US Court is not sure whether to consider situation in Venezuela when deciding in case of Citgo

April 16 2019, 7:26 a.m.

The Court of Appeals of Philadelphia is not sure if it should take into account the current situation in Venezuela when deciding on a case in which the actions of CITGO, the subsidiary of Petróleos de Venezuela (PDVSA) and one of The main assets of the country abroad, publishesVoice of America .

PDVSA brought before the Court of Appeals of the third district the judgment of a judge in Delaware that granted Crystallex in 2018 to annex assets of PDV Holding - the commercial company that owns CITGO - to satisfy an arbitration award of 1,400 million dollars.

In March, the interim government of Juan Guaidó intervened in the case to support the appeal and ask the court not to "endanger the foreign policy of the United States" by "impeding Guaidó's ability to complete the transition of the republic [of Venezuela]. ] to democracy, "according to court documents to which the Voice of America had access.

On Monday, in a court hearing, the legal representative of Guaidó asked the three judges of the district in charge of the case to consider the changes that have taken place in the country's political situation - the fact that Guaidó was named as interim president by the National Assembly-when deciding on the case.

However, the three judges who handle the case, Anthony Scirca, Joseph Greenway and Thomas Ambro questioned the reasons why the court should take into account the dispute over power in Venezuela.

"We could be in the same situation we have now within a year," said Scirca in the Maris room of the Third District court. This is in line with one of the arguments of Crystallex, which was purchased in 2012 by the investment fund Tenor.

"Who controls Venezuela today and what they want or do not want to do in the future is irrelevant if Crystallex is responsible for collecting his award," his lawyer, Miguel Estrada, wrote in a document presented to the court. At the hearing, Estrada told the court that both the government in dispute and the interim government "have a unity of interest" in avoiding the payment of the debt.

Crystallex seeks to make effective an award that the arbitration court of the World Bank granted in 2016 for the expropriation of the Las Cristinas mine during the government of Hugo Chávez.

The defense of PDVSA argued that CITGO was not involved in the prejudice committed against Crystallex and that, therefore, the refinery can distance itself from the Venezuelan state debt.

In the face of the non-payment of a $ 1.4 billion debt to Crystallex, a judge in the state of Delaware decided last year that the Canadian company could annex CITGO assets.

Both PDVSA and the interim government allege that Judge Leonard Stark of Delaware erred in relating PDV Holding - and hence CITGO - to the expropriation of Las Cristinas and in ignoring the immunity of jurisdiction of the oil company because it is owned by the Venezuelan state.

The 2018 ruling determined that PDVSA operated as an "alter ego of the Venezuelan government" and, by extension, Crystallex could annex the assets of its subsidiary in the US. (CITGO) to satisfy the debt.

However, the Canadian mining company is not the only one to which the Bolivarian Republic owes money. Venezuela has an external debt of more than 150 billion dollars, according to the latest estimates of the Institute of International Finance. A large part of that debt is guaranteed by CITGO and, therefore, if Venezuela fails to comply with the payments, the creditors could take over the assets of the company.

The holders of the PDVSA 2020 bond, who are guaranteed 50% of the shares of CITGO and who are owed a payment of 72 million dollars by April 27, also intervened in the case of the appellate court in favor of PDVSA.

The representative of BlackRock Financial Management and Contrarian Capital Management, two investment funds that hold PDVSA bonds, asked the judges to take into account the interests of these creditors when making a decision.

"The creditors are lining up at the door of the court and if Cyrstallex can do [append CITGO shares] they too," said attorney Amanda Davidoff.

The court has not yet given a date to announce whether it will accept the interim government's motion to suspend the case. The representatives of Guaidó, like those of PDVSA and Crystallex declined to comment for this report.