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The National Law Center is a non-profit 501(c)(3) Research and Educational Corporation. © Copyright, 1996
Baker & McKenzie
Elisabeth E Elijuri (Caracas)
(58-2) 953-0833
In December 1995 a petition was filed with the Venezuelan Supreme Court asking for a ruling on the constitutionality of the Conditions in the Congressional Accord approving the 1995 Exploration Bidding Round which took place in July 1995.
The Conditions under examination are summarized as follows:
(i) Condition 2, paragraph 2, providing that the Corporación Venezolana de Petróleo (CVP) will conduct the bidding process to select the Investors for participation in the Association Agreements.
(ii) Condition 4, dealing with the appointment of a Control Committee composed of members designated by investors and the CVP to decide on matters of national interest in carrying out the Agreement.
(iii) Condition 10, which provides that the activities conducted under Association Agreements are not subject to Municipal or State taxes.
(iv) Condition 17, stating that all disputes arising from Association Agreements will be resolved by binding arbitration.
The filing of the Action raises some interesting constitutional questions which, at first glance, do not appear entirely unfounded. Condition 17, defines arbitration as the appropriate forum for resolving disputes. The validity of arbitration has never been decided by the Supreme Court. There have been previous questions concerning the use of arbitration in issues of national importance, including the public debt.
Article 127 of the Constitution provides that "in contracts of public interest, if it is not otherwise inapplicable because of the nature of the contract," a clause providing for dispute resolution in Venezuelan courts under Venezuelan law will be implied. Unfortunately, the language of this provision leaves considerable room for argument due to the ambiguity of the phrase "if not otherwise inapplicable because of the nature of the contract." It is worth noting that there have been contradictory Opinions from the Attorney General's Office on this issue.
The information contained in this article should not form the basis of any decision as to a particular course of action; nor should it be relied on as legal advice or regarded as a substitute for detailed advice in individual cases.