A Barbados-based holding company led by executives of Venezuelan food and beermaker Empresas Polar has filed an international arbitration claim against President Hugo Chavez's government over its nationalization of a fertilizer project, documents show.
The move may set a precedent for Venezuelan companies seeking access to international courts to settle disputes with the socialist government that otherwise would be litigated by local judges, who critics say are controlled by Chavez.
The case is highly delicate as Chavez has repeatedly threatened to nationalize Polar, the South American nation's largest private employer. Its products range from beer to corn flour and reach nearly all of Venezuela's 29 million people.
Arbitration claims by Venezuelan companies could become more frequent if Chavez begins a more widescale expropriation of local businesses after five years of taking over assets of many of Venezuela's top foreign firms.
The World Bank's International Centre for Settlement of Investment Disputes, or ICSID, says the Barbados-based Gambrinus, Corp. registered a claim against Venezuela on December 2 in relation to a fertilizer enterprise.
ICSID declined to provide further details.
But a source close to the case, who asked not to be identified, confirmed the dispute was over fertilizer-maker Fertinitro, which Chavez nationalized in 2010. Polar had a 10 percent stake in it.
Others partners included state petrochemicals company Pequiven, an indirect subsidiary of Italian oil company ENI and U.S.-based Koch Industries, which in July filed for ICSID arbitration over its 35 percent stake in Fertinitro.
Gambrinus company documents obtained by Reuters show a clear link between that firm and Polar. At least two Gambrinus directors are Polar executives, and all seven Gambrinus directors listed in the documents are linked to Polar in some capacity.
Asked to confirm or give details of the Gambrinus case, a Polar spokeswoman said the company had no comment. The office of Venezuela's attorney general, named as a respondent in the case, did not respond to requests for comment. Koch Industries and Pequiven also did not respond to requests for comment.
Gambrinus - the name of a medieval European king who according to legend invented malt beer - filed its claim shortly before Venezuela said in January it was withdrawing from ICSID, which is hearing more than 20 claims against the OPEC member.
Chavez, who says his widespread nationalizations have redressed decades of inequality and unscrupulous business practices, has lambasted the World Bank tribunal as an instrument of colonial domination.
It has not commented on Venezuela's stance.
International arbitration allows companies with investments in foreign countries to resolve disputes with governments without having to litigate in local courts.
Countries allow international arbitration because it makes it more likely that foreign companies will invest there since they feel protected from arbitrary use of the local judiciary.
Investment arbitration must be carried out under agreements known as bilateral investment treaties that are meant to protect foreign companies against unfair treatment.
Venezuela signed a bilateral investment treaty in 1994 with Barbados and currently has more than 20 such treaties active.
Other Venezuelan companies facing threat of seizure, such as the country's banks, also appear to be creating foreign subsidiaries that would let them pursue disputes through international arbitration rather than local courts.
It is generally known among lawyers doing this kind of work that Venezuelan companies have structured investments through other nations, with one consideration being that justice is not even-handed in the Venezuelan courts, said Michael Nolan, a partner at law firm Milbank in Washington, who has represented clients in arbitration cases against Venezuela.
Venezuela's withdrawal from ICSID, which takes effect in mid-2012, will not affect litigation of cases currently pending such as the one filed by Gambrinus or those that are filed in the next few months, Nolan said.
Whatever he says on his Sunday television show, these are legal and binding commitments, he said, referring to Chavez's lengthy weekend broadcasts. Chavez can't unilaterally decide he's taking his marbles and going home.
The lawyer said many foreign firms and possibly Venezuelan offshore companies will still have access to arbitration because of Venezuela's bilateral investment treaties.
Chavez has said he will refuse to pay out any claims ordered by ICSID, but legal experts say 140 other member nations would see judgments as enforceable, meaning companies could obtain court orders to seize Venezuelan assets abroad.
POLAR STRIKES BACK
The maker of Venezuela's most beloved beer and of popular brands of household products, Polar has been frequently criticized by government officials over the years.
Chavez has accused it of refusing to supply a state-run supermarket and of contributing to food shortages by hoarding. Polar, which began making beer in 1941, has always denied those charges but sought to avoid public confrontation with Chavez.
After years of sparring with Polar, Chavez in 2010 ordered the expropriation of some of its beer and Pepsi-Cola warehouses in the city of Barquisimeto, arguing the area should be used to build homes.
Last year, the government expropriated land in the capital Caracas that Polar said was destined for the expansion of a children's nutrition program.
Authorities have also nationalized key suppliers to the company, including glassmaker Owens Illinois, which has also filed for arbitration, and seed-producer Agroislena.
But Chavez has backed away from threats to take over Polar, in part because the move might aggravate periodic shortages of basic products that upset his poor supporters.
Though sympathizers generally back his takeovers in the oil, telecom and finance industries, they routinely say they do not want the government at the helm of Polar. Many laud it for providing high-quality products despite heavy state pressure.
(Additional reporting Mario Naranjo and Marianna Parraga in Caracas, Editing by Andrew Cawthorne, Kieran Murray and Alix Freedman)