Gold Reserve Inc. v The Bolivarian Republic of Venezuela
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Teare |
| Judgment Date | 02 February 2016 |
| Neutral Citation | [2016] EWHC 153 (Comm) |
| Docket Number | Case No: CL-2015-000015 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 02 February 2016 |
Mr. Justice Teare
Case No: CL-2015-000015
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, 7 Rolls Buildings
Fetter Lane, London EC4A 1NL
Graham Dunning QC and Christopher Harris (instructed by Stephenson Harwood LLP) for the Defendant
Michael Bools QC (instructed by Norton Rose Fulbright LLP) for the Claimant
Hearing dates: 18–20 January 2016
This is an application by the Defendant, the Republic of Venezuela ("Venezuela"), to set aside an order of this court made ex parte on documents alone granting leave to the Claimant, Gold Reserve Inc. ("GRI"), to enforce an arbitration award in the same manner as a judgment of this court and giving judgment in the terms of the award.
The arbitration award was dated 22 September 2014 and was made pursuant to the Additional Facility Rules of the International Centre for Settlement of Investment Disputes ("ICSID"). The members of the tribunal were Professor Piero Bernadini (President), Mr. David A.R. Williams QC and Professor Pierre-Marie Dupuy. By the award Venezuela was ordered to pay GRI approximately US$713 million plus interest and costs. The seat of the arbitration was Paris. The hearing took place initially in Washington DC (between 13 and 17 February 2012) and then in Paris (between 15 and 16 October 2013). Following further written submissions the arbitration was closed on 23 July 2014.
The proceedings before this court seeking permission to enforce the award as if it were a judgment were commenced on 19 May 2015 and Phillips J. made the requested order on 20 May 2015 ex parte on documents alone.
The arbitration concerned mining concessions and mining rights in Venezuela (the Brisas Project) held indirectly by GRI, a Canadian company.
On 18 April 1988 and 3 March 1998 the two concessions forming the Brisas Project were granted to a Venezuelan company, Compania Arifere Brisas del Cuyuni ("CAB"). In November 1992 CAB was acquired by Gold Reserve de Venezuela, a subsidiary of Gold Reserve Corp., a company incorporated in the State of Washington. Thus that US company became the indirect owner of the Brisas Project.
In January 1998 a Bilateral Investment Treaty ("BIT") for the promotion and protection of investments was made between Venezuela and Canada. The treaty aimed to promote investments in the host state, either Venezuela or Canada, by citizens or enterprises of the other contracting state, and to protect them.
In October 1998 GRI became the parent company of Gold Reserve Corp. and so became the indirect owner of the Brisas Project. That came about because of a restructuring of GRI and Gold Reserve Corp. whereby Gold Reserve Corp. merged with a subsidiary of GRI (another US company) and shareholders in Gold Reserve Corp. transferred their shares to GRI in return for shares in GRI itself. There is unchallenged evidence that "upon the merger….the shareholders, management, employees, company headquarters and company operations of the Gold Reserve group of companies was left completely unchanged."
Thereafter between 1998 and 2008 GRI raised some US$225 million in equity financings and convertible debt, largely from Canadian sources, and spent close to US$300 million in developing the Brisas Project. In addition it retained in its own name consultants, experts and financial advisers, interacted with lenders in connection with due diligence of the Brisas Project and concluded contracts for the Brisas Project.
I asked counsel for GRI whether I was right to assume that the restructuring of GRI and Gold Reserve Corp. were designed to take the benefit of the protection afforded by the BIT to Canadian companies. I was told that that would not be an unreasonable inference. Mr. Bools said that "one might reasonably infer that if you were planning to make hundreds of millions of dollars of investment into this Venezuelan mine, you might want to arrange your affairs in such a way as to maximise the protection." He said that he was not sure that there was any evidence on the point. I was, however, referred in the course of his submissions to two statements of A. Douglas Belanger, the President of GRI. At paragraph 9 of his first statement he said that "the primary purpose of establishing a Canadian parent company was to enhance the Company's position amongst Canadian investors, many of whom had a significant focus on natural resource companies". Thus it would appear that the company restructuring was for at least two purposes, first, to enhance its ability to raise finance from Canadian investors and, second, to gain the benefit of the protection afforded by the BIT to Canadian companies.
It was the case of GRI before the arbitral tribunal that GRI was, within the terms of the BIT, an "investor" entitled to the protection afforded by the BIT. In particular it claimed to be entitled as an "investor" to submit its claim against Venezuela to an arbitration under the ICSID Additional Facility Rules. Venezuela maintained that GRI was not an "investor" who was entitled to arbitrate a claim against Venezuela with the result that the tribunal had no jurisdiction. The tribunal resolved that dispute in favour of GRI.
Venezuela maintains its position and therefore submits that this court had no power to make an order against Venezuela because, by reason of state immunity, Venezuela is immune from the jurisdiction of the English courts and had not lost that immunity because it had not agreed to arbitrate with GRI.
Venezuela is not bound by the decision of the tribunal on the question of jurisdiction and so this court may decide this question afresh. If Venezuela is right then the order made by this court must be set aside. Venezuela also maintains that the arbitration claim form ought to have been served pursuant to section 12 of the State Immunity Act 1978 (it was not) and that there was non-disclosure of material matters by GRI when applying ex parte with the result that the court's order should be set aside.
State Immunity
It is common ground that Venezuela is entitled to state immunity pursuant to section 1 of the State Immunity Act of 1978 unless it agreed in writing to submit a dispute to arbitration in which case it is not immune as respects proceedings in the courts of the United Kingdom which relate to arbitration; see section 9 of the 1978 Act.
Article XII of the BIT is entitled "Settlement of Disputes between an Investor and the Host Contracting Party". It provides as follows:
1. Any dispute between one Contracting Party and an investor of the other Contracting Party, relating to a claim by the investor that a measure taken or not taken by the former Contracting Party is in breach of this Agreement, and that the investor or an enterprise owned or controlled directly or indirectly by the investor has incurred loss or damage by reason of, or arising out of, that breach, shall, to the extent possible, be settled amicably between them.
2. If a dispute has not been settled amicably within a period of six months from the date on which it was initiated, it may be submitted by the investor to arbitration in accordance with paragraph (4). For the purposes of this paragraph; a dispute is considered to be initiated when the investor of one Contracting Party has delivered notice in writing to the other Contracting Party alleging that a measure taken or not taken by the latter Contracting Party is in breach of this Agreement, and that the investor or an enterprise owned or controlled directly or indirectly by the investor has incurred loss or damage by reason of, or arising out of, that breach.
3. ………….
4. The dispute may, by the investor concerned, be submitted to arbitration under:
(a) The International Centre for the Settlement of Investment Disputes (ICSID), established pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of other States, opened for signature at Washington 18 March, 1965 (ICSID Convention), provided that both the disputing Contracting Party and the Contracting Party of the investor are parties to the ICSID Convention; or
(b) the Additional Facility Rules of ICSID, provided that either the disputing Contracting Party or the Contracting Party of the investor, but not both, is a party to the ICSID Convention; or
In case neither of the procedures mentioned above is available, the investor may submit the dispute to an international arbitrator or ad hoc arbitration tribunal established under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL).
5. Each Contracting Party hereby gives its unconditional consent to the submission of a dispute to international arbitration in accordance with the provisions of this Article.
6. (a) The consent given under paragraph (5), together with either the consent given under paragraph (3), or the consents given under paragraph (12), shall satisfy the requirements for:
(i) written consent of the parties to a dispute for purposes of Chapter II (Jurisdiction of the Centre) of the ICSID Convention and for purposes of the Additional Facility Rules; and
(ii) an "agreement in writing" for purposes of Article II of the United Nations Convention for the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958 ("New York Convention").
(b) The venue for any arbitration under this Article shall be such so as to ensure enforceability under the New York Convention, and claims submitted to arbitration shall be considered to...
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