VENEZUELA:
Government Celebrates
British Ruling Against
Exxon
By Humberto Márquez
CARACAS (IPS) -
Venezuela celebrated, as
a triumph for countries
of the developing South,
Tuesday’s ruling in its
favour by a British
court in a legal dispute
with U.S. oil giant
Exxon Mobil, which
overturned an earlier
court order to freeze
around 12 billion
dollars in Venezuelan
assets.
Exxon "tried to export
British law as global
law, abuse British legal
power and use an English
judge to freeze
Venezuela’s assets not
in England, but
throughout the world,"
Venezuelan Energy
Minister Rafael Ramírez
said in a press
conference.
London High Court Judge
Paul Walker suspended a
court order that froze
global assets belonging
to Venezuela’s state oil
company, PDVSA. "I have
today held that the
injunction granted on 24
January 2008 against the
defendant (PDVSA) should
be discharged," Judge
Walker said in a
statement. Ramírez said
the ruling was "100
percent favourable for
Venezuela, for PDVSA,
for all small nations
that seek to exploit
their natural resources,
and for OPEC (Organisation
of Petroleum Exporting
Countries)," which had
taken a stance in
solidarity with Caracas
in its dispute with the
world’s largest oil
company.
The British court "has
put Exxon in its place,"
said the minister.
Venezuela’s ambassador
in London, Samuel
Moncada, said "this is a
lesson for Exxon and a
major victory for
countries that manage
their natural resources
in a sovereign manner,
because the
transnational
corporation tried to
use, against a sovereign
nation, a court in a
country that had nothing
to do with the dispute."
The court had ordered a
temporary freeze on
PDVSA assets in Europe
to ensure that Exxon
would be paid due
compensation, after the
energy giant refused to
accept new terms in its
contract for working oil
fields in the Orinoco
basin.
Under the old contract,
Exxon held 41.6 percent
of the shares, PDVSA a
similar proportion, and
Britain’s BP 16.8
percent in the Cerro
Largo joint venture. The
new terms, however, made
PDVSA a majority
partner.
Other leading firms,
like BP, France’s Total,
U.S.-based Chevron Corp.
and StatoilHydro of
Norway negotiated new
contracts with the
Venezuelan government,
staying on as minority
partners in Orinoco,
while the Venezuelan oil
company was granted at
least a 60 percent share
in all joint ventures
with foreign
corporations.
Exxon’s decision to
challenge Venezuela in
court helped drive up
oil prices, when
Venezuelan President
Hugo Chávez threatened
to stop exporting oil to
the United States.
"If assets were frozen
every time there was a
dispute over the amount
of compensation to be
paid, there would be
great instability in the
global oil industry,"
said Ramírez.
Former PDVSA president
Luis Giusti, who is
critical of Chávez’s
management of the
country’s oil policy,
told IPS that "we must
celebrate these measures
as victories for
Venezuela, because they
restore our national
wealth to us and reflect
that international
justice is not
necessarily in the hands
of imperialism or of a
company like Exxon."
The arbitration process
will now continue, "and
the numbers will be put
in perspective," said
Giusti. "In terms of
assets, Exxon could have
between 800 million and
1.5 billion, which means
the freeze on 12 billion
dollars in assets was
ridiculous."
After Exxon decided last
year that it would not
stay on as a junior
partner, the two parties
turned to the
International Centre for
Settlement of Investment
Disputes (ICSID) in New
York.
Venezuela proposes
paying the book value of
what Exxon has invested
in this country,
possibly less than one
billion dollars, while
the U.S. firm is
demanding compensation
for over five billion
dollars in lost future
revenues, as the
contract for the Cerro
Negro oil field would
have been in effect for
another 20 years.
Exxon took advantage of
signs that PDVSA was
facing a cash flow
problem since late 2007
-- the firm sought
payment for fuel oil
shipments in just eight
days, instead of the
usual 30, and later
sought up-front payments
for several large
shipments, while it
increasingly settled
debts by paying in oil
-- and upped the
pressure by seeking an
asset freeze, José
Suárez, an expert with
the specialised
publication
Petrofinanzas, told IPS.
A New York court froze
315 million dollars in
assets in a PDVSA
account in the Bank of
New York Mellon Corp.
But at no point did
PDVSA refuse to
negotiate under the
arbitration process, and
it told the courts that
it could not be treated
as a rogue company,
because Venezuela is the
world’s fifth largest
oil exporter and the
firm has 107 billion
dollars in assets, said
Ramírez. Judge Walker,
who said he would hand
down full explanations
for his decision on
Thursday, stated that "I
conclude that Mobil
(has)…no good arguable
case that PDV's conduct
in relation to its
assets is unjustified."
The statement also said
that "In the absence of
any exceptional feature
such as fraud, and in
the absence of
substantial assets of
PDV located here, the
fact that the seat of
arbitration is not here
makes it inappropriate
to grant an order."
The judge pointed out
that orders to freeze
assets are rare and are
usually issued in cases
in which there is
"compelling evidence of
serious international
fraud." But "in the
present case there is no
suggestion whatever of
fraud on the part of"
PDVSA, Walker concluded.
In addition, he ordered
Exxon to cover
Venezuela’s legal costs
in the dispute, and to
make an initial payment
of 380,000 pounds
(765,000 dollars) to
PDVSA within 21 days.
Exxon spokesman Alan
Jeffers said "We think
that it's important the
court did not question
the merits of (Exxon's)
underlying claim, but
rather concluded that an
English court should not
issue a pre-judgment
worldwide freezing
order." |
