Puebla, Mexico, July 12, 2017 (venezuelanalysis.com) – A US appeals court blocked Tuesday the enforcement of a multi-million dollar award against Venezuelan state oil firm PDVSA, citing procedural concerns.
The award previously was handed to oil giant Exxon Mobil after the government in Caracas expropriated many of the firm’s Venezuelan assets in 2007. A US court initially ordered PDVSA to repay US$1.6 billion in compensation to Exxon, though in late 2014 that award was reduced to US$188 million by the World Bank’s International Centre for Settlement of Investment Disputes (ICSID).
Now, the 2nd U.S. Circuit Court of Appeals in Manhattan has found the original ruling should have sought to enforce the award through the Foreign Sovereign Immunities Act (FSIA). FSIA offers stronger protections to sovereign defendants, such as Venezuela.
Circuit Judge Susan Carney said enforcement through the FSIA would “facilitate national uniformity in procedure”.
“Consistency as to enforcement seems to us importantly aligned with the values of predictability and federal control that foreign affairs demands and that the FSIA was designed to promote,” she concluded.
While Venezuela is yet to respond to the ruling, Exxon has stated it is considering further legal action.
The decade old case stems from the seizure of two Exxon assets in Venezuela, the Cerro Negro and La Ceiba oil development ventures. For years, Venezuela and Exxon have been battling in international courts over compensation.
The latest ruling is a rare breath of good news for the Venezuelan government, which is now struggling with its deepest economic crisis in two decades amid stagnant global oil prices – the source of over 90 percent of the country’s foreign currency earnings.
On Tuesday, a top PDVSA official suggested the firm might try to renegotiate its upcoming bond payments. In October and November, the firm is due to pay out around $3.5 billion to bond holders.
Speaking on the sidelines of a conference in Istanbul, Turkey, PDVSA Managing Director for Planning Hector Andrade said there is “a big chance” that the firm will attempt to lower this figure.
“Right now it’s not just about the cooperation between producers… [but] cooperation between producer and consumer,” he said, according to Reuters.
More than US$5 billion in payments due in 2017 have already been postponed until 2020, under a deal struck between PDVSA and bondholders last year.
Also on Tuesday, Venezuela’s Public Prosecution announced it may consider pressing charges against five individuals at oil company Petropiar, who are under suspicion of corruption. The firm is 70 percent owned by the government, while US firm Chevron holds a 30 percent stake.