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Crystallex Int'l Corp. v. Bolivarian Rep. Venez. (3D Cir.)

Published online by Cambridge University Press:  03 February 2021

Kevin D. Benish
Kevin D. Benish*
Affiliation:
Kevin D. Benish is an Adjunct Professor at the New York University School of Law and a Research Fellow at NYU's Center for Transnational Litigation, Arbitration, and Commercial Law.
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Extract

On May 18, 2020, the United States Supreme Court denied a request by the Bolivarian Republic of Venezuela and its state-owned oil company, Petróleos de Venezuela, S.A. (PDVSA), to review the merits of Crystallex Int'l Corp. v. Bolivarian Republic of Venezuela, a decision by the U.S. Court of Appeals for the Third Circuit. In Crystallex, the Third Circuit affirmed a trial court's determination that PDVSA is the “alter ego” of Venezuela itself, thus permitting Crystallex to enforce a $1.4 billion judgment against Venezuela by attaching property held in PDVSA's name. Given the Supreme Court's decision to leave the Third Circuit's opinion undisturbed, Crystallex is a significant decision that may affect parties involved in transnational litigation for years to come—especially those pursuing or defending against U.S. enforcement proceedings involving the property of foreign states.

Type
International Legal Documents
Information
International Legal Materials , Volume 60 , Issue 2 , April 2021 , pp. 147 - 167
Copyright
Copyright © American Society of International Law 2021

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References

ENDNOTES

1 932 F.3d 126 (3d Cir. 2019) [hereinafter Crystallex II], cert. denied, 140 S. Ct. 2762 (2020).

2 For an overview of the arbitration and district court proceedings that led to the Third Circuit's decision, see Crystallex Int'l Corp. v. Bolivarian Republic of Venezuela, 333 F. Supp. 3d 380 (D. Del. 2018) [hereinafter Crystallex I].

3 28 U.S.C. §§ 1609–11.

4 “PDVSA owns 100% of the shares of PDVH … which in turn owns 100% of the shares of CITGO Holding, Inc., which in turn owns 100% of the shares of CITGO Petroleum Corp.” Crystallex I at 418 n.36 (internal quotation marks and citation omitted).

5 Id. at 385.

6 Id. at 387. In the United States and under the FSIA, questions of sovereign immunity and the subject matter jurisdiction of federal courts are intertwined. 28 U.S.C. § 1330(a).

7 462 U.S. 611 (1983).

8 Id. at 629–30. Foreign states and their agencies and instrumentalities otherwise enjoy a “presumption of independent status.” Id. at 627. For a discussion of the Third Circuit's interpretation of the Bancec test, see notes 14–22 and accompanying text, infra.

9 Crystallex I at 401–03, 406–14.

10 Id. at 426. The District Court also issued a subsequent order to initiate the sale of PDVSA's PDVH stock through a public sale. That order, the District Court's August 9 Crystallex I decision, and a petition for a writ of mandamus to prevent the sale of PDVSA's PDVH stock until PDVSA's appeals were decided were all consolidated and resolved by the Court of Appeals for the Third Circuit in its Crystallex decision. See Crystallex II at 134.

11 The Third Circuit recognized the Guaidó regime as authorized to speak for and act on behalf of Venezuela after the United States Government recognized Guaidó as the rightful leader of Venezuela in January 2019. Id. at 135 & n.2. The Circuit Court recognized, however, that Venezuelan President Nicolas Maduro likely maintains meaningful control over Venezuela and PDVSA. Id.

12 Id. at 139.

13 Id. at 138–52.

14 Originally, “the Bancec doctrine came in a case involving the shifting of substantive liability” and was not held explicitly by the Supreme Court to apply outside that context. Id. at 138.

15 Id. at 138–39 (collecting cases).

16 Id.at 139.

17 Id. at 140.

18 Id.

19 138 S. Ct. 816 (2018).

20 Crystallex II at 140–41.

21 Compare id. at 141 (highlighting factors articulated in Rubin), with id. at 141 n.7 (listing factors considered by the District Court).

22 Id. at 141 n.8, 146.

23 Bolivarian Republic of Venezuela v. Crystallex Int'l Corp., 140 S. Ct. 2762 (2020).

24 See, e.g., Valentina Ruiz Leotaud, Crystallex asks US judge to approve sale Venezuelan oil refiner by January 2021, Mining.com (Sept. 20, 2020), www.mining.com/crystallex-asks-us-judge-to-approve-sale-venezuelan-oil-refiner-by-january-2021.

25 See Crystallex II at 151–52 (suggesting courts “ignore the formal separateness of … two [sovereign] entities” only in “extraordinary circumstances,” but concluding the facts of this case “clear[ed] that bar easily”).

26 Id. at 146.

27 Id. at 140.

28 Cf. Bridas S.A.P.I.C. v. Gov't of Turkmenistan, 345 F.3d 347, 360 n.11 (5th Cir. 2003) (listing twenty-one factors for courts to consider when making alter-ego determinations).

29 See generally Restatement (Fourth) of the Foreign Relations Law of the United States, § 452 Reporters’ Notes 7–9 (Am. Law Inst. 2018).

30 See, e.g., Noboa v. Barceló Corporación Empresarial, SA, 812 F.3d 571, 573 (7th Cir. 2016) (interpreting due process limitations on exercise of judicial jurisdiction in light of OBB Personenverkehr AG v. Sachs, 577 U.S. 27 (2015), a case involving the interpretation of the FSIA). Cf. Daimler AG v. Bauman, 571 U.S. 117, 133–36, (2014) (discussing alter-ego and agency theories of judicial jurisdiction in action against private corporation and its subsidiary).