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Reference

Issue

Comments

Article1
(Definitions)
Clause 1

Definition of "Investment" needs to include, "business concessions conferred by law or under contract, including concessions to search for and extract oil and other minerals". The present definition of Investment does not cover this clearly.

Since significant investments are planned in oil and gas sector, clarity is requested by specifically adding the language "business concessions conferred by law or under contract, including concessions to search for and extract oil and other minerals" as one of the listed items.

Article 1
(Definitions)
Clause 2

It is normal in oil and gas sector to make investments through subsidiaries overseas. OVL's investments in San Cristobal Project and Indian Consortium's (OVL, Indian Oil and OIL) investments in Petro-Carabobo are made through overseas subsidiaries. Hence, there is need to protect direct as well as indirect investments by Indian companies in Venezuela, given the risk perceptions.

In draft BIPA, the term "investor'' defines any person, natural or juridical of a contracting party that makes an
investment in the territory of the other Contracting Party. The term "juridical person of a Contracting Party" defines all juridical entity, public or private, profit oriented or not, constituted in conformity with the legislation that Contracting Party or effectively controlled by investors of that Contracting Party.

Hence, coverage of "entities effectively controlled by investors of a Contracting Part/ may already satisfy the need of protecting investments through direct/indirect subsidiaries. In several of Indian BIPAs, indirect ownership may not be covered. However, it will be quite necessary in case of Venezuelan investments.

The coverage of "entities effectively controlled by investors of a Contracting Party" is necessary and needs to be retained/ strengthened during BIPA negotiations, by adding "including direct or indirect subsidiaries" to the said phrase.

Article 1
(Definitions)
Clause 4

The term Territory for the Republic of India needs to be defined and may mean, "the territory of the Republic of India including its territorial waters and the airspace above it and other maritime zones including the Exclusive Economic Zone and continental shelf over which the Republic of India has sovereignty, sovereign rights or exclusive jurisdiction in accordance with its laws in force, the 1982 United Nations Convention on the Law of The Sea and International Law".

Reference to "The I982 United Nations Convention on the Law of the Sea and International Law” is missing from the definition of Venezuelan territory and may be reviewed.

The term Territory for the Republic of India needs to be defined. Reference to
"The 1982 United Nations Convention on the Law of the Sea and International Law"  is missing from the definition of Venezuelan territory and may be reviewed.

Article 2
Clause 1

The protection extends to investments made "before or after'1 the enforcement of the DIPA and is normal. However, it will not be applicable to the controversies arising before the enforcement of the present Agreement.

OVL does not have ongoing controversies. However, to cover the risk of any controversy arising between now and enforcement of BIPA, it is desirable to delete, "it will not be applicable to the controversy arising before the enforcement of the present Agreement."

Article 4
Free Transfer
First para

The clause reasonably covers the sums expected to be repatriated. However, this free transfer is subject to, “the valid exchange rate of the day inconformity with the prevailing rules of exchange at that time." This may hinder repatriation of investments in freely convertible currency and result in application of artificial exchange rate. The Free Transfer article may therefore include that," The transfer shall be made in the currency of the original investment or any other convertible currency/currencies without undue delay. Transfers shall be effected at the applicable market exchange
rate prevailing on the day of the transfer.

The Free Transfer article may include that," The transfer shall be made in the
currency of the original investment or any other convertible currency/ currencies without undue delay. Transfers shall be effected at the applicable market exchange rate prevailing on the day of the transfer."

Article 8 8.2 a,b,c

Solution of disputes between an Investor and a Contracting Party:

1. Clause provides for resolution of disputes through Arbitration. Further the options of various forums have been suggested. This may lead to another disagreement while referring dispute to arbitration between parties
2. Resolution of disputes through Arbitration has been curtailed in situations where dispute is submitted in beginning to Ordinary Jurisdiction of the Contracting Party

1. It is suggested that only one forum be explicitly identified so as to avoid any conflicts in future with respect to choice of forum. We suggest that either UNCITRAL or ICC may be considered for reference
2. It is advisable that any and all disputes be referred to Arbitration only at the first instance. Accordingly, Article 8 sub-point (3) may be considered for deletion. Here the Court has over-riding jurisdiction over arbitration.

Article 9

Solution of differences between Contracting Parties in dispute:

1. Reference of International Justice Tribunal for appointment of Presiding Arbitrator, This seems to be vague
2. Procedure for Arbitration

1. Reference of International Justice Tribunal be replaced with International Court of Justice (ICJ), Hague read with Permanent Court of Arbitration (PCA), Hague as the dispute would be between two nations
2. It is advisable, subject to precedents, that procedural laws for Arbitration may also be identified, in line with above referred ICJ/ PCA. This will avoid differences as to forum/ venue, languages etc.

Article 10
Duration
Clause 3

The Agreement is valid for 10 years and thereafter until terminated.

In case the present Agreement ceases to be in force, its provisions will continue remaining for an additional period
of ten years for the investments made before the date of its termination.

Since oil and gas sector investments are longer term, it is requested to apply the protections under the BIPA for a period of 15 years for investments made during
the term of the BIPA.

Article 10
Duration
Clause 4

It seems that BIPA shall be signed in two languages, both being equally authentic.

In case the BIPA will be signed in bilingual texts, we would request that the text
in English may prevail in case of divergence.