Quadrant’s Damages Expert Testifies in Venezuelan Oil Project Expropriation Arbitrations.
Quadrant’s damages expert, Dr. Flores, was retained by the Bolivarian Republic of Venezuela (“Respondent”) in several arbitrations initiated by Conoco Phillips (“Claimant”), under the ICSID and ICC arbitration rules (ICSID Case No. ARB/07/30; ICC Case No. 20549/ASM/JPA). These arbitrations arose from the expropriation of three oil projects: Hamaca, Petrozuata, and Gulf of Paria (the “Projects”). Claimant sought damages under the ICSID rules and the 1991 Venezuela-Netherlands Bilateral Investment Treaty. Claimants also sought damages under the ICC rules using the association agreements for each of the Projects.
Claimants, in both forums, based on its damages claim on the Lost Profits and Discounted Cash Flow (“DCF”) methods and claimed damages of approximately US$ 20 billion, one of the largest arbitration claims in history. Dr. Flores testified that Claimant’s DCF valuation required numerous corrections. The most consequential correction was that the limited liability clauses for compensation set out in each of the oil project’s association agreements would be considered by a hypothetical willing buyer under the Fair Market Value standard. Dr. Flores also provided detailed corrections to Claimant’s underlying inputs of its DCF model including: production volumes, prices, operating expenses, capital expenses, inflation and exchange rates, fiscal regime, outstanding debt, discount rate and interest. In both cases, at the Tribunals’ request, Dr. Flores provided post‑hearing quantum assessments working with Claimant’s damages expert.
The Tribunal for the ICC claim (President: Dr. Laurent Lévy; Co-arbitrators: Prof. Laurent Aynès, Prof. Andrea Giardina) applied the limited liability provisions for the Hamaca and Petrozuata Projects and awarded damages of approximately US$ 2.0 billion. The Tribunal for ICSID claim (President: Prof. Eduardo Zuleta, Co-arbitrators: Prof. Andreas Bucher, Mr. L. Yves Fortier, C.C., Q.C.) for the ICSID case did not apply the limited liability provisions and awarded damages of approximately US$ 8.5 billion. The ICSID Award is currently in review in annulment proceedings.
Respondent was represented by Curtis Mallet-Prevost Colt & Mosle LLP. Dr. Flores was supported by a Quadrant team that included Ivan Vazquez, Jordan Heim and Ryan McCann.
Sources: ICC Award; ICC Award (Corocoro); ICSID Award