Business
Venezuela must pay oil giant Exxon Mobil $1.6bn (£1bn) in compensation for expropriated assets, an international arbitration tribunal has decided. The BBC reports:
Exxon had claimed up to $16.6bn over the nationalisation of its Cerro Negro Project and other losses in 2007. Venezuela has not said whether it will appeal. But the foreign minister said the decision was "reasonable".
The ruling was made by the World Bank's International Centre for Settlement of Investment Disputes (ICSID). It is a blow to Venezuela which is struggling with a shortage of foreign currency, inflation and a stagnating economy.
Foreign minister Rafael Ramirez called it a victory for Venezuelan sovereignty over "exaggerated claims", referring to the much higher amount indicated by the Exxon Mobil.
The Venezuelan government is currently battling more than 20 similar demands at the World Bank by other foreign companies over the state's takeover of private assets under its former president, Hugo Chavez.
Exxon Mobil said in a statement: "The decision confirms that the Venezuelan government failed to provide fair compensation for expropriated assets." The company added that it "accepts Venezuela's legal right to expropriate the assets of our affiliates subject to compensation at fair market value".
A previous decision in 2012 ruled that PDVSA, the state oil company, should pay Exxon $908m.
The amount to be paid to Exxon under today’s ruling should be reduced after adjustments for payments Venezuela made in 2012 under a previous settlement at the International Chamber of Commerce, or ICC, Venezuela Foreign Minister Rafael Ramirez said on state television. Bloomberg News writes:
The payment will be reduced to about $1 billion and will not be a problem for PDVSA, according to a financial official at the company, who asked not to be named because of internal policy. Venezuela will pay its bonds due this month, he said.
“In the event of favorable award, the claimants are willing to make the required reimbursements to PDVSA,” ICSID said in the ruling. “Double recovery will thus be avoided.”
Energy companies were given until late-2007 to accept proposed contract and compensation terms from Chavez’s government or risk having their assets seized. Exxon and ConocoPhillips, the third-most valuable U.S. crude producer after Exxon and Chevron Corp. (CVX), were the largest American energy companies to reject Venezuela’s terms.
In 2011, the ICC ordered PDVSA to pay Exxon $907.6 million, minus a $161 million counterclaim by PDVSA, for the seizure of a 41.67 percent stake in the Cerro Negro heavy-oil project in the Orinoco Belt, the same one that triggered the claim at the ICSID.
The cases differ because the ICC handles contract disputes while the ICSID hears disputes based on investment treaties between countries. PDVSA said in 2012 that it had settled the ICC ruling with a cash payment of $255 million.
