In September 2014, Gold Reserve won a significant arbitral award ("Award") worth more than US$760 million (and counting, because of post-award interest) against Venezuela for breach of investor-protection standards under the Canada-Venezuela bilateral investment treaty ("Treaty"). In the arbitration, Gold Reserve successfully argued that Venezuela's revocation of certain licenses for gold extraction held by Gold Reserve's subsidiary violated the fair and equitable treatment, full protection and security and expropriation standards of the Treaty. (For further background to the case, see our earlier blog post here.)
Subsequently, two proceedings were filed before the Paris Court of Appeal, being the court at the seat of the arbitration. When Venezuela applied to have the award set aside, Gold Reserve countered that application with a petition to confirm the award. The two procedures differ in scope and length. Although the Paris Court confirmed the award (as previously reported in our blog here), the decision on Venezuela's application to set aside the award remains pending, since the set-aside proceeding entails a more detailed review of the Tribunal's decision-making.
While the set-aside proceeding continues in Paris, Gold Reserve has sought to enforce the award elsewhere, including in Luxembourg and Washington, D.C. The Luxembourg court granted a stay of the enforcement request pending the completion of the Parisian proceedings. However, on November 20, 2015, the U.S. District Court for the District of Columbia granted Gold Reserve's request for enforcement in Washington, D.C. The U.S. District Court, in line with the general pro-enforcement approach of the U.S. courts in their application of the New York Convention, found that Venezuela could neither establish any procedural defects in the arbitration nor prove that enforcement of the Award would violate public policy. Accordingly, Gold Reserve is able to satisfy the Award against Venezuela's assets in Washington, D.C., without waiting for the completion of Venezuela's set-aside proceeding in Paris.
The principal lessons from the U.S. District Court's decision are:
- The Court will give "substantial deference" to the Tribunal's determination on the scope of its jurisdiction.
- Failure to raise an issue squarely and distinctly during the arbitral proceedings may constitute a waiver of the right to raise the same issue before an enforcing court.
- In order to argue successfully that the inequitable allocation of time to the parties led to a due process violation, it is necessary to show exactly what extra time was required for and how the denial of extra time prevented a party from presenting its case.
- The public policy exception to the enforcement of arbitral awards under the New York Convention, as applied by the U.S. courts, is extremely narrow.
- The U.S. courts, and the U.S. District Court for the District of Columbia in particular, have been willing to enforce foreign awards despite parallel proceedings challenging these awards before the courts at the seat of the arbitration.
Each of these points is discussed below.