The International Business Transactions Blog

French Court Reinstates $1.6 Billion Investment Arbitration Award Against Venezuela

By BethEl Nager
Law Student Editor

Rusoro Mining is a publicly-traded gold explorer and producer headquartered in Vancouver, Canada.  In 2006, Rusoro began acquiring mining licenses in the southern region of Venezuela and actively extracted gold in the ensuing years. In 2011, the Socialist government of Hugo Chávez expropriated Rusoro’s assets in Venezuela without compensation, as part of an effort to nationalize all Venezuelan gold production. Resource nationalization has become popular recently, impacting “21 major producers of oil, gas and minerals.”  Predictably, the expropriation of a profitable investment put strong downward pressure on Rusoro’s stock.

After Rusoro failed to agree with the Venezuelan government on a joint venture, it invoked arbitration before the International Centre for the Settlement of Investment Disputes (ICSID) under the 1996 Canada-Venezuela Bilateral Investment Treaty (BIT). Rusoro claimed the full value of the expropriated investment, which it represented as $3.03 billion.

In 2016, an ICSID arbitral tribunal awarded Rusoro over $967 million, plus post-award interest, for expropriation in violation of the BIT. However, Venezuela refused to pay the award, forcing Rusoro to seek judicial assistance in several U.S. jurisdictions. During this period, the award accumulated $80 million in annual interest. For its part, Venezuela sought annulment of the arbitral award before the Paris courts.

In October 2018, Rusoro reached a settlement with Venezuela. The government agreed to pay Rusoro monthly installments over five years, starting in January of 2019. However, that same month, the Paris Court of Appeal issued a judgment finding that the arbitral tribunal’s prior calculations to determine the settlement award were improper. The Cour d’appel claimed the tribunal should have taken into account the decrease in Rusoro’s value in 2009 caused by the nationalization and held that the arbitral tribunal exceeded its jurisdiction by awarding compensation for losses that occurred prior to the three-year limitation period in the Canada-Venezuela BIT.

At the same time, in the Superior Court of Justice of Ontario and the U.S. District Court for the District of Columbia, Rusoro obtained orders to enforce the award against Venezuela. The award now amounts to $1.3 billion plus continuing interest. Venezuela began with a payment of $100 million to a Canadian bank and is expected to complete payments of the arbitral award. 

Back in France, on March 31, 2021, the Cour de Cassation, the highest civil court in France, reinstated the $1.6 billion investment treaty award against the country of Venezuela, reversing and remanding the case to the Paris Court of Appeal. The remanded proceedings were sent to a different bench of the Paris Court of Appeal, where they are currently under consideration.

The litigation between Rusoro has spanned a decade and involved arbitration as well as judicial proceedings in four jurisdictions in three different countries.  Rusoro’s experience may well be viewed as a case study of the importance of ICSID arbitration, the proper conduct of arbitral proceedings, and the judicial enforcement of arbitration awards.