Two United States-based energy companies have successfully registered their US$1.2 billion arbitration award against Venezuelan State-owned energy company Petroleos de Venezuela SA (PDVSA) and two of its subsidiaries in the local courts.
Guardian Media understands that High Court Judge Frank Seepersad, on Wednesday, granted an application from Phillips Petroleum Company (Venezuela) Limited and ConocoPhillips Petrozuata BV against PDVSA, and its subsidiaries Corpoguanipa SA and PDVSA Petroleo SA (PPSA).
Provided that PDVSA and its subsidiaries do not successfully challenge the order within seven days, it would mean that the companies could seek to recover their debt via PDVSA’s locally held assets or business interests including the expected proceeds from the Dragon Gas Field deal between this country and Venezuela.
Similar orders recognising the debt have already been granted in other jurisdictions including the United Kingdom, the US, Hong Kong, the Netherlands, Jamaica, Belize and Portugal.
Attached to its court filings was an affidavit from UK lawyer Stephen Hayes, of the law firm Kobre and Kim, which represented the two companies in related proceedings.
According to Hayes, the companies began doing business in Venezuela after that country’s government offered tax incentives and majority equity stakes in long-term energy projects.
The companies brought arbitration proceedings after the Venezuelan government expropriated its extra-heavy crude oil extraction facilities in the Orinoco Oil Belt between 2004 and 2007.
The companies claimed that they were unlawfully dispossessed and that PDVSA was liable to partially indemnify them against the actions taken by the then government.
In April 2018, a tribunal of the International Chamber of Commerce (ICC) upheld the companies’ case and ordered compensation.
Several months later, the companies entered into a confidential settlement agreement, under which PDVSA and its subsidiaries agreed to clear the debt in periodic instalments.
Hayes claimed that PDVSA expressly and irrevocably waived their right to challenge the ruling and consented to the award being recognised in various jurisdictions.
Hayes claimed that PDVSA failed to honour the terms of the agreement including making its quarterly payments.
Hayes spent a significant portion of his evidence dealing with the Dragon Gas Field project.
Under the project, which has been under discussion since 2016, the National Gas Company (NGC) and Dutch energy giant Shell were allowed to develop the gas field previously held by PDVSA and supply natural gas to this country via a pipeline connected to the Hibiscus platform off the north-west coast of Trinidad.
Hayes pointed out that in August, last year, Shell and NGC committed to reimbursing PDVSA for all its legitimate claims arising out of its earlier investment in the field, which it (PDVSA) estimated at approximately US$1 billion.
He noted that in January, it was reported that PDVSA granted a 30-year licence to NGC and Shell.
While he acknowledged the exact terms of the deal, which is protected by a confidentiality agreement, have not been made public, Hayes referred to an article in this newspaper from February, which quoted a report from the Venezuelan Extraordinary Gazette that stated that Venezuela would receive no less than 45 per cent of the gross income of the licensees.
As part of his decision in the case, Justice Seepersad directed that the defendants and their attorneys be served with the proceedings in various ways including hand delivery and email. The parties to be served include the Venezuelan Embassy at Victoria Avenue in Port-of-Spain.
Justice Seepersad also imposed the seven-day deadline for PDVSA to signal its intention to oppose the order granted by him.
The companies were represented by Sophia Vailloo of Ignatius Chambers.