Arbitral award on individuals with dual nationality

On December 15 2014, the arbitration court, constituted according to the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), issued the resolution regarding the jurisdiction of the case CPA 2013-3 Serafín Garcia Armas and Karina Garcia Gruber (father and daughter) against the Bolivarian Republic of Venezuela. This arbitration was submitted in accordance to the Agreement for Reciprocal Promotion and Protection of Investments (APPRI, for its acronym in Spanish) executed between Spain and Venezuela in 1995 and in force since September 1997.

The controversy began when the Venezuelan government applied some confiscatory measures against the companies Alimentos Frisa, C.A and Transporte Dole, C.A., both owned by the plaintiffs. These measures resulted in the expropriation of these companies without the payment of a proper and just compensation, as well as other infractions taking place against the APPRI and the international law. However, this first resolution was restricted to determining whether the arbitration court had jurisdiction or not over the dispute.

Venezuela responded by arguing that the arbitration court did not have jurisdiction over the plaintiffs’ claims given that the dual nationality of an individual did not fit the “Investor” definition written in the APPRI, and that such Agreement prohibited nationals from suing their own country in international forums. They claimed that the plaintiffs’ dominant or prevailing nationality was Venezuelan and not Spanish, categorizing the latter as merely formal.

In addition, Venezuela considered that the rule set forth in Article 25.2 of the ICSID Convention, prohibiting the application of Bilateral Investment Treaties to individuals of dual nationality, was applicable because the APPRI considers ICSID arbitration as one of the alternative means for dispute resolution between investors and receiving States.

On the other hand, the plaintiffs dismissed these arguments indicating that neither the APPRI nor the international law had rules that allowed for this conclusion.

After analyzing the matter, the arbitration court concluded the following­:

• The APPRI signed by Venezuela and Spain does not expressly exclude individuals with dual nationality, thereby, it cannot be considered as an obstacle. When two States have wanted to exclude dual nationality individuals from the protection of the treaty, they have expressly done so. Therefore the court resolved that the denial of the benefit must be expressly stipulated in the APPRI’s text for its enforceability to be effective.
• By virtue of the will of the Parties, only the UNCITRAL Arbitration Rules are applicable to this controversy, therefore Article 25.2 of the ICSID Convention is not applicable. This Convention is only applicable to the arbitration proceedings carried out under its rules.
• The arbitration court considers Venezuela’s categorization of the Spanish nationality as merely formal to be irrelevant because the APPRI considers this nationality as sufficient. Also, the APPRI does not exclude dual nationality individuals nor does it restrict the effects of a nationality validly recognized by the other State.
• The arbitration court ruling is consistent with previous arbitration awards regarding the temporality of the investments. In other words, in order to be protected by a Bilateral Investment Treaty, it is necessary for the Party who invokes it to be a citizen of one of the States on the date of the violation of the treaty.

In view of the above, the arbitration court resolved that the plaintiffs qualified as investors and that their investments made in Venezuela were in accord with the definitions included in the APPRI; the arbitrators rejected Venezuela’s claims and declared that the arbitration court had competence to intermediate in this dispute.

Although this award is not binding, it sets an important precedent for dual nationality individuals to appeal to international arbitration against Venezuela and claim compensation for unfair expropriations.

Image: Nathan Nelson