Venezuela: ConocoPhillips Closer to Enforcing $9.7B Award After Guaidó Opposition Misses Payments

The opposition leader has drawn fierce criticism for his handling of foreign assets and international arbitration cases.

By Ricardo Vaz
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US oil giant ConocoPhillips is looking to seize Venezuelan assets to collect on a $9.7 billion arbitration award. (Reuters)
US oil giant ConocoPhillips is looking to seize Venezuelan assets to collect on a $9.7 billion arbitration award. (Reuters)

Mérida, October 23, 2021 (venezuelanalysis.com) – A World Bank international arbitration tribunal has suspended proceedings to annul a multi-billion ConocoPhillips award.

The International Centre for Settlement of Investment Disputes (ICSID) announced its decision on October 14 after the Venezuelan so-called “interim government” reportedly failed to meet its obligations.

The Houston-based corporation was awarded US $8.5 billion by the ICSID in March 2019 as compensation for three oil projects (Corocoro, Hamaca and Petrozuata) nationalized in 2007 by the former Hugo Chávez government. The amount has since accrued almost $1.2 billion in interest to total $9.7 billion.

Opposition leader Juan Guaidó proclaimed himself “interim president” in January 2019, and in December 2019 filed to have the award annulled. Recognition from Washington has seen the “interim government” take over litigation in several cases involving the country, particularly in US courts.

However, the suspension of the annulment proceedings is a new blow to the beleaguered anti-government camp. According to ICSID regulations, the party demanding the annulment of an award must cover the proceeding costs in advance. The body declared the Guaidó “administration” to be in default on September 7 before stopping the case this month.

The arbitration dispute likewise revealed a potential conflict of interest in the US-backed opposition. Court documents seen by Venezuelanalysis show that Alberto Ravell is serving as legal counsel for ConocoPhillips in the case. Ravell’s father, Alberto Federico Ravell, is a high-profile anti-government media mogul who has served as Guaidó’s director of communications since April 2019.

A spokesperson from the opposition leader’s press office did not reply to a request for comment.

The Nicolás Maduro government is likewise challenging the ICSID award but saw the tribunal reject its motion to have the Guaidó legal team barred from representing the country. Venezuela officially abandoned the ICSID convention in 2012.

ConocoPhillips’ attorneys included the World Bank body’s decision in an October 20 petition to the US District Court for the District of Columbia requesting a default judgment in order to enforce the award.

“The Petition seeks the recognition of an arbitration award and the enforcement of the pecuniary obligations imposed by that arbitration award,” the text seen by Venezuelanalysis reads.

The oil giant was further bolstered by the court’s clerk entering a default against its opponents after the Venezuelan opposition failed to respond to the case for more than a year.

Guaidó came under fire for the no-show in what is the largest arbitration award against the country. In response, the opposition’s "special prosecutor's office" published a statement denying that it had abandoned the case, claiming that there were no arguments to present before the DC court and that lawyers were focusing on the ICSID annulment efforts instead.

However, the October 4 press release failed to acknowledge that its mandatory payments had been declared missing almost a month earlier. ConocoPhillips’ representation went on to cite the statement as evidence that the US-backed politician and allies were “aware of the proceedings” and “chose not to make an appearance.”

Analysts speculated that the failure to show in court could be tied to an alleged $1.3 billion settlement between the “interim government” and ConocoPhillips. The agreement featured in a report by a Delaware court “special master” on a sales procedure of Venezuelan assets requested by Crystallex. The Canadian miner was granted $1.4 billion in compensation for nationalized assets.

The Guaidó camp denied having struck a deal with the oil corporation and claimed the court document was “mistaken.” Special Master Robert Pincus asked the court to strike the sentence in question from the document but did not explain what motivated the clarification.

The US-recognized “administration” suffered yet another setback in early October as the District Court for the Southern District of New York entered a default judgment favoring three subsidiaries of the Pharo Group. The Cayman Island-based investment firms are looking to collect $1.2 billion from defaulted Venezuelan bonds, with the counsel for the Venezuelan side not responding to the lawsuit filed in April.

In order to collect, creditors have targeted foreign-held Venezuelan assets, chief among them CITGO, US subsidiary of state oil company PDVSA, which is valued at $8 billion. Corporations such as ConocoPhillips and Crystallex have taken to US courts to force an auction of the company’s patrimony. CITGO shares were likewise pledged as collateral for the PDVSA 2020 bond that defaulted after Guaidó and allies failed to make a $913 million payment.

The US Treasury Department’s Office of Foreign Assets Control (OFAC) has blocked the seizure or auction of Venezuelan assets, as well as transactions involving the PDVSA 2020 bond, in an attempt to safeguard its Venezuelan allies’ political prospects.

With reports that the Biden administration might be prepared to lift the measures in 2022, the Guaidó-appointed PDVSA and CITGO ad hoc boards reportedly met with US officials to ask for a 6-7 month extension of the current protections. The CITGO authorities have hired JPMorgan Chase & Co to draft proposals for dealing with creditors.

The running of CITGO and other companies put in Guaidó’s hands has caused significant rifts within the hardline opposition. The 2015 National Assembly, which continues to operate with Washington’s backing despite its term ending, has not approved the JPMorgan talks.

For its part, the Maduro government has blasted the opposition for endangering the country’s assets and pledged to defend them at all costs. Economy Vice Minister William Castillo called the US-backed sector’s actions “the most shameful and criminal operation of robbery” in Venezuelan history.

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