MANHATTAN (CN) - Venezuela can temporarily stay - but not throw out - the enforcement of a $1.6 billion arbitration award to ExxonMobil subsidiaries imposed after it nationalized its oil industry, a federal judge ruled.
The World Bank's International Center for Settlement of Investment Disputes (ICSID) ruled for Mobil Cerro Negro late last year in one of the arbitrations prompted by the 2007 takeover of Venezuela's oil industry by its late leader Hugo Chavez.
When Mobil Cerro Negro and other subsidiaries sued to collect the award in federal court here, Venezuela raised a jurisdictional argument that U.S. District Judge Paul Engelmeyer called a case of "first impression" for the court.
Typically, ICSID judgments are final and not reviewable by any federal court, but Venezuela said that the legislation enacted after later calls for the filing of a plenary action.
The Foreign Sovereign Immunities Act (FSIA), enacted in 1976, supervenes the statute that created the ICSID a decade earlier, Venezuela contends.
On Friday, Engelmeyer wrote that he found Venezuela's reading of the two statutes "deeply problematic."
"Venezuela's construction would bring the FSIA into grave tension with the objectives of the ICSID Convention and of Congress," he wrote in a 50-page opinion. "That is because the history and terms of the ICSID Convention unavoidably reveal that the contracting states to the ICSID Convention intended to put in place an expedited and automatic recognition procedure. They sought to depart from, not to double down on, the model of a contested recognition process used under the New York Convention."
Venezuela had better luck persuading Engelmeyer to hold off on the enforcement until the ICSID rules on its application to revise the award.
"The prudent solution is for the court, pending the outcome of Venezuela's application for revision, to stay enforcement of the ... judgment," the opinion states.
Venezuela's attorney Joseph Pizzurro, from the New York-based firm Curtis, Mallet-Prevost, Colt & Mosle, LLP, declined to comment.
Lawyers for the ExxonMobil subsidiaries declined to comment.
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