MIAMI -- The U.S. Federal District Court for the District of Columbia has entered a default judgment against Venezuela following its failure to file an appearance in a lawsuit brought by Gold Reserve to confirm a $740 million arbitration award dated September 22, 2014.

On November 26, 2014, Gold Reserve had filed a petition to confirm an Award that had been rendered by an arbitration tribunal constituted under the Additional Facility Rules of the International Center for the Settlement of Investment Disputes (“ICSID”) of the World Bank. By Treaty, once such Awards are confirmed, they are enforceable in the United States as if they were a judgment of the court.

The initial step for the proceeding was to serve Venezuela with the petition and other related documents. Once served, Venezuela had 60 days to respond with any arguments it believes it has against the petition to confirm. Since the inception of these proceedings, Venezuela has been willfully avoiding service, refusing, among other things, to authorize its U.S. counsel to accept service.

As a result of that refusal to accept service, on December 31, 2014, the Company initiated service in accordance with the statutory provision of the United States Code, and the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters.

Receipt of the documents on January 8, 2015, was acknowledged by letter from the Venezuelan Foreign Ministry dated January 26, 2015, but only received by the Company’s process server on March 2, 2015. In this letter, however, Venezuela contested the validity of the service, raising non-meritorious and irrelevant objections to service. Therefore, the Company believes Venezuela was properly served on January 8, 2015.

As a result, and at the expiry of the 60-day period following the service of the documents, the Company, on March 26, 2015, requested the Clerk of the District Court for the District of Columbia to enter default against Venezuela, on the basis that, as the letter from the Venezuelan Foreign Ministry clearly showed, the documents had been duly received by the proper recipient of the service process.

The Clerk agreed with the position of the Company and entered default on March 27, 2015. The consequence of the default being entered against Venezuela in respect of appearance is that a default judgment may now be entered against Venezuela upon motion by the Company.

After close of business on March 27, 2015, the same day that the default was entered, Foley Hoag, the U.S. counsel appointed by Venezuela (the same counsel in the ICSID arbitration), entered an appearance for the purpose of opposing the entry of default and requesting that it be set aside. Gold Reserve says they have responded to Venezuela’s opposition on March 30, 2015, and the matter will be decided by a judge in the near future.

"The Company remains firmly committed to the enforcement and collection of the Award, including interest and costs, in full, and will continue to vigorously pursue all available remedies," says Gold Reserve. The Award, now amounting to approximately $750 million, continues to accrue interest at the rate of Libor plus 2% per annum.

“This is another example of Venezuela being dilatory in its actions regarding the payment of the Award," says Gold Reserve’s President, Doug Belanger. "The Company will continue to pursue the collection of our Award in a systematic and methodical way until Venezuela realizes that its needs to stop avoiding its international obligations and pay the Award, sooner rather than later. The Company continues to have communications with designated representatives from the Venezuelan government.”

Gold Reserve also filed to have the Award recognized in Europe. In January, the Paris Court of Appeal granted the Company’s request for the exequatur, or recognition, of the Company’s ICSID Award as a judgment of the Court. The Court dismissed the Republic of Venezuela’s request to stay the execution of the Award pending the outcome of its application to annul (or set aside) the Award, holding that none of the grounds alleged by the Republic of Venezuela, including the lack of jurisdiction of the arbitral tribunal, the violation of international public order, or alleged errors in the calculation of the damages awarded, constituted a sufficient ground to stay the execution of the Award.


After a rash of expropriations and nationalizations by Chavez, Venezuela has 25 cases pending against it at ICSID -- the most of any nation in the world. Faced with the cases, Chavez withdrew Venezuela from ICSID jurisdiction in 2012, but pending cases and new cases brought under bilateral investment treaties and contracts continue to give ICSID jurisdiction to settle the arbitrations.

Other companies with pending ICSID arbitrations against Venezuela include mining and smelting companies Anglo American, Rusoro Mining Ltd., Crystallex International Corporation, Highbury International and Tenaris SA; food industry companies Gruma, Polar, Longreef, and Vestey; and oil industry companies Williams Cos. Inc., Koch Industries Inc., and ConocoPhillips.

In October, an ICSID arbitration panel had awarded ExxonMobil $1.6 billion in its case against Venezuela for the 2007 expropriation of Exxon's investments in the Orinoco oil region. Venezuela filed to Revise and Annul the $1.6 billion ExxonMobil judgment in February, essential staying the judgment so that Venezuela doesn't have to pay it unless the Tribunal rules again that they do.

ICSID is an autonomous international institution established in 1965 under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID or the Washington Convention) with over one hundred and forty member States. The primary purpose of ICSID is to provide facilities for conciliation and arbitration of international investment disputes. ICSID judgements are automatically enforceable in any member state.