Procedural Background and Jurisdictional Objections

This Final Award, rendered on 27 May 2025 under the 1976 UNCITRAL Arbitration Rules and administered by the Permanent Court of Arbitration (PCA Case No. 2019-49), resolves the remaining jurisdictional, admissibility, merits, and quantum issues in the dispute brought by Diamante Trading Investments Ltd. and six individual members of the Herrera family against the Bolivarian Republic of Venezuela. The dispute arose under both the Spain-Venezuela Bilateral Investment Treaty (BIT) and the Barbados-Venezuela BIT in connection with the state takeover, occupation, and dismantling of Herrera C.A., a wholesale distributor of food, personal care, and household products, along with associated companies and extensive real estate holdings.

Venezuela raised multiple preliminary objections. Ratione personae, Venezuela asserted that the five individual Claimants holding dual Spanish-Venezuelan nationality could not invoke the Spain-Venezuela BIT under customary principles of non-responsibility and effective/dominant nationality, and contended that Diamante Trading was a mere shell entity. The Tribunal rejected these objections, holding that Article I(1)(a) of the Spain-Venezuela BIT defines investors autonomously solely by reference to Spanish municipal law, without negative restrictions regarding dual nationality or effective nationality tests. The Tribunal confirmed that the BIT operates as lex specialis over general international law rules, a conclusion reinforced by the negotiating preparatory works. Regarding Diamante Trading, the Tribunal found that incorporation in Barbados satisfied the express requirements of the Barbados-Venezuela BIT.

Ratione materiae and voluntatis, Venezuela argued that Claimants held only passive shareholdings without making active cross-border contributions, and objected to multi-party, multi-treaty proceedings without separate state consent. The Tribunal dismissed these objections, deciding that the definition of investment in both treaties broadly encompasses shares and real property without requiring active capital transfers or meeting the Salini test in non-ICSID arbitrations. It further ruled that open offers to arbitrate under investment treaties do not preclude joint claims sharing an identical factual matrix, and dismissed Venezuela's admissibility objection regarding reflective shareholder loss pursuant to Articles V(3) of the Spain-Venezuela BIT and 5(2) of the Barbados-Venezuela BIT.

Merits, Expropriation, and Police Powers

On the merits, Claimants alleged unlawful expropriation following inspections by the National Superintendence for the Defense of Socioeconomic Rights (SUNDDE) and the National Guard in January 2015, criminal arrest warrants, asset freezes, and indefinite administrative occupation by a state-appointed board (Junta Temporal), which destroyed the business. Venezuela contended its measures were legitimate, temporary exercises of regulatory and police powers aimed at combating hoarding and safeguarding national food security in an economic crisis.

The Tribunal held that Venezuela's indefinite physical and operational seizure of Herrera C.A., which lasted over a decade without formal renewal or resolution of administrative defenses, constituted an unlawful indirect expropriation. The Tribunal found no substantiated factual basis for allegations of hoarding or boycott, observing that Venezuelan criminal courts ultimately acquitted local management. Consequently, the measures were disproportionate, disregarded due process, failed to pursue a bona fide public purpose, and lacked any prompt, adequate, and effective compensation.

Quantum, Currency, and Operative Decision

Applying the Chorzów Factory standard of full reparation, the Tribunal evaluated the fair market value of Herrera C.A. using a Discounted Cash Flow (DCF) model and real estate through historical costs updated for inflation and comparable transactions. Addressing currency and exchange rate controversies, the Tribunal ruled that damages must be expressed in US Dollars, rejecting the official SICAD I rate as inaccessible in practice and adopting a Purchasing Power Parity (PPP) implied exchange rate of 21.63 BsF/USD derived from pre-control market data.

The Tribunal awarded the Herrera family a collective sum of USD 50,879,841.80 (apportioned individually based on consolidated shareholdings in Herrera C.A. and Garajonay) and awarded Diamante Trading USD 46.748.265,02, subject to a strict mutual deduction mechanism preventing double recovery. Pre- and post-award compound interest was granted at 11.54% annually from 11 January 2015, free of Venezuelan taxes. Venezuela was also ordered to pay Claimants EUR 1,341,661.83 in arbitration costs and USD 6,287,316.35 in legal fees and expenses.