Mobil Corporation, Venezuela Holdings, B.V., et al. v. Venezuela

Through subsidiaries, Mobil Corporation (plaintiff) operated two oil exploitation projects in Venezuela. In 2004 and again in 2005, Venezuela unexpectedly and significantly increased the royalties Mobil owed on both projects. These increases caused Mobil to evaluate its legal rights and remedies for both oil projects. Venezuela and the Netherlands had a treaty that allowed the nationals of either country to compel the other state into binding arbitration with the International Centre for Settlement of Investment Disputes (ICSID). To take advantage of the protections of the arbitration option, in 2005, Mobil created Venezuela Holdings, B.V. (plaintiff) in the Netherlands. In 2006, Mobil inserted Venezuela Holdings into Mobil’s corporate chain so that Mobil owned Venezuela Holdings and Venezuela Holdings owned subsidiaries that, down the chain, owned significant portions of both Venezuelan oil projects. In 2006, Mobil notified Venezuela about this change in its structure, and the state did not object. In 2007, Venezuela nationalized both oil projects, essentially taking them from Mobil. Mobil and Venezuela Holdings initiated an ICSID arbitration against Venezuela, arguing that the nationalization of the two projects was unlawful. Venezuela contested the ICSID’s jurisdiction over the dispute, arguing that (1) Mobil had created Venezuela Holdings to take advantage of the treaty right to an ICSID arbitration, (2) Mobil’s action was an abuse of that treaty right, and (3) this abuse meant that Mobil had no right to pursue an ICSID arbitration. The ICSID considered Venezuela’s objection to its jurisdiction.