An international arbitration tribunal has ordered the government of Venezuela to pay ConocoPhillips $8.7 billion in compensation for the government’s unlawful expropriation of ConocoPhillips’ investments in the country in 2007.
The ICSID tribunal ruled in 2013 that the expropriation of ConocoPhillips’ substantial investments in the Hamaca and Petrozuata heavy crude oil projects and the offshore Corocoro development project violated international law. The current ruling addresses compensation, and the timing and manner of collection still needs to be determined.
Kelly B. Rose, senior vice president, legal, general counsel and corporate secretary of ConocoPhillips, says: ‘We welcome the ICSID tribunal’s decision, which upholds the principle that governments cannot unlawfully expropriate private investments without paying compensation.’
In separate and independent legal action in April 2018, an international arbitration tribunal awarded the company $2 billion from Petróleos de Venezuela, S.A. (PDVSA), Venezuela’s state-owned oil company, and two of its subsidiaries. The ruling followed PDVSA’s failure to uphold its contractual commitments in response to Venezuela’s unlawful expropriation of ConocoPhillips’ investments in the Hamaca and Petrozuata projects. In August last year, ConocoPhillips announced it entered into a settlement agreement with PDVSA to recover the full amount owed under that award.
In the early 1990s, Venezuela created a new fiscal framework to attract foreign investment in its heavy oil projects in the Orinoco Belt and elsewhere. Relying on these terms, ConocoPhillips helps Venezuela to develop the Petroxuata, Hamaca and Corocoro projects by providing technology and substantial long-term investments to the government of Venezuela. However, in the summer of 2007, the Venezuelan government expropriated ConocoPhillips’ investments in their entirety without compensation.