Guayaquil, Ecuador, October 4, 2021 (venezuelanalysis.com) – A federal court in Washington, D.C. is set to allow oil giant ConocoPhillips to enforce a US $8.5 billion arbitration award against Venezuela.
According to documents published by Law360, a court clerk declared Venezuela in default after self-proclaimed “Interim President” Juan Guaidó’s lawyers failed to respond to the court in over a year.
The massive award was issued in March 2019 by a World Bank International Centre for Settlement of Investment Disputes (ICSID) tribunal for the 2007 nationalization of ConocoPhillips’ oil projects in Venezuela (Hamaca, Petrozuata and Corocoro) under the former Hugo Chávez government. Both the Nicolás Maduro government and the Guaidó camp have challenged the ICSID decision, with an annulment hearing scheduled for later this month.
The latest ruling in favor of the Houston-based corporation was grounded on the opposition leader’s legal team missing the deadline "to plead or otherwise defend this action though duly served with summons and copy of the complaint” on March 10, 2020.
ConocoPhillips’ letter to the court goes on to explain that "Venezuela has made no appearance in this case [...] and has neither requested nor received any extension of time to file any pleadings."
“Venezuela is neither an infant nor an incompetent person,” the petition concluded.
Washington’s recognition of Guaidó’s self-proclamation in January 2019, saw the politician be handed control of a number of Venezuela’s assets abroad as well as assume the country's legal representation before US courts. However, the hardline leader has been harshly criticized for failing to protect enterprises from creditors and award claimants looking to use shares to collect.
US-based Venezuelan oil subsidiary CITGO, the nation’s most important firm abroad, is currently the target of several claimants, notably ConocoPhillips, Canadian miner Crystallex and bondholders. The $8 billion-worth company was frozen by Washington and placed under Guaidó’s control in February 2019.
So far, the seizure or auction of CITGO shares has been barred by the US Treasury Department’s Office of Foreign Assets Control (OFAC). However, this could change in the first half of 2022, with Washington promising to “reassess” its stance depending on the results of the ongoing talks in Mexico between the Maduro government and the Guaidó-led opposition.
Speaking to Venezuelanalysis, Venezuelan Economy Vice Minister William Castillo stated that the US-backed leader failing to oppose the ConocoPhillips demand has potentially left CITGO at the mercy of the US oil company.
"We are yet to find out what was negotiated between Guaidó and ConocoPhillips or what he received in exchange," argued Castillo. He added that all Venezuelan assets abroad are at risk amid the "judicial limbo" and "corruption" spurred by the opposition’s "false" authorities.
"This has been the most shameful and criminal operation of robbery, looting and surrendering of Venezuelan patrimony in the history of our country," the vice minister concluded.
In a statement published on Monday afternoon, Guaidó's "special prosecutor's office" rejected accusations that it had abandoned the defense in this arbitration award case. It argued that recent events had been "misunderstood," claiming that the court's decision in favor of ConocoPhillips does not interfere with the annulment hearing scheduled for October 25.
For his part, Venezuelan economist Francisco Rodríguez likewise questioned the decision to “abandon the defense” in the country’s most important international arbitration case. “Regardless of the cause, what is clear is that an appropriate defense is not being exercised, exacerbating the risk of losing our assets [abroad],” he wrote on Twitter.
Rodríguez linked the Guaidó attorneys' no-show in the Washington D.C. court to a recent $1.3 billion settlement allegedly signed between the “interim government” and ConocoPhillips. The agreement was revealed in a report by Delaware District Court-appointed "Special Master" Robert B. Pincus on a proposed "sale procedure" of Venezuelan assets to meet creditor demands.
Guaidó denied brokering a deal with the US corporation, stating that the court document was “mistaken.” In a communique, the former lawmaker declared there were “no contracts in progress” for the sale of CITGO. On October 1, Pincus asked the Delaware court to strike the sentence in question. "I understand that there is no such agreement," he wrote in a letter without specifying what justified the clarification.
The owed sum concerns another arbitration award for $2 billion granted to the oil multinational firm in 2018 by an International Chamber of Commerce (ICC) tribunal in a separate claim related to two of the three joint oil fields formerly held in Venezuela. The Maduro administration allegedly paid $753.9 million between 2018 and 2019 before US sanctions blocked the Caribbean nation from servicing debt.
Apart from litigation in US courts, ConocoPhillips has also been seeking to collect using other Venezuelan assets abroad. According to Argus Media, the US corporation has an enforcement attachment against the Netherlands-based Venezuelan oil subsidiary Propernyn and will benefit from a Ducht court decision ordering a Propernyn shares sale procedure to pay a $52 million debt to Curacao's Refineria di Korsou (RdK).
RdK claims that Venezuelan state oil company PDVSA failed to make payments for nearly two years while operating its 335,000 barrels per day (bpd) Isla refinery until late 2019. Propernyn’s portfolio includes a 15 percent stake in Swedish refiner Nynas and the 10 million barrel per day Bopec oil terminal in Bonaire which is currently out of service and in liquidation due to environmental liabilities.
Heated corruption accusations in Guaidó's camp
Venezuela’s second most important foreign-held asset, Colombia-based agrochemical producer Monómeros, has become another focus of mismanagement scandals since a Guaidó-appointed board took control in 2019. The company recently filed for bankruptcy and will look to reach an agreement with creditors.
Humberto Calderón Berti, former PDVSA president who served briefly as opposition envoy in Colombia, is one of the latest critics of the Monómeros administration. In an interview, the former minister said "no person with knowledge on petrochemicals" was named in the company’s board, with anti-government leaders instead looking for favors and profitable business deals.
"The person responsible for the Monómeros situation is Leopoldo López," the oil executive added in reference to Guaidó’s mentor and far-right politician, currently based in Spain after fleeing house arrest in Venezuela during a failed coup attempt in April 2019.
Amid the current struggles, Monómeros could soon join a growing list of Venezuelan assets abroad targeted by arbitration claimants and holders of the PDVSA 2020 bond. The South American country has an estimated $160 billion in outstanding debt.
This article was edited on October 6, 2021, to add Robert Pincus' letter on the alleged deal between the Guaidó-led opposition and ConocoPhillips.
The opening two paragraphs were amended on August 24, 2022, for clarification on the default judgment ruling.
Edited and with additional reporting by Ricardo Vaz from Mérida.