Expropriation, Oil and the Prohibition on the Use of Force: Justification Narratives and the Effectiveness of International Law in the Venezuela Crisis

The US military intervention in Venezuela amounts to a manifest breach of the prohibition on the use of force under international law. Neither self-defence nor authorization by the UN Security Council can be invoked to justify the use of military force under these circumstances. The operation also clearly violates the principle of non-intervention, as it was explicitly aimed to remove a sitting head of State. Criminal allegations raised by the US government against Nicolás Maduro, including accusations related to drug trafficking, do not alter this legal assessment. Even if such allegations were substantiated, they could not provide a legal basis for the use of armed force on the territory of another State.

The blunt illegality of the military action has already been analysed in more detail elsewhere (e.g. here, here, and here) and was called out by a wide range of actors and institutions, including the UN Secretary-General in his remarks addressed to the Security Council in which he expresses to be “deeply concerned that rules of international law have not been respected with regard to the 3 January military action”.

This contribution builds on that assessment and turns to a different, but closely related aspect of the current crisis: the economic justification narrative advanced by the US government, centred on the alleged expropriation of US oil companies and the claimed need to correct past injustice through renewed control over Venezuela’s oil sector.

The Expropriation of US Oil Companies as a Political Justification Narrative

President Trump has repeatedly framed the military action as a response to historic wrongdoing suffered by US oil companies. In a public statement, he claimed that Venezuela had “unilaterally seized and sold American oil, American assets and American platforms, costing us billions and billions of dollars,” adding that “they did this a while ago, but we never had a president that did anything about it. They took all of our property.”  The message is clear: the current intervention is presented as the long-overdue correction of an injustice that previous administrations allegedly failed to address. In this framing, military force appears as the means through which an allegedly unresolved historical wrong is finally remedied.

There is a factual core to this narrative that must be acknowledged. In the early 2000s, under President Hugo Chávez, Venezuela undertook far-reaching nationalisations affecting large parts of its economy, in particular the natural resources and energy sectors. In the oil industry, existing concessions involving private, often foreign, investors were transferred into state-controlled structures. In several instances, formal expropriations occurred without the payment of adequate compensation. 

Against this background, the unlawful expropriations of US oil companies that took place two decades ago thus form a central element of the political justification narrative surrounding the current escalation. What this narrative systematically overlooks, however, is that international law provides effective legal mechanisms for precisely such situations. These mechanisms were actively invoked by affected US investors and produced tangible, legally binding outcomes.

International Investment Law as Rule-Based and Depoliticised Dispute Settlement

International investment law allows foreign investors to bring claims directly against host States for unlawful expropriation and other forms of abusive conduct before international arbitral tribunals. These tribunals often operate under the rules of the International Centre for Settlement of Investment Disputes (ICSID). Most investment claims are legally based on specific contracts or international investment treaties that grant private investors access to investor-State dispute settlement (ISDS). Awards rendered under the ICSID Convention are enforceable in all 158 Contracting States as if they were final judgments of domestic courts. This specific legal system is deliberately designed to address past wrongdoing through financial compensation in a rule-based and judicialized process between foreign investors and States. 

Investment arbitration thus serves a broader systemic function. By granting investors standing to pursue their claims independently, it removes disputes over property and compensation from the realm of high politics. Economic injury is assessed by reference to treaty standards, and addressed through binding arbitral awards. International investment law thereby provides a framework for resolving economic disputes through legal adjudication rather than through power-based enforcement.

US Investors’ Access to ISDS through Corporate Restructuring 

This system has also proven effective for US investors in the specific context of Venezuela’s expropriations. A prominent example is the ICSID arbitration in ConocoPhillips v Venezuela. The dispute concerned the nationalisation of heavy oil projects in the Orinoco Belt, in which the claimant held substantial interests. In its award of 8 March 2019, the tribunal ordered Venezuela to pay damages of approximately USD 8.3 billion for the unlawful expropriation. The award is internationally enforceable under the ICSID Convention and has been recognised by US courts. Other cases point in the same direction. In Venezuela Holdings et al v Venezuela, concerning nationalised investments made by Exxon Mobile in heavy oil projects, an ICSID tribunal awarded nearly USD 1 billion in damages in July 2023. Also, in Tidewater v Venezuela, involving the seizure of maritime infrastructure essential to oil operations, the tribunal awarded USD 46.4 million in compensation. 

Notably, there is no investment treaty between Venezuela and the United States, and US investors therefore did not enjoy treaty-based protection vis-à-vis Venezuela simply by virtue of their nationality. But international investment law allows investors a significant degree of flexibility in structuring their investments and in choosing the nationality of the legal entities through which those investments are held. Through corporate structuring and the use of intermediary holding companies, investors may bring themselves within the personal scope of investment treaties concluded between the host State and third States.

This was not merely a theoretical possibility. Many well-counselled US firms in the Venezuelan oil sector in fact adopted such structuring strategies, often on the advice of major international law firms. ConocoPhillips and ExxonMobil are prominent examples, and the jurisdictional decisions in Mobil v Venezuela and ConocoPhillips v Venezuela became influential in confirming that such corporate structuring qualifies as a “legitimate business practice” under the investment treaty regime. In the above-mentioned cases, both companies relied on the treaty concluded by Venezuela with the Netherlands.  

This practice, commonly referred to as nationality planning, is a well-established and widely accepted feature of the investment treaty system, provided that the relevant treaty requirements are met and the restructuring is not abusive. That said, corporate structuring for obtaining treaty protection remains contested. Critics argue that the investment treaty regime is too permissive toward corporate formalities and enables treaty shopping and reflective loss claims. The Venezuelan cases therefore illustrate the ongoing reform debate about the legitimacy of nationality planning under investment treaties, especially in the context of shareholder claims.

In view of the narrative advanced by the US government, These these cases demonstrate two important points. First, US investors made use of the legal instruments available to them under international investment law. Second, they obtained substantial compensation through these procedures. This account further weakens any political suggestion that military force was necessary to remedy past expropriations. Where international law offers workable and effective legal mechanisms for addressing economic injury, the recourse to armed force cannot plausibly be framed as a substitute.

Return of Gunboat Diplomacy Despite ISDS

The escalation in Venezuela once again highlights the limits of international law when confronted with the use of military force by a State that is determined to advance its economic interests. This is so despite the fact that international investment law provides effective and rule-based mechanisms for the protection of private investors. In fact, one of the core justifications for the existence of investment protection through ISDS is that depoliticised dispute settlement reduces the incentive for States to pursue economic interests through diplomatic pressure, let alone gunboat diplomacy. While a single incident does not disprove this rationale, the current situation suggests that rule-based dispute settlement may not fully deter the use of force where strategic resource control is perceived as having greater strategic value. Because where a State seeks not compensation for past losses but control over future resources, even a functioning judicial system reaches its limits. The existence and effective operation of investment arbitrations in the Venezuelan context makes this particularly evident.

Conclusion

The current escalation is not about the long-overdue correction of an injustice or the absence of legal remedies, but about the deliberate choice to bypass them. Precisely for this reason, it remains essential to clearly identify the violation of international law that occurred on 3 January 2026. It is equally important to recall that, with respect to the expropriation of US oil investors, lawful and well-tested alternatives existed and were in fact successfully used. Pointing to historic expropriations as a political justification narrative therefore cannot alter the fundamental illegality of the use of force, nor displace the principles of resource sovereignty and the international rule of law.