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Editorial Commentary
VenEconomy:
Destructive shows of bravado
From Rome, the Minister of Energy and Oil/President of PDVSA, Rafael Ramírez, announced that, at the end of April, Venezuela would file a complaint regarding the Investment Promotion and Protection Treaty signed with the Netherlands in 1996.
The grounds for this complaint is apparently the “abusive use” by different oil companies, both state- and privately owned, of benefits grant Dutch companies under the treaty because they registered in Holland as “companies native to the country, as in the case of ExxonMobil.”
There are rumors that the Venezuelan Government is also considering filing complaints regarding all treaties of this type that Venezuela has signed to date with different countries.
What is a bi-national investment treaty?
It is a business agreement whereby the parties establish clear, transparent rules for engaging in a given economic activity that are easy to implement and monitor and also clear guarantees, among them, equal treatment, repatriation of profits, labor and environmental rules, intellectual property, and competition and service policies.
But one of the key –indeed essential- elements of a bi-national investment treatment is a dispute settlement clause establishing that the parties shall resort to a neutral arbitration center, such as the World Bank’s International Center for the Settlement of Investment Disputes (ICSID) or the International Chamber of Commerce in Paris, to settle their disputes when they are unable to reach an agreement.
To illustrate the importance of this clause, let us imagine a football match in Cali between the Venezuelan team, the Vino Tinto, and the Colombian team, where the referee is Colombian. This would be quite unacceptable. The same happens in the case of investments and business: the referee must always be impartial.
Venezuela’s complaint regarding this international treaty with the Netherlands is yet another example of the arrogance and highhandedness of a government that, in its nine years in office, has credited to its account innumerable infringements of the property rights and economic freedoms of domestic and foreign investors.
Minister/President Ramírez’ announcement is a show of bravado that reflects a lack of maturity that should come as no surprise to anyone. However, what is surprising is the ignorance it reveals. Or could it be that the numerous advisors and lawyers at the service of PDVSA and the Ministry of Energy and Oil have not explained to the Minister/President that filing such a complaint will not exonerate the country from its liabilities with companies that made their investments following the signing of a bi-national treaty and, consequently, will not affect the decision that ExxonMobil obtained to freeze up to $12 billion of PDVSA’s international assets?
Would someone please explain to the Minister/President, in clear, simple language, that these treaties merely serve to promote the investments that the country so badly needs and to protect Venezuela in the event of business disputes with foreign companies and governments.
VenEconomy is a Venezuela's leading specialized publisher in the economic and financial area. VenEconomy's Points of View on the issues of the day, as seen by VenEconomy during the last week. Petroleumworld does not necessarily share these views.Editor's Note: This commentary was originally published by VenEconomy, on 04/25/2007. Petroleumworld reprint this article in the interest of our readers.
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Petroleumworld News 04/28/08
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