By Elizabeth Whitsitt
January 13, 2010
On November 6, 2009 two members of an arbitral tribunal – Judge Gilbert Guillaume (President) and Professor Georges Abi-Saab – dismissed Venezuela’s challenge to the tribunal’s third member, Mr. Robert B. von Mehren. In a decision only recently made public, the two-man tribunal confirms that proposals to disqualify ICSID arbitrators must be made “promptly”.
Arbitral proceedings between Cemex Caracas Investments B.V., Cemex Caracas II Investments B.V. (Cemex) and Venezuela began in October 2008 some seven months after Hugo Chavez, President of the Bolivarian Republic, announced the nationalization of the country’s cement industry. In the context of a state-wide housing shortage and concerns about unaffordable housing, President Chavez’s nationalization of Venezuela’s cement industry was reportedly done to increase the availability and affordability of construction supplies to Venezuela’s domestic market.*
According to a press release dated August 20, 2008, the world’s third largest cement-producer asserts that the nationalization of its investment “highlight[s] a lack of respect for the principles of international law and the treaties relating to the reciprocal protection of investments which forbid the occupation of goods and deprivation of rights without fair and effective compensation and without an expropriation procedure.”**
With the tribunal’s first session set to take place in Paris in mid-November 2009, Venezuela filed a formal proposal for disqualification of Mr. von Mehren on October 26, 2009 only three weeks before the tribunal’s scheduled first session and almost three months after the tribunal was constituted.
Venezuela’s challenge to Mr. von Mehren focused on his relationship with Debevoise & Plimpton LLP, a law firm representing swiss-based Holcim Ltd., another one of the world’s leading cement suppliers, in a similar dispute against Venezuela that was registered by ICSID on April 10, 2009. Counsel for Venezuela did acknowledge that Mr. von Mehren was a retired partner of the law firm. However, counsel also noted that the US national maintained significant connections with the firm as Mr. von Mehren was still listed on Debevoise website, and maintained an office, administrative services and an email account through the firm. Given such ties, Venezuela expressed doubts about whether Mr. von Mehren would “exercise independent judgment” in the dispute and whether his relationship to Debevoise “create[d] a risk of disclosure of confidential information.”
The substance of those concerns is not addressed in the two-man tribunal’s decision, however. Judge Guillaume and Professor Abi-Saab instead focused their reasoning on the timing of Venezuela’s proposal to disqualify Mr. von Mehren. Relying on Rule 9(1) of the ICSID Arbitration Rules, the two men confirmed that proposals for the disqualification of an arbitrator must be made “promptly” and dismissed Venezuela’s challenge on that basis.
Specifically, Judge Guillaume and Professor Abi-Saab determined that “every material element of [Venezuela’s] application for disqualification was well known to it” by the time parallel proceedings were initiated by Holcim Ltd. against Venezuela on April 10, 2009, at least six months prior to its proposal for disqualification. Having waited too long, both men held that Venezuela had “waived its right” to request the disqualification of Mr. Mehren.
* “Chavez Plans to Nationalize Venezuela Cement Industry,” By Steven Bodzin and Thomas Black, Bloomberg.com, 4 April 2008.
** Cemex Company Press Release dated 20 August 2008, available on the company’s website at: http://www.cemex.com/qr/mc_pr_082008.asp