{"id":466,"date":"2010-04-07T14:06:00","date_gmt":"2010-04-07T19:06:00","guid":{"rendered":"http:\/\/itn.mattrock.ca\/2010\/04\/07\/cemex-v-venezuela-provisional-measures-allowed-in-circumstances-of-necessity-and-urgency-2\/"},"modified":"2013-01-23T08:16:47","modified_gmt":"2013-01-23T14:16:47","slug":"cemex-v-venezuela-provisional-measures-allowed-in-circumstances-of-necessity-and-urgency-2","status":"publish","type":"post","link":"https:\/\/www.iisd.org\/itn\/2010\/04\/07\/cemex-v-venezuela-provisional-measures-allowed-in-circumstances-of-necessity-and-urgency-2\/","title":{"rendered":"Cemex v. Venezuela: Provisional Measures allowed in circumstances of necessity and urgency"},"content":{"rendered":"

By Elizabeth Whitsitt<\/span><\/strong><\/p>\n

April 8, 2010<\/span><\/strong><\/p>\n

An ICSID<\/span> tribunal has refused a request for provisional measures by the world\u2019s third largest cement-producer.\u00a0 In its decision dated March 3, 2010, the tribunal confirms that provisional measures may only be granted in circumstances of \u201c\u2026necessity and urgency to avoid an irreparable harm.\u201d<\/span><\/p>\n

Arbitral proceedings between Cemex and Venezuela began in October 2008 – months after Hugo Chavez, President of the Bolivarian Republic, announced the nationalization of the country\u2019s cement industry.\u00a0 In the context of a state-wide housing shortage and concerns about unaffordable housing, President Chavez\u2019s nationalization of Venezuela\u2019s cement industry was reportedly done to increase the availability and affordability of construction supplies to Venezuela\u2019s domestic market.*<\/span><\/p>\n

Since that time, Dutch-incorporated Cemex Caracas Investments B.V. and Cemex Caracas II Investments B.V. (Cemex) has asserted that it has been deprived of the ownership rights over their investment without fair and effective compensation and appropriate procedures for expropriation.**<\/span><\/p>\n

Cemex filed a request for provisional measures with the tribunal on September 1, 2009.\u00a0 Specifically, Cemex sought to restrain Venezuela from attempting to seize three cement carriers which it had sold to the Mexican firm Sunbulk Shipping, N.V.\u00a0 In support of its application, Cemex argued that Venezuela\u2019s efforts to seize the vessels would \u201cseverely aggravate\u201d the dispute and increase Cemex\u2019s damages as it would have to refund Sunbulk the money paid for the carriers.<\/span><\/p>\n

In response, Venezuela grounded its arguments on the language of the ICSID Convention<\/span> and its Arbitration Rules.\u00a0 Among other things, Venezuela asserted that the granting of provisional measures \u201cmust be based upon circumstances of necessity and urgency to avoid an irreparable harm\u201d and \u201cmust relate to the preservation of the requesting party\u2019s rights and to the subject matter of the case before the tribunal\u2026\u201d\u00a0 According to Venezuela, Cemex ignored those legal standards, choosing instead to rely on the principle of non-aggravation as the basis for its application.\u00a0 In Venezuela\u2019s view, however, \u201c\u2018the principle of non-aggravation\u2019\u2026[could] not be used as a substitute for the requirements of necessity, urgency and irreparable or non-compensable harm.\u201d<\/span><\/p>\n

Ultimately the tribunal, composed of Judge Gilbert Guillaume, Professor Georges Abi-Saab and Mr. Robert von Mehren, sided with Venezuela.\u00a0 In coming to this conclusion, the tribunal canvassed the jurisprudence of the International Court of Justice (ICJ) and ICSID tribunals with respect to provisional measures.\u00a0 In so doing, the tribunal made a number of observations.\u00a0 In particular, the tribunal noted that the ICJ had consistently determined that provisional measures should only be granted in circumstances where there was \u201c\u2026an urgent necessity to prevent irreparable prejudice\u2026\u201d to the rights which were the subject of the dispute.<\/span><\/p>\n

Similarly, the tribunal noted that when determining whether to grant provisional measures ICSID tribunals tended to follow this same standard even where different formulations of the same criteria were applied.\u00a0 Thus, the tribunal considered that the relevant ICSID cases made a distinction between situations where: (i) the alleged prejudice could be compensated by awarding damages and (ii) the alleged prejudice could not be fully compensated (i.e. cases where there is a serious risk of destruction of a going concern that constitutes and investment).<\/span><\/p>\n

In light of this analysis the tribunal saw no reason to stray from the standard consistently applied by the ICJ and past ICSID tribunals.\u00a0 Specifically the tribunal found that should Venezuela seize the cement carriers, Cemex would suffer a financial loss that could be compensated by a damages award.\u00a0 As a result, the tribunal opined that Cemex\u2019s alleged harm was not \u201cirreparable\u201d and therefore did not meet the requirements of \u201curgency\u201d and \u201cnecessity\u201d needed to grant the requested provisional measures.<\/span><\/p>\n

Sources:<\/span><\/p>\n

* \u201cChavez Plans to Nationalize Venezuela Cement Industry,\u201d By Steven Bodzin and Thomas Black, Bloomberg.com, 4 April 2008.<\/span><\/p>\n

** Cemex Company Press Release dated 20 August 2008, available on the company\u2019s website at: <\/span>http:\/\/www.cemex.com\/qr\/mc_pr_082008.asp<\/span><\/a><\/p>\n

Decision on Provisional Measures in Cemex v. Venezuela is available here: <\/span>http:\/\/ita.law.uvic.ca\/documents\/Cemex.pdf<\/span><\/a>.<\/span><\/p>\n

Previous ITN<\/span> Reporting:<\/span><\/p>\n

\u201cCemex v. Venezuela: challenges to ICSID arbitrators must be made \u201cpromptly\u201d,\u201d By Elizabeth Whitsitt, Investment Treaty News, 13 January 2010, available here:<\/span><\/p>\n

http:\/\/www.investmenttreatynews.org\/cms\/news\/archive\/2010\/01\/12\/cemex-v-venezuela-challenges-to-icsid-arbitrators-must-be-made-promptly.aspx<\/span><\/a><\/p>\n