Parties: Nova Scotia Power Incorporated v. Bolivarian Republic of Venezuela
Case number: ICSID Case No. ARB(AF)/11/1
Outcome: Tribunal declined jurisdiction; each party bears its own costs and shares arbitration costs equally.
Applicable law: Canada-Venezuela BIT (1996); ICSID Additional Facility Rules (2006)
Issues in play: The definition of 'investment' under the BIT and the ICSID Additional Facility Rules was central. The tribunal applied the Salini criteria (contribution, duration, risk) to distinguish an investment from an ordinary commercial transaction.
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