ConocoPhillips’ seizure of PDVSA assets: Can Curaçao invoke the ‘state of necessity’ exception?

The attachment

It goes without saying that the seizure of assets belonging to PDVSA by ConocoPhillips on the Dutch Caribbean islands of Aruba, Bonaire, Curaçao and St Eustatius can have dramatic consequences, especially for Curaçao. Said seizure results from an arbitration award of 24 April 2018 issued by the ICC, the International Chamber of Commerce in Paris.

An ICC tribunal reportedly has ruled that PDVSA must pay compensation to ConocoPhillips BV, a Dutch company that is a 100% subsidiary of the American ConocoPhillips Company, resulting from the expropriation of two major oil projects undertaken by the company in Venezuela in 2007. The seizure on the Dutch Caribbean islands involves a total amount of $2,582 million.

While we are aware that seizure actions also have been taken on Aruba, Bonaire and St Eustatius, our reflections are limited to what is happening on Curaçao. On 4 May 2018, the Curaçao court of first instance granted leave to the company to provisionally seize all of PDVSA's assets located on Curaçao amounting to more than 636 million Dollars. The company has 30 days, counting from 4 May 2018, to submit a formal request for the enforcement of the arbitral award.

The obligation to recognize and enforce

The enforcement of a foreign arbitral award is based on the "Convention on the Recognition and Enforcement of Foreign Arbitral Awards" (New York, June 10, 1958). The Constitution of Curaçao assigns internal effect to treaties that apply to the country, as a result of which the enforcing court must comply with the aforementioned treaty. By virtue of this convention, Curaçao is under international obligation to recognize and enforce an arbitral award rendered in another treaty State.

Recognition and enforcement of a foreign arbitral award may be refused on seven grounds set forth in the New York Convention, which may only be invoked by the party concerned, except that an enforcing court may refuse recognition if it finds on its own motion that recognition or enforcement would be contrary to the public policy (or public) of the country in which it sits. Even if one or more of the grounds for refusing recognition would be present in this case, as a non-party Curaçao will not be in a position to invoke any of these exceptions.

However, as with any treaty, when applying the New York Convention, other relevant provisions of international law must be taken into account. This is inherent in the applicable rules of the Vienna Convention on the Law of Treaties, which reflect a codification of norms of customary international law. In a recent ruling, the Dutch Supreme Court confirmed that these rules should be take into account by Dutch courts in the process of interpreting and applying the New York Convention (decision of 24 November 2017, ECLI: NL: HR: 2017: 2992).

A grave and imminent peril

Many fear that, given the dire circumstances in which it finds itself, PDVSA will be unable to resume refining and oil transhipment in Curaçao if ConocoPhillips were to be successful in enforcing the arbitral award in Curaçao. This might fundamentally affect Curaçao’s ability to guarantee the minimum level of public services facilities.

In Curaçao, an estimated 4,000 people find direct and indirect employment due to the presence of the Isla refinery and the transhipment activities. Under normal circumstances, the refinery contributes between 16 and 20 percent to the local economy. The refinery also plays a crucial role in the energy chain of Curaçao and it forms an important source of the necessary foreign exchange to guarantee the external value of the guilder.

Add to that the real shrinkage of the economy which the country has been facing for two years, and it becomes evident that a cessation of refining and oil transhipment would be unbearable for Curaçao. As a matter of fact, it should not be ruled out that if the situation continues long enough, the parity with the US Dollar that has existed since 1978 will not be sustainable, so that the cost of living will become even more expensive for the majority of the population.

It is, therefore, not surprising that people are looking to the government for action. One of the questions that arises is whether there are legal means available to the government that would enable it to invoke the national interest in the legal dispute between PDVSA and ConocoPhillips. We believe that, from the point of view of public international law, this question can be answered in the affirmative, provided that timely and adequate action is taken.

Necessity exception

We are of the view that, given the risk of catastrophic consequences for the Curaçao economy, it may be possible for the government to invoke the state of necessity exception under the law of State responsibility for internationally wrongful acts in this case. Such necessity is deemed to exist when a situation poses a grave and imminent peril that threatens an essential interest, including a serious danger to the existence of the state itself, its political or economic survival, the maintenance of the conditions under which the essential services of the state can function, the maintenance of internal peace etc.

For the sake of clarity, we do not refer to the necessity exception under the law of treaties, also enshrined in the Vienna Convention, which concerns the validity of treaties. We are referring to the rule precluding wrongfulness under the law of international responsibility, which applies when conduct in breach of an international obligation was the only means to avert a situation that would otherwise affect a state's political or economic survival, or the maintenance of the conditions under which the essential services of the state can function.

This rule has been codified in the Articles on State Responsibility adopted by the International Law Commission of the United Nations in 2001. In other words, because disallowing the enforcement of the foreign arbitral award would not jeopardize an essential interest of another interested State party to the New York Convention, Curaçao may impede the seizure of the PDVSA assets located within its territory.

The absence of an essential interest of another interested State party to the New York Convention is illustrated by the fact that PDVSA assets amenable to seizure are available in the territory of other treaty parties, where enforcement would not have the same impact on the economy as would be the case in Curaçao. In addition, it must be borne in mind that ConocoPhillips, in parallel with the ICC arbitration, had successfully brought an arbitration case against the State of Venezuela before ICSID, the World Bank's arbitration institution.

More importantly, ConocoPhillips had already instituted proceedings before the US courts accusing the Venezuelan government of trying to evade a potential arbitration award by shifting assets owned by its state oil company out of the United States. Thus, one is left to wonder why Curacao should bear the brunt of this catastrophic seizure attempt by ConocoPhillips.

Third party opposition of the seizure

For a circumstance precluding wrongfulness to be applicable in the present case, that exception must be pleaded. It would appear that the third-party proceedings under the Curaçao Code of Civil Procedure would be the appropriate avenue for such a plea.

Third-party opposition of a seizure is a special form of resistance. It gives a third party the opportunity to challenge a proposed or commenced execution or to oppose an enforced or conservatory attachment.

In most cases, it will be a third party whose assets have been seized in relation to a claim against someone else. We believe that nothing precludes a third-party action by Curaçao itself to safeguard an essential interest of the state against the grave and imminent peril described above.

It has been reported that three Curaçao state-owned companies have instituted legal proceedings against the seizure actions of ConocoPhillips and in that context have called upon PDVSA to guarantee that it can meet its contractual obligation to supply fuel to these companies for the purpose of providing the essential public services. This duty of delivery to the public companies is deemed to be an obligation to the population of Curaçao.

It must be acknowledged, however, that if delivery is impeded by an attachment pursuant to the New York Convention, PDVSA cannot be blamed. The ball remains in the government’s court. Moreover, it remains to be seen whether a party other than the country itself can rely upon the necessity exception.

It is indeed to be expected that the competent court will only take into account the interests of the parties to the proceedings. Therefore, it is essential that Curaçao itself asserts a position as an intervening party in order to ensure that the court take into account the serious threat to the country as a whole and that it makes it clear to all parties involved that the government, if necessary, will invoke the state of necessity exception under international law if the seizure and execution actions are not abandoned.


Under the New York Convention, the Curaçao court has no choice but to permit the seizure of PDVSA's assets, except if PDVSA can invoke one of the grounds for non-recognition set forth in this Convention or if the court finds on its own motion that enforcement would be contrary to the public policy of Curaçao. Whereas the country itself cannot rely on any of the exceptions enumerated in the New York Convention in order to avert the imminent peril, the state of necessity exception under the law of State responsibility provides the government with an instrument to protect the essential interests of Curaçao.

In our view, due to the grave and imminent peril presented by the recognition and enforcement of the foreign arbitral award in the present circumstances, the government would be justified to invoke the state of necessity exception and impede enforcement actions targeting the PDVSA assets located in Curaçao.

Rutsel Silvestre J. Martha and Pieter H.F. Bekker

R.S.J. Martha is the principal of Lindeborg Counsellors at Law (London, UK); Professor Pieter H.F. Bekker is the Chair in International Law at the Centre for Energy, Petroleum and Mineral Law and Policy, University of Dundee (UK) and partner at CMS Law

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