Within days, the disputed takeover of minority holdings in Petrojam by the Jamaican government is likely to get a hearing from an international arbitration panel.
It comes amid new disclosure by the Ministry of Finance that PDV Caribe SA, a subsidiary of Venezuelan oil company PDVSA, has made a claim for US$84.7 million as compensation for the forced takeover of its 49 per cent interest in the Petrojam oil refinery based in Kingston, a figure that far exceeds the price Jamaica had reportedly offered to pay four years ago.
On Monday, a market filing by the Ministry of Finance in the United States indicated that the compulsory acquisition of Petrojam is expected to be taken up on October 31 by the International Chamber of Commerce, ICC, based in Paris, a century-old body founded in 1919, which represents the interests of 140 countries.
The respondents named in the request for arbitration from PDV Caribe are the Petroleum Corporation of Jamaica and Petrojam Limited, both of which were joint-venture partners with PDV in the Kingston-based refinery.
Jamaica, as majority owner of Petrojam, took full ownership of the refinery under the Compulsory Acquisition (Shares in Petrojam) Act 2019, at a time when Venezuela had been placed under heavy sanction. The sanctions list did not include the South American country’s interest in Petrojam, but the Jamaican government still feared it could curtail efforts by the refinery to conduct international transactions were correspondent banks, for example, to become skittish.
Although no figures were officially disclosed regarding the takeover price, the money was said to have been placed in escrow. It’s been reported that Kingston offered Caracas US$40 million for the minority shares, then later increased that to US$50 million. Both prices were rejected.
The current claim by PDV Caribe translates to $13 billion in local currency.
The update on the dispute was included in a prospectus filed by the Ministry of Finance to raise fresh debt capital in foreign markets.
The ICC is in the process of seeking clearance to accept payment of advance costs from the sanctioned country.
“The provisional view of the arbitral tribunal is that it would not be appropriate to proceed with the case unless and until a solution is found, so that the advance cost can be paid to the ICC by the claimant. The arbitral tribunal has extended the stay of proceeding of this case until October 31, 2023,” said the ministry in the prospectus.
The United States has lifted sanctions against Venezuelan temporarily, since September, which should make it easier for the ICC to secure the exemption.
Attorney-at-law Michael Hylton, KC, who was the legal representative of PDV Caribe in 2019, declined to comment on the current matter.
“I have no information” and further, “I do not disclose information on my clients”, he added when asked if he was still retained by PDV Caribe.
Minister of Finance Dr Nigel Clarke also declined to comment on the funds held in escrow accounts on behalf of Venezuela. Such funds also include amounts due from Jamaica under the PetroCaribe Agreement, which were placed in a segregated account with the Bank of Jamaica that, as of September 30, totalled approximately US$2.7 million.
Since July 2021, following an arbitration award to third-party claimants against Venezuela, and as ordered by the Supreme Court in Kingston, Jamaica has made payments owed under the PetroCaribe Agreement totalling approximately US$25.2 million from the segregated account into a receivership for beneficiaries, the prospectus stated.
With the sanctions temporarily lifted, the Venezuelan government headed by Nicolas Maduro is seeking the release of assets and payments held frozen under sanctions in various jurisdictions.
The Bank of England currently holds 31 tons of Venezuela’s gold, and the United States also holds assets belonging to the Central Bank of Venezuela.
The US has promised diplomatic protection from creditors for the release of funds, which the Maduro regime promises will be used for public works and health.