Houston-Based Oil Co. Withdraws Request for ICSID Arbitration Against Venezuela

A Houston-based oil and gas company has withdrawn its mid-January request for arbitration before the International Centre for Settlement of Investment Disputes (“ICSID”).  On January 16th, Harvest Natural Resources, Inc. reportedly asked the ICSID to consider its case against the Government of Venezuela in an effort to protect its 32 percent stake in the Petrodelta joint oil and gas venture.  According to Harvest, the Venezuelan government has blocked its multiple attempts to sell the company’s estimated $400 million interest in the project.

Harvest apparently withdrew its ICSID request without prejudice pursuant to an order that was issued by a Delaware Court of Chancery.  The case was filed by Petroandina Resources Corporation due to the potential risk Harvest’s arbitration request posed to the company’s Venezuelan investments.  Petroandina is an indirect equity owner in Harvest.

Harvest apparently expects its arbitration request to be revived in the future.  Harvest President and CEO James A. Edmiston stated:

Harvest remains committed to protecting the value of the Company’s investment in Venezuela.  Unfortunately, despite the fact that we continue to believe that the immediate pursuit of the claims set forth in our Arbitration Request is in the best interests of all equity owners of Harvest BV, we will be delayed from promptly pursuing these claims without going through a process established in the shareholders’ agreement with Petroandina or obtaining a waiver of that process.  As always, we remain receptive to an urgent resolution of our issues with the Government of Venezuela, reached in good faith dialogue, between all parties concerned.

Although Venezuela withdrew from ICSID nearly three years ago, an arbitration case against the nation could be held under the ICSID additional facility (“AF”) rules.  Under the AF rules, the parties would be required to utilize the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

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