On October 23, 2019, the Venezuelan government failed to show up for litigation filed in Washington, D.C. This case was regarding the enforcement of a “some $520 million” subsidy allotment to a Mexican corn flour and tortilla company—Gruma SAB de CV—found in US grocery stores. Spanish subsidiaries of Gruma SAB de CV, Valores Mundiales SL and Consorcio Andino SL, filed earlier this year against the Bolivarian Republic of Venezuela subsidiaries “for breach of the bilateral investment treaty between Spain and Venezuela.” It was filed after Venezuela seized control of Gruma SAB de CV in 2010, and its smaller US branch companies, resulting in a direct concern to US and Spanish business interests. The Venezuelan government committed these acts under late President Hugo Chavez’ expropriation methods that nationalized entities such as major oil companies, rice mills, agricultural land, and banks. Valores and Consorcio won an original award through the International Centre for Settlement of Investment Disputes (ICSID) tribunal in December 2018. However, as of October 2019, Valores and Consorcio filed with the ICSID to report Venezuela has still not paid said reward or costs of the proceedings.
Maduro’s Venezuelan government continues to expropriate investments from its domestic and foreign partners under the precedent set by Chavez. The Gruma SAB de CV’s arbitration case is one of many open cases against Maduro and his predecessor Chavez’ regime. As a result of Venezuela’s nationalization of many resources and big-dollar corporations, tensions lie between Venezuela and other international entities with ties to Venezuela. This is exemplified by major arbitration cases like those of ConocoPhillips, Tidewater, Exterran Holdings Inc, and Crystallex International Corp against Venezuela.
Currently, the ICSID has 17 pending cases filed against Venezuela. The ICSID is typically used by foreign entities to avoid bias against their claims in domestic courts and as a mechanism for conciliation over arbitration cases through a neutral forum. This court can be used by either national governments or by private corporations to file investment disputes. Venezuela was signed into the ICSID in 1995, however, the country denounced its participation in 2012. This was in response to the tribunal’s ruling for Venezuela to provide compensation in a suit involving the US company Exxon Mobil after Chavez’ nationalization of the oil fields in 2007. The ICSID was created under the World Bank’s supervision. With the Administrative Council being chaired by the World Bank President and member states, Venezuela as a withdrawn state (from the ICSID) remains under the World Bank’s influence as a member state of this international organization. The ICSID also proceeds under the UN Commission on International Trade Law that applies to every member state, including Venezuela. Therefore, Venezuela as a non-member state of the ICSID still remains under the obligation of international law to follow customary arbitration law and adhere to its rulings. Despite this, it seems unlikely that Venezuela will remain dedicated to the promotion of international justice in line with these precedents.
Venezuela’s precedent for the legal nationalization of companies, resources, and territory is not uncommon for international governments throughout history. In the US, for instance, nationalization has been used during times of war, or economic crises. However, countries like the US that successfully nationalize certain privatized industries do so in a few instances and often just for temporary periods of time. Compensation for private industries is also a characteristic that Venezuela has failed to instrument.
Venezuelan nationalization of private industries and land owned by the elites, who were either remanent of the colonists or cooperative with the colonist system, is an attempt to spread wealth after foreign actors monopolized resources in the country. Marginalized populations of the Venezuelan poor elected Chavez to power in hopes of breaking up the bourgeoisie. The precedent for taking back private-owned resources is inspired by socialist movement by leaders like Nasser in the 1950s, with the Suez Canal nationalization, and the Iranian oil revolution in 1979—both from British powers.
The Trump administration has recently taken a harsh stance against Venezuela, intensifying after the 2019 Venezuelan political crisis. This political fiasco continues to surround the bid for Presidency in Venezuela between current President Maduro and US-backed Juan Guaidó. By supporting Guaidó, the US has a chance to gain footing in Venezuelan oil business again, after Maduro and Chavez’ socialist policies boxed out US companies.
As a reflection of this strategy to push out Maduro, the US has chosen to cut imports of Venezuelan crude oil and petroleum products. Venezuela as a rentier state, like many other members of the Organization of the Petroleum Exporting Countries (OPEC), depends on oil revenues to finance Maduro’s regime. Consequently, US imports have fallen from 19,303 thousand barrels of crude oil to 7 thousand barrels of crude oil from June 2018 to June 2019, according to the EIA. Diplomatic efforts have also been made to combat Maduro’s regime. In August 2019, Trump issued Executive Order 13884, freezing all Venzeulan property and interests on US soil. Additional actions were taken by this administration, including 2017’s Executive Order 13808’s sanctions against Venezuelan access to the US financial market. Furthermore, in 2018 Trump issued Executive Order 13827 prohibiting Venezuelan cryptocurrency use in the US and by US-persons and also banning the purchase of Venezuelan debt through Trump’s 2018 Executive Order 13835. This has isolated Venezuela’s market and depreciated its national capital.
Trump has attempted to sell his administration’s US Venezuela’s sanctions as measures to force Maduro’s regime to stop committing human rights violations. Though the state of human rights in Venezuela, and the effect that these sanctions have on human rights, are issues of major concern, bi-partisanship over economic issues and arbitration cases is a major objective within US foreign policy. This is especially true when arbitration cases involve US commercial, capitalist sector interests. By issuing strong sanctions against Venezuela and actively pursuing international legal action against Venezuelan governments, the US wishes to use the law as a means of placing pressure on Maduro’s regime to act in accordance with international law. The US has not only imposed sanctions against Venezuela but also has threatened other foreign nations from engaging in trade with Venezuelan businesses, especially with the state-run oil company: Petróleos de Venezuela, S.A (PDVSA).
As of September 2019, Venezuela’s PDVSA, which generates most of the country’s wealth, has only three large customers: Russia’s Rosneft, Spain’s Repsol, and Cuba’s Cubametales. Business is lacking from international markets as many companies are also wary to invest in Venezuelan businesses that threaten the nationalization of their contributions. Gruma SAB de CV’s case is one of many cautionary tales to foreign businesses. Another famous, recent example is the ICSID ConocoPhillips case—an American oil company victim to expropriation by Chavez’ nationalization policies. ConocoPhillips’ claims are also centered around the expropriation of foreign assets by the late Chavez’ dictatorship. The ICSID ruled to award ConocoPhillips, at over $8 billion in compensation, but like Gruma SAB de CV, has not been compensated by Venezuela.
Venezuela’s pressure to pay reparations in accordance with international law is not being repressed. Instead, arbitration case after arbitration case has been filed to right the wrongs that Venezuela’s economic dictatorship has done to foreign investment companies. It is unclear whether US and foreign sanctions against Venezuela will force parties to award subsidies to those harmed by Venezuelan nationalization. However, as Venezuela faces inflation, economic instability, and continuous political problems, the active cases in the ICSID could remain in a permanent status of pending. Therefore, cases like that of the Spanish subsidiaries of Gruma SAB de CV, Valores and Consorcio, seem to be one of many tales that we will continue to see in the international arena and most likely further see the perpetual failure of the Maduro regime to follow international customary arbitration law.