The award amounts to more than $485m including interest from the date of the expropriation by Venezuela (October 26, 2010) and costs and remains subject to the committee's consideration of Venezuela's application for annulment.
Operations in Los Guayos and Valera
O-I was informed of Venezuela's plans to transition management of the company's operations in Los Guayos and Valera, by to government control, led by president Hugo Chávez, in October 2010.
Chávez styled himself as the leader of the ‘Bolivarian Revolution’, at the time, a socialist political program (Chavismo) including nationalism, a centralized economy, and a strong military engaged in public projects.
He led the charge against private property rights, ratifying legislation that grants the Executive branch absolute power to intervene private entities, without due process, for any reason and at any time.
BeverageDaily reported O-I was taking Venezuela to a World Bank Tribunal that same year.
At the time, the three-member tribunal found Venezuela violated its obligations under the 1991 bilateral investment treaty between the Netherlands and Venezuela and awarded Owens-Illinois European Group (OIEG) more than $372m in compensation plus interest (calculated at a rate of 1 year US dollar LIBOR plus 4%).
Significant practical challenges
As part of the award, interest compounds annually from the date of expropriation until the date of effective payment. The expropriation occurred on October 26, 2010, and the interest, calculated to date, exceeds $84m. The tribunal also awarded costs and legal fees to OIEG.
"As the tribunal found, Venezuela expropriated very valuable assets, which were the result of more than half a century of hard work and commitment by O-I employees and for which the country now has to compensate O-I,” said Al Stroucken, chairman/CEO, O-I.
The company now intends to take appropriate steps to vigorously enforce and collect the award, which is enforceable in approximately 150 member states that are party to the ICSID Convention.
However, even with the lifting of the stay of enforcement, the O-I recognizes the collection of the award may present significant practical challenges.
A spokesperson for the company said it cannot reasonably predict the efforts that will be necessary to successfully enforce collection of the award or the timing of any such collection efforts.
Also, because the award has yet to be satisfied and the annulment proceeding is pending, the company is unable at this stage to predict the amount or timing of compensation it will ultimately receive.
If Venezuela fails to meet its obligations, OIEG will seek to enforce the award against Venezuela's assets around the world or find alternative measures of redress.