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  HOME | Venezuela (Click here for more Venezuela news)

Venezuela's PDVSA Asks U.S. Appellate Court to Block Citgo Sale
Venezuela's state owned oil company Petroleos de Venezuela SA (PDVSA) has announced that it has asked a Federal Appeals Court to stop a District Court from selling PDVSA's shares in Citgo.




MIAMI -- PDVSA says that it has filed an immediate petition to block a decision of a Federal District Court to proceed with the attachment and sale of Citgo parent PDV Holding over a $1.4 billion expropriation debt owed to Canadian goldminer Crystallex.

"This Friday, August 24, PDVSA filed a petition in the U.S. Court of Appeals for the Third Circuit requesting that the Court of Appeals issue an order (mandamus) directing the District Court to (i) vacate its August 24 order authorizing the issuance and service of a writ attaching the shares of PDV Holding, and (ii) acknowledge that the District Court has been divested of jurisdiction with respect to PDVSA and its property, and, therefore, refrain from any enforcement of its August 9 order, pending final resolution of the appeal against such order notified by PDVSA on August 10."

A search of both the Appellate and District Court rolls by LAHT does not show the Petition in the docket yet.

On August 9, Chief Judge Leonard Stark of the U.S. District Court in Delaware ordered a fieri facias Writ of Attachment on Venezuela's state oil company Petroleos de Venezuela SA (PDVSA)'s PDV Holding, a Delaware holding company that owns 100% of the shares of PDVSA's U.S. refining subsidiary Citgo Holding.

Fieri Facias is Latin for "cause it to be done." A Fieri Facias Writ of Attachment instructs a sheriff to seize and sell a defendant's property in order to satisfy a monetary judgment against the defendant.

What makes the judgment unusual is that Crystallex had a $1.4 billion judgment against Venezuela -- not PDVSA -- but Crystallex was able to establish that Venezuela had blurred the lines of legal separation between Venezuela and PDVSA and that PDVSA was the "alter ego" of Venezuela. Even today, Venezuela's Minister of Oil, General Manuel Quevedo, is also the head of PDVSA. PDVSA is 100% owned by Venezuela.

PDVSA immediately appealed the judgment and argued that the District Court no longer had the power to deal with the issues as it had appealed.

The District Court disagreed and ruled on August 23 that it had a right and duty to enforce its judgments until a stay was ordered in the case. Since no such stay had been issued, it ordered the Writ of Attachment served by the U.S. Marshalls on PDV Holding, who would either have to pay the $1.4 billion or the U.S. Marshall's Service would sell the company or enough shares of the company to the highest bidder to realize the $1.4 billion owed to Crystallex.




CRYSTALLEX $1.4 BILLION ARBITRATION AWARD UPHELD IN FEDERAL COURT

On March 25, 2017, the Federal Court in Washington, D.C. upheld and registered the $1.4 billion award against Venezuela.

"Because none of Venezuela’s arguments suffice to vacate or modify the award under the New York Convention, the Court grants Crystallex’s petition to confirm the award and denies Venezuela’s motion to vacate," concluded U.S. Federal District Court Judge Rudolph Contreras, dismissing Venezuela's objections.

Hughes Hubbard & Reed led the successful legal team on behalf of Crystallex for the registration and verification of the award. Foley Hoag led Venezuela's defense team. Crystallex has also had the award upheld and registered in Canada.

DELAWARE FRAUDULENT TRANSFER SUIT

Crystallex was already suing Venezuela's PDVSA, PDV Holding and Citgo in U.S. Federal District Court in Delaware for the "fraudulent transfer" of billions of dollars of Citgo assets out of the U.S. Russia's state owned oil giant Rosneft has now also been named a defendant in that suit after an investigation by the Latin American Herald Tribune uncovered that Venezuela had mortgaged 49.9% of Citgo to Rosneft in exchange for a $1.5 billion loan. That innovative lawsuit, led by Gibson, Dunn and Crutcher, is ongoing, and parts of it are already in the Federal Court of Appeals.

The World Bank ICSID Judgment

In April of 2014, the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) had awarded the mining company Crystallex $1.202 Billion plus interest due to Venezuela’s unfair and inequitable treatment and unlawful expropriation of Crystallex’s investment in the Las Cristinas mining project in Venezuela.

Crystallex had filed its arbitration before ICSID on February 16, 2011, arguing that Venezuela had violated a Treaty between Canada and Venezuela for the "Promotion and Protection of Investments."

The ICSID Award upheld Crystallex’s claims that Venezuela breached Articles II(2) and VII(1) of the Treaty by failing to accord Crystallex’s investments in Venezuela fair and equitable treatment and by unlawfully expropriating those investments.

As a result of these breaches, ICSID ordered Venezuela to pay damages then amounting to $1.386 billion, based on a value for Crystallex’s investment in the Las Cristinas mine of US$1.202 billion on 13 April 2008 – the date when an environmental permit was denied by Venezuela – together with pre- and post-award interest from that date.

Among other things, the Tribunal criticized Venezuela’s Ministry of the Environment for its “arbitrary” and “non-transparent and inconsistent conduct” in connection with its denial of an environmental permit.

The Tribunal stated that it “cannot but conclude that the Permit denial letter and the Romero Report on which the first appears to be based are so fundamentally deficient that, to the eyes of a reasonable third person, they ‘surprise a sense of juridical propriety’….”

Venezuela, the Tribunal concluded, “frustrated Crystallex’s legitimate expectations …, engaged in arbitrary conduct in denying the Permit and rescinding the [Contract it had signed with Crystallex], and committed several acts lacking transparency and consistency.”

The Tribunal therefore found that Venezuela’s “overall conduct vis-à-vis Crystallex, thus violated the [Treaty]standard … and caused all of the investments made by Crystallex to become worthless.”

“On behalf of Crystallex’s board of directors, management, employees and all of its stakeholders, we are pleased that the Tribunal has recognized Venezuela’s unlawful expropriation of the Company’s investment in the Las Cristinas mining project," Crystallex CEO Robert Fung said at the time of the April 2016 judgment. "The company looks forward to collecting on the Award on behalf of all of its stakeholders. We thank our stakeholders for their deep understanding and support throughout this difficult and prolonged process, and our legal team, led by Freshfields’ partner Nigel Blackaby.”

At ICSID, Crystallex was represented by Freshfields Bruckhaus Deringer in Washington, D.C., Travieso Evans Arria Rengel & Paz and Wallis Guerrero in Caracas. Venezuela was represented by Foley Hoag.

Crystallex v Venezuela - US... by on Scribd


Crystallex v Venezuela - USDC Del - Order - 9 August 2018 by Latin American Herald Tribune on Scribd


Crystallex v Venezuela - USDC Del - Opinion (Redacted) - 10 August 2018 by Latin American Herald Tribune on Scribd


Crystallex v Venezuela - USDC Del - Cry Motion for Attachment - 14 Aug 2017 by Latin American Herald Tribune on Scribd


Crystallex v Venezuela - USDC Del - Cry Proposed Attachment Order - 14 Aug 2017 by Latin American Herald Tribune on Scribd


Crystallex v Venezuela - USDC Del - Cry Myatt Declaration in Support of Attachment Motion - 14 Aug 2017 by Latin American Herald Tribune on Scribd


Crystallex v Venezuela - USDC DC - Opinion Registering $1.4 Million Judgment against Venezuela - 25 March 2... by Latin American Herald Tribune on Scribd


Crystallex v Venezuela - ICSID - Award for Crystallex ($1.4 billion) - 4 April 2016 by Latin American Herald Tribune on Scribd


Crystallex v PDVSA - USDC Del - Amended Originating Complaint Including Rosneft & GLAS - 4 Jan 2017 by Latin American Herald Tribune on Scribd



 

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