Gold Reserve v Venezuela and the enforcement of ICSID awards

In recent years, Latin American states have increasingly resisted The International Centre for Settlement of Investment Disputes (ICSID) state-investor dispute mechanism, which they claim favours investors. One of the key criticisms leveled against ICSID arbitration is the lack of an appeals process and limited annulment procedure for awards rendered under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention).

It is worth noting, however, that the ICSID Convention will not apply to all proceedings administered by ICSID. The steps taken by Venezuela and Canadian mining company Gold Reserve since a Paris-seated tribunal issued an award in favour of Gold Reserve in September 2014 provide a useful illustration in this regard.

Gold Reserve’s US$740 million ICSID award against Venezuela (the Award)

A Paris-seated tribunal found that Venezuela had breached the fair and equitable treatment standard of the Canada-Venezuela bilateral investment treaty when it terminated Gold Reserve’s Las Brisas gold and copper concession.

The tribunal awarded Gold Reserve US$740.3 million, being US$713 million for the fair market value of the Brisas project, $22.3 million for interest since April 2008 and $5 million for reimbursement of the company’s legal and technical costs.

The Award was issued under the ICSID Additional Facility Rules as Canada had not yet ratified the ICSID Convention at the time the claim was filed in 2009.

Developments in Paris and Washington, DC

After the Award was issued, Venezuela sought to have it set aside by the Paris Court of Appeal. Gold Reserve then made a cross petition for recognition of the Award by the Paris Court. Two days prior to the hearing scheduled for 27 November 2014, Venezuela filed submissions opposing the company’s request for exequatur and, in the alternative, requesting a stay of execution pending the determination of its application for annulment of the Award.

On 26 November 2014, Gold Reserve filed a further petition for recognition of the Award, in Washington, DC. The following day, the Paris Court approved Gold Reserve’s request to postpone the hearing until 8 January 2015 to allow the company to respond to Venezuela’s request for a stay of execution.

Venezuela was only able to seek the set-aside of the award in the Paris Court because the award was rendered under the ICSID Additional Facility Rules, and not under the ICSID Convention. The Award was therefore subject to the regime of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). Although the New York Convention presumes the validity of international arbitration awards and facilitates their recognition and enforcement in the territory of any Contracting States, the national courts of Contracting States retain power to set aside awards on narrowly circumscribed procedural and public policy grounds.

Enforcement under the ICSID Convention

Under Article 54(1) of the ICSID Convention, each contracting state must recognise an award rendered under the ICSID Convention as binding and enforce a monetary award within its territory as though it were a final award of a court in that state. This makes recognition and enforcement easier for an award rendered under the ICSID Convention than for an award governed by the New York Convention.

Awards rendered under the ICSID Convention are not subject to national law. They may only be contested out of court, under the limited review mechanisms in the ICSID Convention.

An application for an annulment of an award under Article 52 (1) of the ICSID Convention is put to a three-member ad hoc committee constituted for that purpose. A party may request an annulment of an award on one or more of the following grounds:

  • That the Tribunal was not properly constituted.
  • That the Tribunal has manifestly exceeded its powers.
  • That there was corruption on the part of a member of the Tribunal.
  • That there has been a serious departure from a fundamental rule of procedure.
  • That the award has failed to state the reasons on which it is based.

An annulment review is therefore a limited exercise, designed to safeguard the integrity of the tribunal, procedure and award, not the outcome of the proceedings. It does not provide for an appeal or retrial of an initial award.

The need to satisfy a high threshold in securing annulments is borne out by ICSID statistics. Those demonstrate that, from 2011 to the end of June 2014, only one ICSID award was successfully annulled in part or in full, while 20 further annulment applications were rejected or discontinued.


The shorthand term “ICSID arbitration” is generally used to refer to proceedings that fall within the scope of the ICSID Convention. It is important to note, however, that ICSID also administers proceedings under the ICSID Additional Facility Rules and the UNCITRAL Rules. As illustrated by the recent developments in the dispute between Gold Reserve and Venezuela, ICSID awards which are rendered under those Rules rather than under the ICSID Convention will not benefit from the ICSID Convention recognition and enforcement regime; instead, they will be governed by the New York Convention, as implemented in the Contracting State jurisdictions where they are issued or where their recognition and enforcement is ultimately sought. Investors are thus reminded once more of the importance of seeking specialist advice on the investment protections available to them, whether at the stage of deciding how best to structure their investment or before starting formal proceedings.

Please see here for our recent post on the future of investor-state arbitration, or here for a link to a short podcast in which we consider in further detail some of the key issues being debated in relation to investment protection and investor-state dispute settlement (ISDS) and the implications of the outcome for investors investing from one market into the other

For further information, please contact Matthew Weiniger QC, Partner, Naomi Lisney, Associate, London or your usual Herbert Smith Freehills contact.