By Deborah Ruff and Carolina Plaza.

Conclusions

Reopening with residual risk: Venezuela’s 2026 reforms signal a clear shift toward reviving foreign investment in the hydrocarbons and mining sectors, but the country’s history of expropriation, exposure to arbitration, and enforcement challenges continues to influence investors’ perception of risk.

Arbitration remains a critical protective tool: Venezuela’s withdrawal from ICSID shifted the venue for arbitration between investors and the State, with UNCITRAL arbitration under existing BITs as the primary alternative. Recent reforms in the hydrocarbons and mining sectors reinforce the availability of contractual arbitration, subject to considerations of enforceability and careful contractual drafting.

Structure remains essential: Despite a selective easing of sanctions, regulatory volatility and compliance constraints persist, making disciplined investment structuring, contractual protections, and dispute planning essential for managing risk.

The investment climate in Venezuela has historically been shaped by policies that emphasize state control over strategic natural resources, including nationalizations and regulatory intervention in the hydrocarbon and mining industries. This approach was particularly evident in the hydrocarbon sector through the Hydrocarbons Act of 2006, which required foreign investors to restructure their stakes in state-controlled joint ventures and accept higher tax and royalty burdens. These measures reduced operational control and altered economic expectations, leading to a series of high-profile disputes, including Venezuela Holdings (Exxon) and others v. Venezuela and ConocoPhillips v. Venezuela. Similar measures in the mining sector altered ownership structures and regulatory conditions, leading to significant arbitration claims, including Rusoro Mining LTD v. Venezuela and Crystallex International v. Venezuela.

The investment climate deteriorated further following Venezuela’s withdrawal from the International Centre for Settlement of Investment Disputes (ICSID) in 2012. However, Venezuela’s withdrawal did not terminate its existing obligations under bilateral investment treaties (BITs), many of which remain in force and continue to provide access to investor-state arbitration through alternative mechanisms, including ad hoc arbitration under the UNCITRAL Rules. Consequently, Venezuela has remained exposed to investor-state arbitration and complex enforcement proceedings, with at least 67 claims filed between 1996 and 2025, many of them in the oil, gas, and mining sectors.

In this context, Venezuela has entered a period of political and regulatory transition, accompanied by reforms in the hydrocarbons and mining sectors aimed at facilitating renewed foreign investment and improving the overall investment framework. There are market signals a renewed interest among investors in Venezuela.

Arbitration Options for Foreign Investors in Venezuela Following the Withdrawal from CIADI

Although Venezuela withdrew from the CIADI Convention in 2012, foreign investors may still have access to investor-state arbitration under several of Venezuela’s BITs. Several BITs remain in force—including those concluded with the United Kingdom, Spain, the Netherlands, Sweden and Canada— preserve the consent to arbitration through the ICSID Supplementary Mechanism or ad hoc proceedings under the UNCITRAL Arbitration Rules. More recent treaties also confirm the continued availability of non-ICSID arbitration avenues. For example, the BIT China–Venezuela expressly permits UNCITRAL ad hoc arbitration and other agreed-upon mechanisms, whereas the BIT Colombia–Venezuela, although it is not yet in force, similarly provides for UNCITRAL arbitration as an available dispute resolution mechanism. Unlike ICSID arbitration, UNCITRAL proceedings remain ad hoc in nature, although they are often administered by institutions such as the Permanent Court of Arbitration or, in some cases, with administrative support from ICSID itself. Taken together, these treaties indicate that Venezuela’s withdrawal from the ICSID Convention did not eliminate investor-state arbitration, but rather shifted the procedural landscape toward alternative arbitration frameworks, with UNCITRAL arbitration emerging as the primary mechanism for foreign investors seeking a neutral resolution of disputes.

UNCITRAL arbitration has taken on particular significance in the Venezuelan context because it offers procedural flexibility, allows the parties to select arbitrators and a neutral seat for arbitration, and benefits from the enforcement framework of the 1958 New York Convention. However, although Venezuela is a party to the New York Convention, the commentators They have observed that enforcement proceedings in Venezuela can be complicated by the invocation of public policy defenses, particularly when the losing party is a state entity or a state-owned entity.

Recent Legal Developments

Recent legislative reforms in Venezuela’s hydrocarbons and mining sectors reflect a limited recognition of arbitration as a mechanism for resolving disputes at the contractual level. Although distinct from treaty-based arbitration, these reforms confirm the permissibility of arbitration clauses in investment agreements and signal a broader shift toward incorporating international dispute resolution practices into the domestic legal framework.

• Reform of the Hydrocarbons Act
  
  The Amendment to the Organic Law on Hydrocarbons reflects a shift toward a more investment-oriented framework, designed to facilitate foreign participation in the oil and gas sector. The revised regime allows private companies to participate in upstream activities (exploration, extraction, gathering, transportation, and storage) through contractual agreements with state entities, in addition to the continued use of joint ventures. It allows the Ministry of Hydrocarbons to authorize minority shareholders to participate in the operational management of a joint venture, administer the joint venture’s funds, and market all or part of the joint venture’s production. It also allows the previously fixed 30% royalty rate to be reduced by the Ministry of Hydrocarbons on a case-by-case basis depending on the project.
  
  The law also provides that the parties may agree to resolve disputes through arbitration and other alternative dispute resolution mechanisms. This does not constitute prior consent by the State to arbitration, but rather allows for the inclusion of arbitration clauses that comply with the guidelines to be issued by the Ministry of Hydrocarbons and the Attorney General’s Office. Since these guidelines have not yet been issued, several important questions remain unanswered, such as whether they will require that the seat of such arbitration be located in Venezuela. Consequently, the enforcement considerations mentioned above remain relevant, particularly with regard to proceedings involving state entities. Consequently, the recent reform should be understood more as an improvement to the formal legal framework for arbitration and dispute resolution, rather than a complete elimination of enforcement risk. Nevertheless, the availability of arbitration clauses and the possibility of seeking recognition and enforcement in foreign jurisdictions under the New York Convention can provide investors with significant protections outside the Venezuelan courts. Taken together, these changes aim to improve legal predictability, refine risk allocation, and support renewed investor participation.
  
• Reform of the Mining Law
  
  The New Mining Law, passed in April 2026, is part of a broader initiative to reopen the extractive sector to foreign investment and replace the previous regulatory framework. The legislation is designed to facilitate participation within a more structured legal environment, while maintaining state ownership of mineral resources.
  
  A key feature of the reform is the explicit recognition that disputes can be resolved through arbitration and other alternative dispute resolution mechanisms, in addition to national courts. Like the amendment to the Organic Law on Hydrocarbons, this does not constitute a permanent consent to arbitration, but it confirms the permissibility of arbitration clauses in investment agreements. Although the same enforcement risk explained above persists, from the perspective of disputes, this clarification indicates an effort to improve the overall investment framework.

Strategic Considerations for Investors

In light of Venezuela’s evolving legal framework and its gradual reintegration into international markets, investors can benefit from adopting a structured approach to risk management. Structuring the investment to maximize available protections, such as access to treaty-based protections and enforcement mechanisms outside Venezuela when available. Given the practical difficulties that may arise in enforcing arbitral awards against state entities in Venezuela, carefully drafted dispute resolution provisions and stabilization or renegotiation mechanisms remain particularly important for managing legal and enforcement risks.

For a more detailed analysis, please refer to our document, An Integrated Approach to the Protection of International Investment in Energy.

Conclusion

Recent reforms in Venezuela signal an effort to facilitate renewed foreign investment and address aspects of legal uncertainty that have historically affected the market. At the same time, the interplay between evolving contractual frameworks, an active sanctions regime, and a history of investor-state disputes suggests that opportunities will remain closely tied to careful legal structuring, enforceability considerations, and risk management. Investors, therefore, must weigh potential opportunities against the need for disciplined compliance and preparedness for disputes.

To learn more about recent developments in Venezuela, visit our website at Venezuela Task Force and our website at International Arbitration Practice.