Gold Reserve Inc v The Bolivarian Republic of Venezuela

State immunity is lost where a state has agreed in writing to submit a dispute to arbitration. Under a bilateral investment treaty, that agreement may arise from the state’s standing consent, accepted by the qualifying investor when arbitration is commenced.

The treaty definition of investor must be construed objectively and even-handedly under the ordinary meaning of the treaty, its context, and its object and purpose. Passive ownership alone is insufficient to make an investment. Active expenditure on developing an asset already owned or controlled indirectly may suffice.

On an ex parte enforcement application, the applicant must disclose likely jurisdictional defences and crucial points for and against the application. A serious failure may exceptionally be marked by indemnity costs where the relevant issue has since been determined.

Gold Reserve Inc sought enforcement in England of an ICSID Additional Facility award requiring Venezuela to pay approximately US$713 million. Phillips J granted permission ex parte and entered judgment in the terms of the award.

Venezuela applied to set aside that order. It argued that Gold Reserve was not an investor under the Canada-Venezuela bilateral investment treaty, so there was no written agreement to arbitrate and Venezuela retained state immunity. It also challenged service, alleged failures of full and frank disclosure, and contended that the order granted interest beyond the award.

The central issues were whether Gold Reserve qualified as an investor, whether service of the arbitration claim form was required, how the disclosure failure should be remedied, and the proper terms of enforcement.

The application to set aside the enforcement order was dismissed. The order was maintained but varied. Interest was excluded from the costs award, and post-judgment interest was fixed at the rate awarded by the tribunal. Gold Reserve was ordered to pay Venezuela’s costs of the disclosure and interest issues on an indemnity basis.

1. Treaty interpretation and immunity. The definition of investor had to be interpreted under the ordinary meaning of the treaty terms, in context and in light of the treaty’s object and purpose. There was no presumption favouring a broad construction designed to support arbitral jurisdiction. The approach was even-handed and objective. The court adopted the approach in Libananco Holdings v Turkey ICSID Case No. ARB/06/8.
2. Making the investment. The phrase required some action by the claimant. Passive ownership alone was insufficient, as illustrated by Standard Chartered Bank v United Republic of Tanzania ICSID Case No. ARB/10/12 (November 2012). Gold Reserve did not make an investment merely by becoming the indirect owner through a corporate restructuring, because it had made no payment or transfer of value. It later raised finance and spent nearly US$300 million developing the Brisas Project, while controlling the project in its own name. That activity constituted making an investment in Venezuela.
3. Written arbitration agreement. The BIT’s consent to arbitration operated as a unilateral offer accepted when the investor commenced arbitration. The resulting agreement in writing was distinct from the inter-state treaty, consistent with Republic of Ecuador v Occidental Exploration and Production Company [2006] 2 WLR 70 and Czech Republic v EMV [2008] 1 AER (Comm) 531. Venezuela therefore lost immunity under section 9 of the State Immunity Act 1978.
4. Service and disclosure. Section 12(1) of the State Immunity Act 1978 applied only to documents required to be served. CPR rule 62.18 did not require service of the arbitration claim form where the court made an ex parte enforcement order; the order itself was the document requiring service. The court declined to follow AIC Ltd. v The Federal Government of Nigeria 2003 EWHC 1357 QB on the broader construction of section 12. Gold Reserve nevertheless failed seriously in its duty of full and frank disclosure by omitting the substance of Venezuela’s continuing immunity arguments and the risk of submission to jurisdiction.
5. Remedy and interest. Although such a failure would generally justify setting aside, this was a rare case. The immunity issue had been fully determined, and setting aside would cause expense and delay without practical benefit. The order could remain subject to indemnity costs. An enforcement order should mirror the award. For a foreign-currency award, the court’s discretion under section 44A of the Administration of Justice Act 1970 should ordinarily respect the tribunal’s chosen rate.

This was a first-instance application concerning an ex parte enforcement order.

• High Court (Commercial Court): Phillips J granted permission to enforce the award and entered judgment on 20 May 2015. Teare J dismissed Venezuela’s application to set aside, maintained the order, varied its interest provisions, and made indemnity costs orders.