Crystallex, Venezuela Butt Heads Over Special Master Order

Law360 (May 10, 2021, 10:12 PM EDT) -- Crystallex is objecting to a position adopted by Venezuela and its state-owned oil company, Petroleos de Venezuela S.A, that the parties involved in the sale of Citgo's parent company — and perhaps even the special master overseeing it — will need a license to proceed with the transaction due to U.S. sanctions on Caracas.

The Canadian company argued in a letter filed with U.S. District Judge Leonard P. Stark in Delaware on Monday that Venezuela is just trying to delay the sale of PDVSA's shares in PDV Holding Inc., the indirect parent of U.S. petroleum company Citgo, as the parties in the sale move ahead from retired Skadden Arps Slate Meagher & Flom LLP partner Robert Pincus' appointment by Judge Stark as special master last month to help steer the transaction.

Crystallex, which has pushed for the sale to move ahead so it can satisfy a $1.2 billion judgment against Venezuela, argued that the objections put forward by the country have already been rejected.

"If accepted now, this conduct will embolden Venezuela to continue its well-documented history of using every conceivable procedural maneuver to hinder collection of the judgment," according to the letter. "There is no reason why [the Office of Foreign Assets Control]'s guidance or approval is needed for the special master to be paid or to carry out his mandate.

The U.S. Treasury's Office of Foreign Assets Control, which administers U.S. sanctions against foreign countries, often requires a license to deal with sanctioned countries.

The parties are currently jostling over the wording to be contained in a proposed order regarding the special master, in which the parties are slated to set out how Pincus' role will be fulfilled.

In its letter on Monday, Crystallex proposed that the special master should make clear in the order that he is acting as "an arm of the court."

One other objection to the proposed order was lodged by ConocoPhillips, which is owed some $2 billion by Venezuela after the country nationalized two of its onshore extra-heavy oil projects without compensation in 2007. Pincus told Judge Stark in a letter on Sunday that the oil company objected to his proposed $2 million figure for the total amount he can claim in fees and expenses for himself, and his counsel and advisers.

ConocoPhillips has offered to fund one-third of the costs of the execution sale, according to court records.

Counsel for Crystallex declined to comment on Monday. Counsel and representatives for Venezuela and ConocoPhillips were not immediately available to comment.

Crystallex won its award in April 2016 after an international tribunal concluded that Venezuela breached its investment treaty with Canada by wrongfully ousting the company from an operating contract for the Las Cristinas mine, which contains one of the world's largest undeveloped gold deposits. The award was confirmed by a D.C. federal court in March 2017.

In an order issued in January, Judge Stark denied Venezuela's motion to quash an attachment order for the PDV Holding shares that he issued to Crystallex more than two years ago in light of the "extraordinary" circumstances relating to an ongoing power struggle between Venezuelan President Nicolás Maduro and opposition leader Juan Guaidó, saying that it would be "inequitable" to permit Caracas to continue evading payment on what it owes.

Citgo, meanwhile — widely referred to as the "foreign crown jewel" of Venezuela's oil industry — has become the target of numerous creditors owed an estimated $150 billion by Caracas.

Crystallex is represented by Travis S. Hunter, Jeffrey L. Moyer and Raymond J. DiCamillo of Richards Layton & Finger PA, and Robert L. Weigel, Rahim Moloo, Miguel A. Estrada, Lucas C. Townsend and Jason W. Myatt of Gibson Dunn & Crutcher LLP.

Citgo Petroleum Corp. and PDV Holding Inc. are represented by Kenneth J. Nachbar and Alexandra M. Cumings of Morris Nichols Arsht & Tunnell LLP, and Nathan P. Eimer and Lisa S. Meyer of Eimer Stahl LLP.

PDVSA is represented by Samuel T. Hirzel II of Heyman Enerio Gattuso & Hirzel LLP, and Joseph D. Pizzurro and Julia B. Mosse of Curtis Mallet-Prevost Colt & Mosle LLP.

Venezuela is represented by Donald B. Verrilli Jr., George M. Garvey, Elaine J. Goldenberg, Ginger D. Anders, Brendan B. Gants and Jacobus P. van der Ven of Munger Tolles & Olson LLP, and A. Thompson Bayliss and Stephen C. Childs of Abrams Bayliss LLP.

Phillips Petroleum Company Venezuela Ltd. and ConocoPhillips Petrozuata BV are represented by Michael S. Kim, Marcus J. Green and Josef M. Klazen of Kobre & Kim LLP, Richard G. Mason, Amy R. Wolf and Michael H. Cassel of Wachtell Lipton Rosen & Katz, and by Garrett B. Moritz of Ross Aronstam & Moritz LLP.

The case is Crystallex International Corp. v. Bolivarian Republic of Venezuela, case number 1:17-mc-00151, in the U.S. District Court for the District of Delaware.

--Editing by Michael Watanabe.

Correction: This story has been updated to make clear that Pincus is retired from Skadden Arps Slate Meagher & Flom LLP.

 

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