Should Venezuela rejoin ICSID and negotiate a bilateral investment treaty with the United States?

Venezuela and Bolivia are the only two countries in the world that have formally withdrawn from the ICSID Convention and remain outside it. Ecuador took the same path in 2009 but rejoined in 2021. The contrast is worth examining.

At a time when Venezuela is seeking to attract foreign investment and signal openness to international markets, its absence from ICSID sends the wrong message. Rejoining that forum, combined with the negotiation of a bilateral investment treaty ("BIT") with the United States, could be one of the most effective institutional steps Venezuela can take to rebuild its credibility with international investors.

For context on how we advise investors on treaty protection and arbitration strategy, see our Investment Arbitration practice. We have also analyzed how bilateral investment treaties can change the risk map for investors in the case of the Venezuela-Colombia BIT.

What is ICSID and why does it matter?

• ICSID — the International Centre for Settlement of Investment Disputes — is the world's leading arbitral forum for resolving disputes between foreign investors and States. Administered by the World Bank Group, it offers neutral, predictable, and broadly recognized arbitration procedures.
• For the foreign investor, access to ICSID measurably reduces country risk. Without this mechanism, investors are left exposed to the host State's domestic courts — with all the uncertainty that entails.
• One hundred sixty-seven countries are parties to the ICSID Convention. Operating outside that universe places Venezuela at a structural disadvantage compared to other investment destinations in the region.

Venezuela's withdrawal and its costs

• Venezuela formally withdrew from the ICSID Convention in January 2012, with effect from July of that year. At the time, it faced more than 20 arbitral proceedings before ICSID, most of them arising from expropriation without adequate compensation.
• The withdrawal did not extinguish the existing claims. Venezuela continued to be sued in those arbitrations — and lost several of them — accumulating awards it has not honored. The withdrawal did not protect the State: it merely isolated it.
• Since then, Venezuela has ceded ground to other investment destinations in the region that do offer access to ICSID and conventional protection for investors.

Ecuador's lesson

• Ecuador withdrew from the ICSID Convention in 2009 and faced a similar cycle of international arbitrations. In 2021, however, it chose to rejoin. The reason was essentially economic: ICSID membership was an implicit condition for attracting foreign investment in the oil and mining sectors.
• Ecuador's experience shows that a return is possible, relatively straightforward, and generates tangible benefits in terms of investment flows and institutional credibility.

A BIT with the United States: the missing piece

• Venezuela does not have a BIT in force with the United States. This absence is striking: historically, U.S. investors have been among the most active in Venezuela, particularly in the energy, services, and manufacturing sectors.
• A BIT with the United States would grant U.S. investors a minimum standard of treatment, protection against arbitrary expropriation, free transfer of capital, and access to international arbitration — including ICSID, should Venezuela rejoin the Convention. Conversely, Venezuelan investors in the United States would enjoy the same protections. A BIT would also give Venezuela the opportunity to attract larger-scale investment across sectors beyond oil.
• In the current context, with Venezuela seeking to normalize its international economic relations, negotiating a BIT with the United States would be a powerful and concrete institutional signal.

What next?

Rejoining ICSID and negotiating a BIT with the United States are sovereign decisions — not magical solutions. They are, however, powerful institutional signals: foreign investors evaluate not only a project's financial return, but also the legal architecture of the host country. Venezuela can strengthen that architecture through concrete decisions.

International arbitration is part of that architecture. For a broader overview of arbitration as a dispute-resolution tool in Venezuela, see our analysis of commercial arbitration in Venezuela.

Ágora Abogados S.C. advises domestic and international clients on investment protection, international arbitration, and the structuring of investment projects in Venezuela. We have experience designing structures that maximize the protection available under international law, including investment treaties and arbitration before international forums.

Because in investment matters, anticipating legal risk is as important as identifying the opportunity.