Investments in Venezuela are protected under bilateral treaties

Venezuela's withdrawal from the International Centre for Settlement of Investment Disputes (Icsid) is a fact. According to the Venezuelan government, such measure implies a step forward in search of a new arbitration mechanism, but in practice it does not mean a detachment from the international law and order.

Venezuela's withdrawal may be considered by investors as an additional risk for future investments. However, investments in Venezuela continue to be governed by the legal framework established in the bilateral treaties Venezuela has signed with other 26 countries.

"The international system for foreign investment protection is based on bilateral treaties on investment protection and promotion that establish substantive protection rules such as non-discrimination before the law, banning of unfair and unequal treatment and the prohibition of expropriation without due compensation," lawyer and arbitration specialist Hernando Díaz-Candia stated.

In fact, such agreements establish the procedures to solve disputes between investors and government. Under many of these treaties, Icsid is the first choice among the arbitration centers the parties may resort to. Therefore, new complaints may be filed with Icsid against Venezuela.

In addition to the Icsid, the bilateral treaties usually include an ad hoc court governed by the arbitration regulations of the United Nations Commission on International Trade Law (UNCITRAL).

Venezuela's exit from the Icsid does not exempt the Republic from complying with the awards issued in connection with the complaints filed with the body until July 24, 2012, six months after Venezuela officially denounced the Icsid Convention. Some 20 complaints against Venezuela are pending in Icsid, and no party has lost its rights.

The Executive Office has also announced its intention of renegotiate bilateral treaties on investments. However, even if such treaties are renegotiated or expire (most of them are valid for 10 years), the instruments include a provision protecting investments for additional 10 years after the denunciation of the treaties.

rdeniz@eluniversal.com

Translated by Karina Salas