Phillips Petroleum Company Venezuela Limited, Conocophillips Petrozuata B.V. v. Petroleos De Venezuela, S.A., Corpoguanipa, S.A., PDVSA Petroleo, S.A.
ICC · Investment (ICSID and treaty) · Venezuela · 24 Apr 2018
Why it matters
This ICC award is a landmark in the long-running dispute between ConocoPhillips and Venezuela over the nationalization of oil projects in the Orinoco Belt. It provides a detailed analysis of contractual protections against discriminatory state measures, the distinction between willful breach and sovereign acts, and the calculation of damages for expropriation. The award also addresses the allocation of costs in complex multiparty arbitrations.
Summary
The arbitration arose from the nationalization of two heavy oil upgrading projects in Venezuela's Orinoco Belt: the Petrozuata Project and the Hamaca Project. Claimants, affiliates of ConocoPhillips, held interests in these projects through association agreements (AAs) with Venezuelan state-owned entities. In 2007, Venezuela issued a nationalization decree (Decree No. 5,200) that forced the migration of the AAs into mixed companies, effectively expropriating the Claimants' interests. Claimants brought claims under the AAs and related guarantees, alleging that the nationalization and certain tax increases constituted 'Discriminatory Actions' (DAs) and 'Willful Breaches' of contract. The Tribunal, applying Venezuelan law and the ICC Rules, found that the Income Tax Increase and the Expropriation were DAs under the AAs, but dismissed the willful breach claims, holding that the nationalization decree was a sovereign act not attributable to the Respondents. The Tribunal also dismissed a counterclaim by Corpoguanipa. On quantum, the Tribunal applied the contractual DA formulae and awarded Claimants approximately USD 1.99 billion, including pre-award interest. The award is notable for its detailed analysis of causation, the distinction between contractual and sovereign liability, and the valuation of expropriated assets.
The detail
Parties: Phillips Petroleum Company Venezuela Limited, Conocophillips Petrozuata B.V. v. Petroleos De Venezuela, S.A., Corpoguanipa, S.A., PDVSA Petroleo, S.A.
Case number: ICC Case No. 20549/ASM/JPA
Outcome: The Tribunal dismissed the willful breach claims and the hecho ilícito claim, declared that the Income Tax Increase and the Expropriation constituted Discriminatory Actions, and awarded Claimants USD 1,986,047,214.72 (including pre-award interest) for the Discriminatory Actions, with post-award interest. Each party bears its own legal costs; arbitration costs split evenly.
Quantum: USD 1,986,047,214.72
Applicable law: ICC Rules; Venezuelan law; Association Agreements (Petrozuata AA and Hamaca AA) and related Guarantees.
Issues in play: The case involved contractual provisions defining 'Discriminatory Actions' and 'Willful Breach' under the Association Agreements, and the interplay between state sovereign acts (nationalization decree) and contractual obligations. The Tribunal applied Venezuelan civil law principles on liability and causation.
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