Rusoro Mining Ltd. v. Bolivarian Republic of Venezuela
ICSID · Investment (ICSID and treaty) · Venezuela · 22 Aug 2016
Why it matters
This award is a landmark in investor-state arbitration for its detailed analysis of the fair market value of a gold mining enterprise in the context of an unlawful expropriation. The tribunal rejected Venezuela's time-bar defense for the 2009 measures but found the 2010 measures were legitimate sovereign acts, except for the export restriction. The quantum of USD 966.5 million is one of the largest ICSID awards against Venezuela, and the decision on interest and tax indemnification sets important precedents.
Summary
Rusoro Mining Ltd., a Canadian company, invested in gold mining in Venezuela through a series of acquisitions between 2006 and 2008. In 2009, Venezuela imposed exchange controls and gold export restrictions that adversely affected Rusoro's operations. In 2011, Venezuela nationalized the gold mining industry via Decree No. 8.413, taking control of Rusoro's assets. Rusoro initiated ICSID arbitration under the Canada-Venezuela BIT, claiming expropriation and breaches of fair and equitable treatment, full protection and security, non-discrimination, free transfer of funds, and export restrictions. Venezuela objected to jurisdiction on grounds of time bar, illegality of Rusoro's investments, and lack of consent. The tribunal upheld jurisdiction, rejecting Venezuela's objections. On the merits, the tribunal found that the 2009 measures were time-barred, but the 2011 nationalization constituted an unlawful expropriation because Venezuela failed to pay compensation. The tribunal also found that the 2010 BCV Resolution imposing additional gold export restrictions breached the BIT's Annex. However, the tribunal rejected Rusoro's claims that the 2010 exchange control measures breached the BIT, holding they were legitimate sovereign acts. Venezuela's counter-claim for improper mining practices was dismissed for lack of jurisdiction. The tribunal awarded Rusoro USD 966.5 million for expropriation, calculated based on the fair market value of the investment at the date of the nationalization, using a combination of investment valuation adjusted for gold price evolution and book value. An additional USD 1.277 million was awarded for the export restriction breach. Interest was set at USD LIBOR plus 4%, compounded annually, from the date of expropriation to payment. The award was declared net of Venezuelan taxes, with Venezuela required to indemnify Rusoro for any such taxes. The tribunal also ordered Venezuela to pay USD 3.3025 million in costs.
The detail
Parties: Rusoro Mining Ltd. v. Bolivarian Republic of Venezuela
Case number: ICSID Case No. ARB(AF)/12/5
Outcome: Venezuela ordered to pay Rusoro USD 966,500,000 as compensation for unlawful expropriation, plus USD 1,277,002 for breach of export restrictions, interest, costs, and net of Venezuelan taxes.
Quantum: USD 967,777,002 plus interest and costs
Applicable law: Canada-Venezuela BIT (1996), ICSID Additional Facility Rules, Venezuelan law
Issues in play: The BIT's expropriation provision (Art. VII) requiring prompt, adequate, and effective compensation collided with Venezuela's sovereign right to nationalize its gold mining industry. Also at issue was the BIT's free transfer of funds clause (Art. VIII) and the Annex's export restriction clause (para. 6(d)).
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