Lenz & Staehelin obtains second win for investor in setting aside proceedings before the Swiss Federal Supreme Court

Lenz & Staehelin has for a second time successfully represented Clorox Spain (Clorox), a Spanish subsidiary of The Clorox International Company (Clorox International), in proceedings before the Swiss Federal Supreme Court (Supreme Court) against the Bolivarian Republic of Venezuela (Venezuela). In a decision dated 20 May 2022 just posted on the Supreme Court's website, the Supreme Court rejected Venezuela's application to set aside an arbitral award on jurisdiction rendered by a tribunal established under the Spain-Venezuela Bilateral Investment Treaty (BIT). The Supreme Court also ordered Venezuela to pay the costs of the proceedings as well as a significant contribution towards Clorox' legal costs. The decision represents another win for Clorox before the Supreme Court, which had previously set aside the tribunal's initial award on jurisdiction in what was the Court's first (and so far only) annulment of an investment treaty award rendered in Switzerland (see newsflash available here).

In the underlying arbitral proceedings administered by the Permanent Court of Arbitration, the tribunal (seated in Geneva and adjudicating under the UNCITRAL Arbitration Rules) had initially held in May 2019 that it did not have jurisdiction over the dispute as (in the tribunal's initial view) Clorox had never made an investment protected under the BIT. In a decision rendered in March 2020, the Supreme Court had set aside this first award, finding that the tribunal had wrongly imposed a non-existing jurisdictional requirement on the investor and that the tribunal would have to address Venezuela's remaining jurisdictional objections in a new decision.

In June 2021 the tribunal rendered a new jurisdictional award, dismissing Venezuela's remaining objections and finding that it had jurisdiction over the dispute. Venezuela proceeded to challenge this award before the Supreme Court, alleging that the tribunal should have found Clorox' restructuring in 2011 (which gave rise to the investor's protection under the BIT) to constitute an abuse of process and that it should have denied jurisdiction as a consequence.

In its 20 May 2022 decision, the Court rejected Venezuela's allegations and confirmed that Clorox' restructuring had not been abusive. In particular, the Court held that, at the time of the restructuring, the specific dispute between the parties had not been foreseeable and that, contrary to Venezuela's assertions, the restructuring had not been made in view of that dispute. Since structuring an investment so as to obtain treaty protection was in principle legitimate, Venezuela's contention of abuse was unfounded and the tribunal did have jurisdiction based on the BIT.

The Lenz & Staehelin team included partner Xavier Favre-Bulle and counsel Hanno Wehland (both Litigation and Arbitration).