Flughafen Zürich A.G. and Gestión e Ingenería IDC S.A. v. Bolivarian Republic of Venezuela: when can multiple claimants bring claims under separate BITs in one set of proceedings?

This is the second of two posts discussing the recent award in Flughafen Zürich A.G. and Gestión e Ingenería IDC S.A. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/19. The previous post was published on Thursday last week and it dealt with Venezuela's objection that Flughafen was a government instrumentality of the Swiss State.  In this post we will discuss Venezuela's allegation that it did not consent to the Claimants bringing two claims under different BITs in one set of proceedings.

The tribunal's decision is notable because it upholds the right of multiple claimants to bring joint proceedings under different instruments without the need for the host state's specific consent to such form of proceedings.

Background

As we reported previously, the arbitral proceedings were brought by Flughafen Zürich A.G. ("Flughafen"), a company incorporated under the laws of Switzerland, and Gestión e Ingenería IDC S.A. ("IDC"), a Chilean corporation. The Claimants had formed a consortium to administer, manage and operate the Isla Margarita airport under a contract with the state of Nueva Esparta. The arbitral tribunal found Venezuela liable for breaching both BITs on the ground of expropriation and denial of justice.

Lack of consent to the consolidation of claims

In bringing the claim, Flughafen relied upon the Venezuela-Switzerland BIT, while IDC relied upon the Venezuela-Chile BIT. Venezuela contended that by doing so the Claimants unduly consolidated their claims in circumstances that Venezuela did not consent to such consolidation. According to Venezuela, the two BITs upon which the Claimants relied contained arbitration provisions which were incompatible, and without Venezuela's consent, consolidation could not be available. In addition, Venezuela argued that the substantive provisions of each BIT were different.

The arbitral Tribunal began its analysis by reframing the issue to be decided. The Tribunal observed that "consolidation is the joinder of separate proceedings on the basis of common questions of law or fact in the underlying dispute". In this arbitration, however, the Claimants brought their case jointly right from the outset. There were never two proceedings but just one.

The relevant question was, therefore, whether the Claimants were entitled to bring a joint claim where they rely on different BITs but have made a joint investment and have suffered damages as a result of the same set of facts.

The Tribunal noted that although neither BIT explicitly authorised joint claims, there is no prohibition. Nor does the ICSID Convention or the ICISD Arbitration Rules bar joint claims. In this case, the Claimants shared a single version of the facts, invoked essentially the same rights, and it was "reasonable" to settle their claims in a single arbitration, reducing costs and the risk of contradictory decisions.

The Tribunal saw no reason why the Claimants should be forced to pursue their claims in separate proceedings. Consequently, the Tribunal dismissed Venezuela's objection and allowed the Claimants to proceed jointly.

This conclusion is of interest because it acknowledges the right of multiple claimants to bring joint proceedings under different instruments without the need to obtain the state's specific consent to such form of proceedings. This is a convenient route for investors of different nationalities, protected under different BITs, which have embarked upon a joint project and have suffered damages as a result of the host state's actions.

For further information, please contact Iain Maxwell, Of Counsel, or your usual Herbert Smith Freehills contact.