ICSID Tribunal Endorses Compass Lexecon Expert Opinions in Arbitration Awarding Claimants More Than $430 Million in Damages for Unfair Treatment of Venezuelan Flour Producers

Compass Lexecon experts Santiago Dellepiane and Professor Pablo T. Spiller were retained by Valores Mundiales S.L. and Consorcio Andino S.L. (“Claimants”), two large-scale producers of flour and related products, as quantum experts in an ICSID arbitration against the Republic of Venezuela. The dispute arose from a series of measures enacted by Venezuela which interfered with the normal functioning of the Claimants’ business in Venezuela. An ICSID Tribunal found Venezuela’s measures to be discriminatory and in violation of the Fair and Equitable Treatment standard. As a result, it granted Claimants damages in the amount of $430.4 million as the difference between the fair market value of the business as of January 2013 (when the last of these measures was enacted) and the value of a contemporaneous transaction.

The Tribunal sided with Mr. Dellepiane and Professor Spiller on their projection of the companies’ “but-for” cash flows, rejecting every adjustment proposed by Respondent’s experts. The Tribunal also relied on Mr. Dellepiane and Professor Spiller’s calculation of the discount rate, applying only a minor adjustment that increased the discount rate by 0.08 percentage points, from 10.12 percent to 10.20 percent, and rejecting Venezuela’s expert’s 19.16 percent discount rate. Relying on the Compass Lexecon experts’ cash flows and the adjusted discount rate, the Tribunal concluded that the “but-for” value of Claimants’ investments was $572.8 million, almost the same as the $579.5 million estimated by Mr. Dellepiane and Professor Spiller.

In addition, the Tribunal agreed with Mr. Dellepiane and Professor Spiller’s estimate of additional damages of $50.2 million, corresponding to Venezuela’s ordered diversion of more than 86,400 metric tons of corn from Claimants’ inventories to their competitors in 2012.

The Tribunal ultimately awarded Claimants damages in excess of $430 million as of January 22, 2013, plus interest and costs for Venezuela’s failure to provide Claimants’ investments a Fair and Equitable Treatment, while allowing Claimants to maintain their ownership of their Venezuela investment.

Gustavo De Marco led the team supporting Compass Lexecon’s experts and was assisted by Andrés Casserly, Nancy Cherashore and Federico Villar. Compass Lexecon worked with a legal team at Covington and Burling LLP, led by Miguel López Forastier.