New opinion: Third Circuit approves attachment of U.S.-based assets of Venezuela’s state-owned oil company [guest post]

This is a guest post by David Goodwin.

Crystallex International v. Venezuela—Foreign Sovereign Immunities Act—affirmance—Ambro

In 2011, Venezuela nationalized its gold mines and seized gold deposits belonging to plaintiff Crystallex. Crystallex won an international arbitration award against Venezuela, confirmed its arbitration award in D.C., and set about trying to collect. An attempt to thwart asset transfers to various other entities using Delaware’s Uniform Fraudulent Transfer Act was unsuccessful, but Crystallex also went after the U.S.-based holdings of PDVSA, Venezuela’s state-owned oil company. Arguing that PDVSA was an “alter ego” of Venezuela under the Foreign Sovereign Immunities Act of 1976, Crystallex prevailed below, and today, the Third Circuit affirmed.

Judge Ambro’s opinion for the Court acknowledges the fraught political backdrop, but is anything but tentative; rather, it is a muscular, confident opinion in a very technical area of law. Jurisdictional pitfalls abound, but the primary issue is the proper application of First National City Bank v. Bancec, 462 U.S. 611 (1983), which allows judgment creditors to go after instrumentalities of foreign sovereigns if they are so “extensively controlled” that a principal/agent relationship is created. Judge Ambro summarizes the topline conclusions on pages 13 and 14, and I can do no better than to simply quote them below:

(A) whether the Bancec “alter ego” doctrine determines the District Court’s jurisdiction to attach PDVSA’s assets (it does), (B) the scope of the Bancec inquiry and whether its factors are satisfied here (they are), and (C) whether PDVSA’s shares of PDVH [the holding company for CITGO] are immune from attachment under the Sovereign Immunities Act (they are not).

There are several innovations along the way. For instance, the Court concludes that under 28 U.S.C. § 1963, sovereign immunity exceptions extend to subsequent enforcement actions that arise out of earlier litigation—which is what happened here, in what Judge Ambro terms a “continuation” of the arbitration confirmation proceedings in D.C. district court. And, in particular, Judge Ambro looks to two recent Supreme Court decisions—Republic of Sudan v. Harrison, 139 S. Ct. 1048 (2019), and Rubin v. Islamic Republic of Iran, 138 S. Ct. 816 (2018)—as clarifying application of the Sovereign Immunities Act and the Bancec inquiry. With regard to the latter, Judge Ambro’s opinion applies slightly different factors (from Rubin) than the District Court applied, but comes to the same conclusions. In fact, Judge Ambro writes on page 33 that actual application of Bancec is “straightforward.”

Joining Judge Ambro were Greenaway and Scirica.

The opinion cites extensively from oral argument, and with good reason: it was a four-hour tour de force. Joseph Pizzurro of Curtis Mallet-Prevost Colt & Mosle argued for PDVSA, Gibson Dunn’s Miguel Estrada argued for Crystallex, Arnold & Porter Kaye Scholer’s Kent Yalowitz argued for Venezuela, and Sullivan & Cromwell’s Amanda F. Davidoff argued for amicus appellants Blackrock Financial Management and the delightfully named Contrarian Capital Management. While he didn’t argue, former DNJ U.S. Attorney Paul Fishman was on Venezuela’s brief.