Icsid may order compensation based on market value of assets

Exxon Mobil may be paid several billion dollars.

An arbitration claim at the World Bank's International Centre for Settlement of Investment Disputes (Icsid) related to a dispute between US oil company Exxon Mobil and Venezuela could be settled with a significant compensation for the US oil company, provided that Icsid judges issue their ruling based on the bilateral agreements signed by Venezuela.

Exxon Mobil's claim is based on the protection that the Venezuelan government must provide to the investments made by companies based in the Kingdom of the Netherlands, under the Convention for the Mutual Protection of Investments that Venezuela signed in 1991, which is in force since 1993.

The Icsid convention states that the arbitration court's rulings will be issued based on the legal instruments signed by the parties. In this respect, the bilateral agreement between Venezuela and the Netherlands sets the conditions for takeovers such as the one implemented by the Venezuela government on the assets of Cerro Negro and Petrozuata joint ventures. The aforementioned agreement provides for compensation by the Venezuelan government

Under the current bilateral agreement, "the compensation (related to an expropriation) will be consistent with the market value of the investments affected immediately before the seizure, or before they have been made of public knowledge and it will include the payment of interest rates at the normal commercial rate up to the date of payment."

It means that if the Icsid awards compensation to Exxon Mobil, the oil company may receive several billion dollars, according to the market valuation of Exxon's projects.