Paris Court of Appeal, No. 15/01040
Paris Court of Appeal, First Pole, First Chamber, 25 April 2017, No. 15/01040
Judicial Chronology:
Court of Cassation, First Civil Chamber, 13 February 2019, No. 17-25.851
Award, 26 April 2019
Paris Court of Appeal, Fifth Pole, Sixteenth Chamber, 3 June 2020, No. 19/03588
BOLIVARIAN REPUBLIC OF VENEZUELA
Vs.
Mr. C Y ARMAS
Mr. C Y and his daughter, Ms. Z Y, raising their Spanish nationality, initiated arbitration proceedings on the basis of the Agreement between the Kingdom of Spain and the Republic of Venezuela for the Promotion and Reciprocal Protection of Investments, signed in Caracas on 2 November 1995, which entered into force on 10 September 1997 (hereinafter, BIT for Bilateral Treaty for the Protection of Hispano-Venezuelan Investments). They sought compensation for the damage resulting from the measures taken by the Venezuelan authorities against two Venezuelan companies working in the food sector, Alimentos Frisa and TransporteDole.
The parties chose an ad hoc arbitration administered by the Permanent Court of Arbitration in The Hague under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL).
The arbitral tribunal, composed of Mr. Tawil, Mr. Oreamuno Blanco (arbitrators) and Mr. Grebler, Chairman, rendered an award in Paris on 15 December 2014, declaring it had jurisdiction to settle the dispute. On 14 January 2015, the Bolivarian Republic of Venezuela filed an appeal against this award.
By submissions notified on 1 February 2017, the Bolivarian Republic of Venezuela requested the court to set aside the award and to order the opposing party to pay the sum of 150,000 euros pursuant to Article 700 of the Code of Civil Procedure.
It alleges procedural fraud (Article 1520-5 of the Code of Civil Procedure), a lack of jurisdiction of the arbitral tribunal (Article 1520-1), the failure by the arbitrators to deal with the mission (Article 1520-3), the violation of a principle of international public policy according to which the nationals of a State could not sue that State in an international proceeding (Article 1520-5), and violation of due process (in French Principe du contradictoire) (Article 1520-4).
By submissions notified on 28 February 2017, Mr and Ms Y asked the court to reject the appeal, to grant enforcement (in French Exequatur) on the award and to order the Republic of Venezuela to pay them the sum of 200,000 euros in application of article 700 of the code of civil procedure.
UPON WHICH:
On the first ground of annulment alleging violation of international public policy (Article 1520-5 of the Code of Civil Procedure):
The Republic of Venezuela argues that the award was vitiated by fraud so that its recognition or enforcement would be contrary to international public policy. It argues that the assertions according to which Mr. C Y and Ms. Z Y acquired the shares of Alimentos Frisa and Transporte Dole are false, as evidenced by their own statements which show that they did not pay the price, and that these lies have been accredited to the arbitrators by the production of falsified shareholder registers and minutes of general meetings.
Considering that the fraud of the award presupposes that false documents were produced, that false testimony was taken or that documents relevant to the resolution of the dispute were fraudulently concealed from the arbitrators, so that the arbitrators' decision was vitiated;
Considering that in the present case, it is not disputed that Mr. C Y, who was born in 1944 to XXX Spanish father and mother, moved to Venezuela in 1961, that he acquired Venezuelan nationality in 1972, at a time when Spain and Venezuela did not admit dual nationality, which ceased in 2004; that his daughter Z, born in 1980 in Venezuela, of Venezuelan nationality, obtained Spanish nationality in 2003;
Considering that it is common knowledge that Mr. Y, together with his brother, has established several companies in Venezuela in the food sector since 1967; that within this family group, Transporte Dole and Alimentos Frisa were established in 1998 and 1999 respectively by two of Mr. Y’s daughters, A and B;
Considering that during the months of May and June 2010, the Venezuelan authorities took various measures of confiscation, detention and temporary administration with regard to the property of Transporte Dole and Alimentos Frisa;
Considering that the request for arbitration for compensation of the loss resulting from these measures was presented by Mr. C Y and Mrs. Z Y, raising their Spanish nationality, and declaring themselves to be the owners of the shares of these two companies by virtue of sales made by Mrs. A and Mrs. B Y in 2001 and 2006; considering that the Republic of Venezuela opposes to the reality of these sales; that it claims, on the one hand, that the informal appeal filed on 18 April 2011 by the legal counsel of Transporte Dole, as well as the notice of controversy made on 27 January 2012, designated Mrs. B and A Y as the sole shareholders of Transporte Dole, on the other hand, that if the minutes of the general meeting of shareholders produced in the debates indicated that the sales had been made in return for a cash payment, for which a receipt was given, it appeared during the hearing under oath of the various protagonists that no price had ever been paid. Finally, the Republic of Venezuela claimes that a graphological expertise showed that the reconstitution of the shareholder registers, as well as the minutes of the general meetings of Transporte Dole and Alimentos Frisa used in the debates were forgeries; that the Republic of Venezuela added that it brought an action for review before the arbitral tribunal based on these facts;
But considering that even supposing that it is shown that the sales of shares by B and A Y to C and Z Y did not take place or were not carried out on the dates alleged by the claimants in the arbitration, it would not result in that the decision of the arbitrators would be vitiated;
That in fact, the challenged award deals exclusively with jurisdiction; that the Arbitral Tribunal, on ratione personae jurisdiction, decided that dual Spanish-Venezuelan nationality did not deprive the Claimants of the benefit of the BIT and, on ratione materiae jurisdiction, that it was not relevant “to inquire as to the nationality of the Claimants on the dates on which they made their investments in Venezuela, since those dates are not a determining factor in deciding on the application (of the BIT)”. (Award, § 214); that Venezuela in no way argues that these issues would have been assessed differently by the arbitrators if the persons claiming to have been aggrieved had been Mrs. B and AY, since the sales had not taken place;
That the ground of procedural fraud must therefore be dismissed;
On the second ground for annulment alleging that the arbitral tribunal lacked ratione personae jurisdiction (Article 1520-1 of the Code of Civil Procedure) and on the third ground for annulment alleging that the arbitrators failed to comply with their mission (Article 1520-3 of the Code of Civil Procedure):
On jurisdiction, the Republic of Venezuela explains that the desire to exclude dual nationals results from the very terms of the definition of investor by the BIT, as well as from the reference made to the ICSID convention, and that it is also inferred from the terms of the treaty of Amity under which the BIT was concluded and from the objectives of that treaty. It argues that the provisions of the BIT must be interpreted in the light of the principle of international law that prohibits a natural person from suing his or her own State before an international body, or the principle that, in the case of dual nationality, the effective nationality of the applicant should be sought. It added that Venezuelan law should apply to the determination of nationality.
The Republic of Venezuela further contends that the arbitrators, by failing to apply international and domestic standards, to which the BIT referred for its interpretation, failed in their mission.
Considering that the annulment judge reviews the decision of the Arbitral Tribunal on its jurisdiction, whether it has declared it has jurisdiction or not, looking for all the elements of law or fact allowing to assess the scope of the arbitration agreement and to deduce the consequences on the respect of the mission entrusted to the arbitrators; that it is no different when the arbitrators are referred on the basis of the provisions of a treaty;
Considering that, in this case, the terms of the Republic of Venezuela’s offer of arbitration are based on the terms of the BIT signed on 2 November 1995 with the Kingdom of Spain; Considering that, according to Article I of that treaty: “For the purposes of this Agreement: 1. the term ‘investor’ means (a) natural persons who are nationals of one of the Contracting Parties under their national law and who make investments in the territory of the other Contracting Party”;
That the Parties are in opposition as to the right of dual nationals of Spain and Venezuela to invoke the treaty against one of the States of which they are nationals;
Considering that Article XI. 4 of the BIT stipulates:
“Article 31
1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.
2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes: (a) any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty; (b) any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.
3. There shall be taken into account, together with the context:
(a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions;
(b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;
(c) any relevant rules of international law applicable in the relations between the parties.
4. A special meaning shall be given to a term if it is established that the parties so intended.
Article 32
Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31:
(a) leaves the meaning ambiguous or obscure; or
(b) leads to a result which is manifestly absurd or unreasonable.”
Considering, firstly, that it does not follow from this rule, nor from any principle of interpretation, that a distinction should be made where a text does not make it; that, contrary to what the Republic of Venezuela maintains, the very terms of the aforementioned Article I of the BIT do not show any exclusion of bi-nationals, nor does the general scheme of this international instrument show that a particular fate should be reserved for them;
Considering, secondly, that the object and purpose of the treaty, which, according to the preamble, is “to create favourable conditions for investments made by investors of each Contracting Party in the territory of the other”, would only be partially satisfied if investments by bi-nationals were excluded;
Considering, thirdly, that Article XI of the BIT, relating to disputes between a Contracting Party and investors of the other Contracting Party, provides that such disputes shall be submitted either to the competent courts of the Contracting Party in whose territory the investment was made, or to the International Centre for Settlement of Investment Disputes (ICSID) established by the Washington Convention of 18 March 1965 or to the Additional Facility administered by the ICSID Secretariat, or, if the parties so agree, to an ad hoc arbitral tribunal established in accordance with the UNCITRAL rules;
Considering that, the fact that Venezuela and Spain have conducted arbitration under the supervision of ICSID - which does not admit claims of natural persons who are also nationals of the defendant State -, one of the modalities for the settlement of disputes under the BIT cannot be analysed as a willingness to exclude in all cases the action of dual nationals against the State of which they are nationals, whereas ad hoc arbitration was also provided for under the UNCITRAL rules, which do not provide for such inadmissibility;
Considering that in the present case it is the latter solution which was chosen by mutual agreement between Mr and Ms Y and Venezuela, which has therefore accepted the procedural consequences of such a choice;
Considering, fourthly, that while Article XI (b) of the BIT provides that the arbitration shall be based on “the rules and principles of international law” and Article 31 (c) of the Vienna Convention states that the relevant rules of international law applicable in the relations between the parties form part of the context in the light of which a treaty is to be interpreted, these are supplementary rules to be used only if the meaning of the treaty is obscure or ambiguous; as stated, the Spanish-Venezuelan BIT, unlike other international instruments, does not make a special fate for bi-nationals, so that there is no need to add to the text a distinction that the Contracting Parties did not intend to insert;
Considering, moreover, that it has not been established by Venezuela that past treaties on the protection of investments, State practice, and international judicial decisions, would give rise to a contemporary customary principle of a general prohibition on the nationals of a State from suing that State before an international body, nor that the principle of the legal equality of States, recalled by the Spanish-Venezuelan Friendship Treaty, would have such a consequence;
Venezuela does not further demonstrate that, except in the hypothesis of fraud, there is an international consensus, in investment arbitration, on the principle of effective nationality, according to which only strong, multiple and durable links of a legal, economic and social nature would allow a natural person to claim before an international body the nationality of a State of which he is formally a national;
Considering, finally, that if Article XI. 4 c) of the BIT provides for the application to arbitration of the national law of the Contracting Party in whose territory the investment was made, Article I. 1 defines investors as natural persons who have the nationality of one of the Contracting Parties by virtue of their national law. So, the circumstance, alleged by the claimant, that Venezuelan law would prohibit dual nationality is irrelevant in assessing whether the claimants were entitled to claim Spanish nationality;
Considering therefore that the finding that the Kingdom of Spain recognised Consorts Y as its nationals on the date the arbitral proceedings were instituted was sufficient to establish the ratione personae jurisdiction of the arbitral tribunal;
The Arbitral Tribunal, by simply applying Article I of the BIT, did not disregard its mission;
Considering that the second and third grounds for annulment alleging lack of ratione personae jurisdiction of the arbitral tribunal, and the failure of the arbitrators to comply with their mission in the assessment of this ground of jurisdiction, must be dismissed;
On the fourth ground for annulment alleging lack of ratione materiae jurisdiction of the arbitral tribunal (Article 1520-1 of the Code of Civil Procedure) and on the fifth ground for annulment alleging that arbitrators did not comply with their mission (Article 1520-3 of the Code of Civil Procedure):
The Republic of Venezuela argues that to benefit from the protection of the BIT, it is not sufficient, contrary to the majority decision of the arbitrators, that the investors had Spanish nationality at the date of the alleged violation of the treaty and at the date of the filing of the action, but that they had to have it at the date they made their investment. In the present case, however, in 2001, the date on which the shares were acquired, the consorts had exclusively Venezuelan nationality and the alleged subsequent acquisitions are not proven by documentary evidence. The claimant complains that the arbitrators failed to apply not only the provisions of the BIT defining investment, but also other agreements concluded between the parties to which the treaty refers - in particular the Friendship Treaty, the objective of which is to promote direct investment - and the principles of international law. The Republic of Venezuela also criticises the arbitral tribunal which did not apply Venezuelan law, contrary to the provisions of the BIT, and in particular the provisions that provide for the registration of foreign investments, from which it can be deduced that the assets in question, which have not been registered, could not be considered as Spanish investments in Venezuela.
Considering, in the first place, that, as has been said, the BIT stipulates, in its Article XI. 4 that:
“Arbitration shall be based on:
(a) The provisions of this Agreement and those of other agreements concluded between the Contracting Parties;
(b) The rules and principles of International Law;
(c) The national law of the Contracting Party in whose territory the investment was made, including the rules relating to conflict of laws'; That from the provisions of (c) of this Article, the Republic of Venezuela infers that only investments qualified as foreign under its national law, and therefore registered as such by its administration, would be protected;
But considering that Venezuela cannot rely on the provisions of its domestic law to frustrate its commitments under the treaty; that the treaty defines investments without any reference to a national registration formality, the fact that the disputed assets have not been registered has no effect on the application of the BIT;
Considering, however, secondly, that according to Article I.2 of the BIT: ‘The term ‘investments’ means any type of assets invested by investors of one Contracting Party in the territory of the other Contracting Party’; that according to Article I.1: ‘The term ‘investors’ means: a) Natural persons who are nationals of one of the Contracting Parties under their national law and who make investments in the territory of the other Contracting Party”;
Considering that in the ordinary meaning of these terms, the investment is not an asset merely “held” by an investor of the other Contracting Party - which would exclude any reference to the date of acquisition - but an asset “invested” by an investor of the other Contracting Party - which necessarily refers to a condition of nationality of the investor at the date of investment;
That the award is therefore subject to annulment in that it excludes any element of temporality in the determination of the protected investments;
On the sixth ground for annulment alleging violation of international public policy (Article 1520-5 of the Code of Civil Procedure):
The Republic of Venezuela contends that by allowing Venezuelan nationals to sue their own State before an international court, the award violates international public policy.
Considering that the alleged principle does not correspond to the French conception of international public policy; that the ground can only be dismissed;
On the seventh ground for annulment alleging that the tribunal did not comply with due process (in French Principe de la contradiction) (Article 1520-4 of the Code of Civil Procedure):
The claiamnt alleges that the arbitral tribunal disregarded due process (in French Principe de la contradiction) by reasoning a contrario on the basis of 69 BITs signed by Venezuela and Spain with third States, without these documents being produced at the debates or discussed between the parties.
Considering that it follows from the award that the arbitral tribunal based its conviction on the very terms of the Spanish-Venezuelan BIT, mentioning that use to international law was only necessary if the wording of the treaty was not sufficiently clear, which was not the case in its opinion (award, in particular § 157); that it was therefore only to corroborate this interpretation and make their point of view explicit that the arbitrators referred to the practice of the two States in their relations with third States; that this overabundant reasoning could not be a ground for annulment;
That the ground alleging violation of due process (in French Principe de la contradiction) will therefore be dismissed;
Considering that it follows from all of the above that the award must be set aside, but only in so far as it decides that the disputed assets are investments within the meaning of the treaty, regardless of the nationality of the investors at the date on which they made their investments;
On Article 700 of the Code of Civil Procedure:
Considering that the two parties are partially unsuccessful, there is no reason for either of them to benefit from the provisions of Article 700 of the Code of Civil Procedure;
FOR THESE REASONS:
Sets aside the award rendered in Paris between the parties on 15 December 2014, but only in so far as it decides that the disputed assets are investments within the meaning of the Treaty, regardless of the nationality of the investors on the date they made their investments.
Says that, for the rest, the award is enforceable.
Holds that each party shall retain the burden of the costs it has incurred.
Rejects all other requests.