Chavez Says Venezuela Won’t Accept World Bank Arbitration

BusinessWeek
Nathan Crooks and Jose Orozco

Hugo Chavez

Jan. 9 (Bloomberg) -- Venezuela will pull out of a World Bank-affiliated arbitration panel and won’t accept any of its rulings, including a multi-billion claim for a nationalized oil project by Exxon Mobil Corp., President Hugo Chavez said.

The Washington-based International Centre for Settlement of Investment Disputes, or ICSID, is considering Exxon’s claim in one of about 20 suits filed there against the Venezuelan government. Wichita, Kansas-based Koch Industries Inc. and Owens-Illinois, Inc., the world’s largest maker of glass containers, are among other companies seeking compensation.

“We won’t recognize any decisions from the ICSID,” Chavez, who has seized assets in the energy, mining and telecommunications industry during his 12-year rule, said yesterday on state television. Exxon is “seeking the impossible, that we pay what we will never pay.”

Exxon, the world’s largest oil company by market value, was the first to abandon Venezuela after Chavez expropriated industry assets in 2007. The self-declared socialist revolutionary forced foreign oil producers into joint ventures as minority partners that year and is also in arbitration at the World Bank with ConocoPhillips, which rejected the terms.

“We’ve got to get out of that ICSID,” Chavez, 57, said during a six-hour Alo Presidente talk show yesterday, which he resumed for the first time since being diagnosed with cancer in June. The South American leader on Jan. 4 said that Exxon had been “arrogant” for demanding as much as $12 billion in compensation for its stake in the Cerro Negro project that produced and processed heavy crude oil.

Exxon had no comment on Chavez’s statement, spokesman Patrick McGinn said yesterday in an e-mail.

Pulling Out

Chavez has threatened to withdraw Venezuela from ICSID as early as 2007. If he follows through this time, it’s unlikely to affect arbitrations already underway, said Michael Nolan, a partner in the Washington office of Milbank, Tweed, Hadley & McCloy.

“Chavez is not going to solve Venezuela’s very serious international legal problems with either speeches or even a formal denunciation of the ICSID convention,” Nolan, who has represented clients in arbitration with Venezuela, said today in an e-mailed response to questions.

Exiting the arbitration panel would also require Venezuela withdraw from some 20 bilateral investment treaties with various countries, a process that would still give companies “many years” to initiate claims against the government, he added.

Enforcement Measures

In a separate case, the New York-based International Chamber of Commerce, an arbitration court, ruled last month that state oil company Petroleos de Venezuela SA must pay Exxon a net $746.9 million for the Cerro Negro nationalization.

Exxon in 2010 reduced its claim to $7 billion from $12 billion, according to PDVSA, as the Caracas-based company is known. Chavez said yesterday that the country would only reimburse Exxon for what it had actually invested in the country.

PDVSA said on Jan. 2 that it would pay $255 million in cash for the ICC judgment, after accounting for about $300 million in a frozen New York bank account and $191 million of Exxon debt that it will cancel. The total amount of the International Chamber of Commerce ruling was for $907.6 million, minus a $161 million counterclaim by PDVSA.

A decision favoring Exxon at the ICSID would be more easily-enforced because it gives a successful claimant the right to enforce against assets in third party states, Nolan said.

“If Exxon gets an award in the ICSID, the enforcement mechanisms are strong,” said Nolan.

Owens-Illinois in September filed for arbitration at the ICSID for compensation for two bottling plants nationalized by Chavez’s government in 2010. Other companies with claims against Venezuela at the ICSID include Tenaris SA, the world’s biggest maker of seamless steel tubes, and The Williams Companies, Inc., a natural gas services supplier located in Tulsa, Oklahoma.

--Editors: Stephen Merelman, Joshua Goodman

To contact the reporters on this story: Jose Orozco in Caracas at jorozco8@bloomberg.net; Nathan Crooks in Caracas at ncrooks@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

China-US Energy Geopolitics: The Battle for Oil in the South China Sea

Global Research
Michel Chossudovsky

A new area of potential confrontation is developing between China and the U.S. According to reports, Exxon Mobil which has acquired exploration and production rights from Vietnam has discovered substantial gas reserves in the South China Sea  off the coast of North Vietnam.

"U.S. oil company ExxonMobil is reporting a "potentially significant" gas discovery off the coast of Vietnam, stating in a press release, "We can confirm ExxonMobil Exploration and Production Vietnam Limited drilled its second exploration well offshore Danang in August 2011 and encountered hydrocarbons." (See John C.K. Daly, Apocalypse Redux? U.S. Natural Gas Find off Vietnam Could Raise Tensions with China,  http://oilprice.com )

It is important to note that  these off-shore reserves are located between the North Vietnam coastline and China's Hainan island in an area of disputed jurisdiction between Vietnam and China. (see map above) The contested area is made up of blocks 117, 118 and 119, which according to Hanoi fall  within the 200-mile exclusive economic zone under international maritime law (Ibid)

On October 31, following the ExxonMobil discovery announcement, China responded by warning foreign companies not to meddle  "in areas also claimed by China." ( China again warns foreign oil firms on South China Sea exploration | Reuters, October 31, 2011)

"We hope foreign companies do not get involved in disputed waters for oil and gas exploration and development. This position has been consistent," Hong said, when asked whether China plans to ask Exxon Mobil to withdraw from its oil and gas deal with Vietnam.

Environmental Disaster in the Gulf of Mexico: The Escalation of BP's Liability

Global Research
Dahr Jamail

As oil, sickness and contamination persist, Gulf residents and lawyers file thousands of lawsuits against the oil giant.

"If you got caught humping another woman - [if] you're both naked and caught in the act - you'd want BP to explain to your wife how it didn't happen."

This colorful analogy was proposed by Dean Blanchard, a seafood distributor on Grand Isle, Louisiana, to explain oil giant BP's continuing machinations to evade liability in the aftermath of the April 2010 disaster.

During a recent discussion in his office, Blanchard told Al Jazeera that the fishing waters off Louisiana are only producing one per cent of the shrimp they formerly produced. "Half of the local fishermen have shut down," he stated. "They are dying. And [as] for the fishing, every day they are hauling dead porpoises in front of my place. I have a claim filed with BP, but none of us in the seafood business are being paid."

Speculating that he may soon have to close down his company, Blanchard spoke for hundreds of thousands of Gulf Coast residents who remain angry and frustrated when he added: "I worked 30 years to establish my business, and now BP has destroyed my life."

Fallout and responsibility

In a key investigative report released on September 14, the US government heaped most of the blame for the oil disaster on BP, which now faces a raft of criminal and civil litigation and billions of dollars in potential damages.

The report concluded that BP violated federal regulations, ignored safety concerns and crucial warnings, and made careless decisions during the cementing of the well nearly two kilometres underwater.

"That report summarised what we already knew, and it will help establish the punitive damage case against the defendant [BP]," New Orleans-based attorney Stuart Smith, representing more than 1,000 cases against BP, told Al Jazeera.

Smith has been litigating against oil companies for 25 years, and in 2001 was lead counsel in a case that resulted in a $1bn verdict against ExxonMobil.

"The fastest way to lose a toxic tort case is to rely on the government or the defendant to collect the evidence," explained Smith, whose firm has spent more than $2m for its client's cases by collecting samples and data and having them analysed by experts.

As litigation against BP continues to mount, several studies have confirmed Smith and Blanchard's concerns about the deep impact of BP's oil disaster.

One recent study carried out by experts at Auburn University concluded that mats of oil that remain submerged on the seabed could pose a long-term risk to coastal ecosystems. Large quantities of tar balls and oil mats have washed ashore, or have been uncovered by recent storms, at Gulf Shores and Orange Beach, Alabama, as well as at several beaches in Louisiana and in Pensacola, Florida. A recent Al Jazeera over-flight of the area near BP's capped Macondo well, the origin of the April 2010 disaster, revealed a long swathe of oil and sheen.

Dr Wilma Subra, a chemist and MacArthur Fellow, has - since autumn of 2010 - been conducting tests on seafood and sediment samples along the Gulf for chemicals present in BP's crude oil and toxic dispersants.

"Tests have shown significant levels of oil pollution in oysters and crabs along the Louisiana coastline," Subra told Al Jazeera. "We have also found high levels of hydrocarbons in the soil and vegetation."

Appeals Court Revives Torture Claims Against Exxon

BLT

In a major ruling with wide implications for corporations that operate overseas, a divided federal appeals court in Washington today said Exxon Mobil Corp. is not immune from liability for alleged brutal conduct that agents of the company allegedly orchestrated against a group of Indonesian villagers.

The plaintiffs, 15 Indonesian villagers, sued Exxon in two actions in U.S. District Court for the District of Columbia, claiming government security forces, working for Exxon, killed and tortured villagers in Aceh, Indonesia.

The villagers, represented by Cohen Milstein Sellers & Toll, alleged Exxon employed Indonesian military as private security to protect a natural gas facility. The plaintiffs’ lawyers argued Exxon had control over the soldiers.

“The law of the United States has been uniform since its founding that corporations can be held liable for the torts committed by their agents,” Judge Judith Rogers of the U.S. Court of Appeals for the D.C. Circuit said in the opinion, joined by Judge David Tatel. “This is confirmed in international practice, both in treaties and in legal systems throughout the world.”

The majority judges—Judge Brett Kavanaugh voted in dissent—sent the case back to Washington federal district court for further proceedings. The initial suit has been pending for a decade.
Cohen Milstein’s Agnieszka Fryszman, who argued for the plaintiffs in the D.C. Circuit in January, praised the D.C. Circuit’s ruling, calling it a “big and significant win that makes our case much stronger than it was before the appeal.”