Venezuela: Supreme Court Decision Allows For Certainty In Reciprocal Investments
Last Updated: 14 August 2001

One of the most important decisions to be issued by the Constitutional Chamber of the Supreme Justice Tribunal over the last few days has been the dismissal of the motion for nullity filed by attorneys Fermín Toro Jiménez and Luis Britto García against the agreement for the avoidance of double taxation subscribed by the United States and Venezuela. The defense of such action had been assumed by the National Investment Promotion Council (CONAPRI), with counsel from the offices of Torres Plaz & Araujo.

In late April last year, the request was filed with the Supreme Justice Tribunal to find for the supposed nullity by unconstitutionality of the Act of Ratification of the Convention subscribed between the Government of the Republic of Venezuela for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital (the "Venezuela-USA DTC"). The decision by the Constitutional Chamber of this last Tuesday, August 7, 2001, to dismiss the motion against the referred convention established a sound interpretation of the device contained in Article 301 of the Constitution (which did not exist in the earlier 1961 Constitution) concerning the subscription and enforcement of international treaties by Venezuela, not only in the area of taxation, but also regarding investment promotion and protection.

Juan Carlos Garantón Blanco, Esq., a partner at the law offices of Torres Plaz & Araujo, which participated in the process as counsel to CONAPRI, noted that "the recent decision by the Tribunal has established a framework of certainty for the investments made to and from Venezuela, as it was proven that the aforesaid agreement, and other similar ones, is developed completely within the legislative approval, and the provisions of the Convention – and of its Act of Ratification – conform to the provisions of Article 128 of the 1961 Constitution and Articles 154 and 187 of the Bolivarian Republic".

Garantón has further noted that the reasoning used by the claimants in requesting the nullity by unconstitutionality, which was based on the alleged breach of formalities and passing of international treaties and the supposed unconstitutionality of certain articles of the Venezuela-USA DTC – specifically the Articles establishing the mechanisms of distribution of tax power in matters of maritime and aerial transportation, interest and royalties -, was unfounded and did not conform to the Constitutional norms applicable to the matter, namely the 1961 Constitution and the current Bolivarian Constitution. "This decision is a timely and decisive message from Venezuelan institutions to foreign and domestic investors", adds Garantón.

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