Venezuela fails in State Immunity Challenge against enforcement of ICSID award.

03/02/16

In Gold Reserve Inc v. The Bolivarian Republic of Venezuela [2016] EWHC 153 (Comm), Teare J. has rejected Venezuela’s claim to State immunity and given valuable guidance as to the proper procedure for the enforcement of New York Convention awards against States.

By an award dated 22 September 2014 and made pursuant to the ICSID Additional Facility Rules, Venezuela was ordered to pay Gold Reserve approximately US$713 million for failing to failing to accord Gold Reserve’s investment in a Venezuelan gold and copper mine fair and equitable treatment.

By an application made ex parte in an arbitration claim form dated 19^th May 2015 , Gold Reserve applied for permission to enforce the award as a judgment of the High Court and for judgment to be entered in the terms of the award. Phillips J. made such an order on 20 May 2015 and it was served on Venezuela on 25 September 2015.

Venezuela applied to challenge the court’s jurisdiction over it on the grounds (i) that it was entitled to State immunity, (ii) that the proceedings had not properly been served on it (because only the ex parte order and not the arbitration claim form had been served) and (iii) that there had been one or more material non-disclosures in the ex parte application.

Teare J. rejected the State’s plea of State immunity. In doing so he held that Gold Reserve was a party to an arbitration agreement in writing between itself and Venezuela within the terms of section 9, State Immunity Act 1978. That agreement arose out of a standing offer to arbitrate investment disputes arising under the Canada – Venezuela Bilateral Investment Treat (the “BIT”). Gold Reserve qualified as an “Investor” under Article XII of the BIT because it had acquired an indirect interest in a Venezuelan company and the mining rights held by that company and had invested approximately US$300 million in developing the mining project. In those circumstances, Gold Reserve had “made” “the investment” in the territory of Venezuela as required by the BIT.

The Judge also rejected Venezuela’s argument that it had not properly been served with the arbitration claim form: section 12, State Immunity Act 1978 required that “Any writ or other document required to be served for institution proceedings against a State” to be served through the Foreign and Commonwealth Office. Where an application had been made to enforce a New York Convention award and the court had made an ex parte order giving permission to do so, it was the order and not the claim form which was “required to be served” under CPR 62.18.

Teare J also held, however, that, although the judge on the ex parte application had been told that Venezuela had contested the validity of the arbitration agreement between itself and Gold Reserve before the tribunal, the fact that the State had continued to dispute its validity in other proceedings in Paris and Luxembourg had not been disclosed and it should have been. Had that been brought to the Court’s attention, it was likely that the judge would not have made the ex parte order (on the ground that it was probable that the defendant would seek to rely on the State immunity). Instead the Court would have ordered the arbitration claim form to be served on Venezuela pursuant to CPR 62.18(2), thereby triggering an inter partes hearing.

Nevertheless, Teare J., in the exercise of his discretion, refused to set aside the ex parte order: it was striking that Venezuela was in the same position it would have been had the order not been made: there had been an inter partes hearing and a determination of the State immunity plea as a preliminary issue.

The Judge gave permission to appeal on the questions of State immunity and the operation of section 12 of the 1978 Act but refused permission to appeal his exercise of discretion.

The judgment is here.