Venezuela Wins & Loses Exxon Mobil Dispute

When Venezuela nationalized the Exxon Mobil portion of oil production in the country, they were offered $1 billion dollars from the Venezuelan government. Exxon Mobil refused the offer and instead took them to the International Chamber of Commerce and claimed the state oil company PDVSA did have liability when its assets were nationalized. They asked the court to be compensated $10 billion for its heavy crude upgrading project in the Orinoco belt. The case is now over and the arbitration tribunal at the ICC has awarded Exxon Mobil $908 million, less than a tenth of what they were asking and less then what Venezuela was offering them.

This has been a great boon to Venezuela and is seen as a victory for the Bolivarian nation. ICC has clearly stated that Exxon Mobil is in the wrong. The fact that they were awarded less than the compensation they were offered shows that the ICC felt Exxon Mobil was wasting their time. The $908 million ruling seems to be intended to give Exxon Mobile the amount they were offered by Venezuela minus the cost of going to court over the matter. Essentially they deducted Venezuela’s court costs from the settlement. Also in cases like this damage to reputation of the defendant is also taken into consideration.

It appears that the arbitration tribunal felt that the compensation offered by Venezuela was fair and that Exxon Mobil should have taken it. They gave the right ruling, the compensation they were offered minus the costs of Venezuela having to go to arbitration when it was not necessary.

However it should be noted that Exxon Mobil still has another case against Venezuela. This one however is in arbitration before the World Bank-affiliated International Centre for Settlement of Investment Disputes. I think its pretty obvious the World Bank will be much less accommodating to Venezuela than the ICC was. Several other companies are still seeking compensation from nationalizations that were carried out. Mexican cement company Cemex SAB, Swiss cement-maker Holcim and Canadian miner Gold Reserve.

Those who opposed the leftist government are saying that nationalization has slowed foreign investment which would help boots Venezuela’s crude production. However a state company has done the job instead putting the billions made in profit to towards social services, infrastructure projects and subsidies towards food that are increasing the living standards of Venezuelans and cut the poverty rate in half since Chavez was first elected.