A Paris court has recently upheld Air Canada's claim of $21 million against Venezuela. The decision comes after a long-standing dispute between the airline and the South American country, which had failed to make payments for services rendered. The ruling affirms Air Canada's right to compensation for the outstanding debt, which is expected to provide some relief to the airline amidst the challenging economic conditions caused by the COVID-19 pandemic. This decision also underscores the importance of honoring financial obligations and upholding contractual agreements, particularly in the aviation industry where reliable and timely payments are critical for sustaining operations.
Paris Appeal Court Rules in Favor of Air Canada in Dispute with Venezuela
The Paris Appeal Court has recently issued a judgment in favor of Air Canada in a long-standing dispute with Venezuela. The dispute revolves around the payment of approximately USD21 million in compensation for airline ticket revenues that were withheld by the South American country.
In its ruling on September 26, 2023, the Appeal Court not only found in favor of Air Canada but also ordered Venezuela to pay an additional EUR100,000 euros (USD106,000) in costs.
Background
The dispute between Air Canada and Venezuela dates back to 2017 when the airline lodged a complaint with the United Nations' International Centre for Settlement of Investment Disputes (ICSID). The case, numbered ARB(AF)/17/1, was filed due to Venezuela's failure to repatriate around USD50 million in revenue from tickets sold by Air Canada in Venezuela between September 2012 and January 2014.
Air Canada's Claims
Air Canada accused Venezuela of violating an agreement known as the "BIT" treaty, which required the repatriation of funds. The airline claimed that despite its repeated requests, Venezuela did not respond or take any action to fulfill its obligations.
Venezuela implemented an exchange control regime in 2003, known as the Comisión de Administración de Divisas (CADIVI), which regulated the distribution, purchase, and sale of foreign currencies. Air Canada had submitted 91 requests for currency acquisition (Autorización de Adquisición de Divisas - AAD) between September 2012 and November 2012, totaling USD91 million. These requests were approved by CADIVI.
However, in January 2014, CADIVI issued an administrative order stating that foreign airlines' AADs would be processed at a different exchange rate of approximately VES11 bolivars for one US dollar. In response, Air Canada suspended its sales and flights to Caracas Simón Bolivar, citing civil unrest and difficulties in conducting business in Venezuela, including the issue of repatriating its funds.
Legal Proceedings
Despite promises from Venezuela in late March 2014 to allow foreign airlines to repatriate their revenues, this never materialized. Efforts were made by various parties, including the International Air Transport Association (IATA), to resolve the situation. However, Air Canada decided to file an official dispute against Venezuela on June 15, 2016, ultimately leading to the case being brought before the ICSID in 2017.
During the legal proceedings, Venezuela argued that its failure to repatriate Air Canada's funds was due to insufficient US dollar reserves, administrative shortcomings on the airline's part, and the country's sovereign prerogative to reject such requests.
Venezuela's Appeal & Judgment by the Paris Appeal Court
The United Nations' International Centre for Settlement of Investment Disputes (ICSID) issued a compensation award in favor of Air Canada on September 13, 2021, with minor amendments on October 27, 2021. The award ordered Venezuela to pay Air Canada a total of USD20,790,574 with interest backdated to May 26, 2014, at a rate reflecting the cost of the debt from that date.
Venezuela appealed this decision to the Paris court on November 29, 2021, seeking to annul the compensation awarded to Air Canada. However, the recent judgment by the Paris Appeal Court has upheld the original decision by the ICSID and ordered Venezuela to pay an additional EUR100,000 euros (USD106,000) in costs.
Significance of the Ruling
This ruling by the Paris Appeal Court marks a significant victory for Air Canada in its ongoing battle for compensation from Venezuela. It reaffirms the importance of upholding international agreements and ensuring that obligations between nations are honored. The decision also highlights the role of international arbitration bodies such as the ICSID in resolving disputes between countries and private entities.
Air Canada can now look forward to receiving the compensation it is rightfully owed, providing some resolution to a long-standing issue that has affected its operations in Venezuela. The judgment serves as a reminder of the importance of fair and transparent business practices and the need for countries to fulfill their obligations under international treaties and agreements.
-Source(ch-aviation)
