• INTERNATIONAL ARBITRATION RECENT CASES

Abertis v. Bolivia
Abertis Infraestructuras S.A. (“Abertis”) brought an arbitration under UNCITRAL rules againstthe Plurinational State of Bolivia (“Bolivia”) alleging that certain measures taken by regulatory authorities in Bolivia negatively affected Abertis’ interest in Servicios de Aeropuertos Bolivianos, S.A. (“SABSA”), the operator of the international airports of La Paz, Cochambamba, and Santa Cruz de la Sierra. Econ One was retained by counsel for Bolivia to assist on quantum issues. Dr. Daniel Flores submitted an expert report (in Spanish) in which he calculated the economic effect of those regulatory measures, in combination with SABSA’s failure to fulfill an agreed-upon investment plan. Dr. Flores also was asked to calculate the fair market value of SABSA. Additional submissions by the parties’ experts are scheduled.

Guaracachi and Rurelec v. Bolivia
Guaracachi America, Inc and Rurelec PLC (collectively, “claimants”) brought an arbitration under UNCITRAL rules against the Plurinational State of Bolivia (“Bolivia”) relating to the nationalization in 2010 of claimants’ interest in Empresa Eléctrica Guaracachi, S.A. (“EGSA”), a power generator in Bolivia. Claimants also alleged that they were negatively impacted by certain regulatory changes that occurred in 2007 and 2008. Econ One was retained by counsel for Bolivia to assist on quantum issues. Dr. Daniel Flores submitted two expert reports (in Spanish) in which he calculated the fair market value of EGSA, as well as the economic impact on EGSA of those regulatory changes. Dr. Flores testified at the hearing on this matter.

Koch v. Venezuela
This dispute involves a claim by Koch Minerals Sàrl (“KOMSA”) and Koch Nitrogen
International Sàrl (“KNI”) against the Bolivarian Republic of Venezuela (“Venezuela”). Koch seeks compensation in relation to (1) the nationalization in 2010 of KOMSA’s interest in Fertilizantes Nitrogenados de Venezuela (“FertiNitro”), a nitrogen-based fertilizer producer, (2) the termination of KNI’s offtake contract, and (3) certain laws and regulations in effect prior to the nationalization. Econ One was retained by counsel for Venezuela to assist on quantum issues in an ICSID arbitration brought by KOMSA and KNI. Dr. Daniel Flores submitted an expert report in which he (1) calculated the value of KOMSA’s interest in FertiNitro, (2) calculated the value of KNI’s offtake contract, and (3) assessed the economic effect on
FertiNitro of those certain laws and regulations. Additional submissions by the parties’ experts are scheduled.

Universal v. Venezuela
Universal Compression International Holdings, S.L.U. (“Universal”) brought an ICSID arbitration against the Bolivarian Republic of Venezuela (“Venezuela”) following the nationalization of certain gas compression and power generation assets formerly owned by Universal’s subsidiary in Venezuela in 2009.

Econ One was retained to assist counsel for Venezuela on quantum issues. Dr. Daniel Flores submitted two expert reports that set forth (1) the projection of the cash flows that could have been generated under the gas compression and power generation contracts that Universal’s subsidiary had in Venezuela and (2) the value of the nationalized assets. Dr. Flores also testified at the hearing on this matter. The parties reached a settlement agreement a few weeks after the hearing.

CIMSA v. GCC
Compañía de Inversiones Mercantiles, S.A. (“CIMSA”) and GCC Latinoamérica, S.A. de C.V. (“GCC”) were shareholders of Sociedad Boliviana de Cemento, S.A. (“Soboce”), Bolivia’s largest cement company. In 2011, GCC notified CIMSA that it had received a letter of intention from Consorcio Cementero del Sur, S.A., a Peruvian company, for the acquisition of the shares that GCC had in Soboce. CIMSA notified GCC that it was going to exercise its right of first refusal and acquire GCC’s shares in accordance with the Shareholders Agreement between CIMSA and GCC. GCC refused CIMSA’s exercise of its right of first refusal and instead transferred its shares to the Peruvian company.

Econ One was retained by counsel for CIMSA to calculate damages suffered by CIMSA due to GCC’s transfer of its shares to the Peruvian company. Dr. Daniel Flores submitted an expert report (in Spanish) in an arbitration conducted under the rules of the Inter-American Commercial Arbitration Commission. Additional submissions by the parties are scheduled for late 2012.

MTS v. Turkmenistan
This dispute involved a claim by Barash Communication Technologies, Inc. and Mobile Telesystems OJSC (“MTS”) against the Ministry of Communication of Turkmenistan and the State of Turkmenistan (“Turkmenistan”). MTS claimed that Turkmenistan breached its obligations when it decided not to renew an agreement signed in 2005 under which MTS provided mobile communication services in Turkmenistan. After expiration of the agreement in December 2010, MTS ceased operating in the telecommunications market in Turkmenistan.

Econ One was retained by counsel representing Turkmenistan to assist in an ICC arbitration brought by MTS. Dr. Daniel Flores co-authored an expert report that set forth the calculation of the value of a hypothetical five-year extension of the original agreement. After the parties reached a settlement agreement, MTS was re-issued licenses to provide mobile communication services in Turkmenistan

Mobil Cerro Negro v. PDVSA
Cerro Negro Subsidiaries of Mobil, PDVSA (the Venezuelan national oil company), and Veba (later acquired by BP) participated in a joint venture to develop an oil project in Venezuela known as Cerro Negro. The Cerro Negro project was carried out pursuant to a 1997 agreement. Under that agreement, PDVSA Cerro Negro agreed to compensate Mobil Cerro Negro for “discriminatory measures” taken by the Venezuelan Government that caused a “material adverse impact.” That agreement provided for limitations on any potential obligation by PDVSA Cerro Negro.

Econ One was retained to assist counsel for PDVSA in an ICC arbitration brought by Mobil Cerro Negro claiming a breach of contract by PDVSA Cerro Negro. Anthony Finizza, Jeffrey Leitzinger, and Barry Pulliam submitted expert reports in which they calculated compensation cash flows pursuant to the association agreement. Dr. Finizza and Dr. Leitzinger testified at the hearing on this matter in New York. The ICC tribunal issued its Award and PDVSA paid the amount set forth in the Award.

Mobil v. Venezuela
This dispute involves a claim by Venezuela Holdings, B.V., Mobil Cerro Negro Holding, Ltd., Mobil Venezolana de Petróleos Holdings, Inc., Mobil Cerro Negro Ltd., and Mobil Venezolana de Petróleos, Inc. (“the Mobil companies”) against the Bolivarian Republic of Venezuela. At issue is the Mobil companies’ former interest in an oil development project in Venezuela known as Cerro Negro. The Cerro Negro project was carried out pursuant to a 1997 agreement which established a joint venture between subsidiaries of Mobil, PDVSA (the Venezuelan national oil company), and Veba (later acquired by BP). Beginning in 2004, the Venezuelan government began to increase taxes and royalties applicable to all oil projects. In 2007, changes in Venezuelan law required oil and gas projects, including the Cerro Negro project, to migrate to a new ownership structure with PDVSA as the majority owner. The Mobil companies refused to accept the new ownership structure and chose to exit the Cerro Negro project at the time of the migration.

Econ One was retained to assist counsel for Venezuela in an ICSID arbitration brought by the Mobil companies against the Venezuelan government claiming that changes in tax and royalties, as well as the migration, violated standards of fair and equitable treatment under international law. Anthony Finizza, Daniel Flores, and Jeffrey Leitzinger submitted an expert report regarding claims for compensation owed by Venezuela to the Mobil companies for their interest in the Cerro Negro project. Anthony Finizza and Daniel Flores testified at the hearing on the merits in February 2012 in Paris.

ConocoPhillips v. Venezuela
This dispute involves a claim by ConocoPhillips Petrozuata B.V., ConocoPhillips Hamaca B.V., ConocoPhillips Gulf of Paria B.V., and ConocoPhillips Company ("the Conoco companies") against the Bolivarian Republic of Venezuela. At issue are the Conoco companies' former interests in three oil development projects ("the Conoco projects") in Venezuela. Pursuant to agreements negotiated in the mid 1990s, the Conoco companies participated in the Conoco projects as the majority interest owners with the Venezuelan national oil company, PDVSA, as a minority interest partner. Beginning in 2004, the Venezuelan government began to increase taxes and royalties applicable to all oil projects. In 2007, changes in Venezuelan law required oil and gas projects, including the Conoco projects, to migrate to a new ownership structure with PDVSA as the majority owner. The Conoco companies refused to accept the new ownership structure and chose to exit the Conoco projects at the time of the migration.

Econ One was retained to assist counsel for Venezuela in an ICSID arbitration brought by the Conoco companies against the Venezuelan government claiming that a change in taxes and royalties, as well as the migration, violated standards of fair and equitable treatment under international law. Dr. Jeffrey Leitzinger and Dr. Anthony Finizza submitted expert reports regarding claims for compensation owed by Venezuela to the Conoco companies for their interest in the Conoco projects. Dr. Daniel Flores submitted two expert reports regarding discount rates used to calculate the present values of numerous other oil projects. All three Econ One experts testified at the hearing on this matter in The Hague, The Netherlands. No decision has yet been published by the arbitration tribunal.