PHILADELPHIA (CN) — Representing a client bankrupted by Venezuela, a Gibson Dunn lawyer urged the Third Circuit on Monday to sign off an order attaching Venezuela’s shares in its state-owned oil company.
“We had a judgment from a sovereign debtor that chose to evade its creditors,” attorney Miguel Estrada said at oral arguments that stretched for four hours Monday afternoon in Philadelphia.
The debtor in the case is Venezuela, which has since 2016 owed a $1.2 billion arbitration judgment to the now-defunct gold-mining company Crystallex International Corp.
Years earlier, Venezuela nationalized Crystallex’s mining operations in the region known as Las Cristinas — home to one of the largest undeveloped gold deposits in the world — and Crystallex in turn has sought to satisfy the judgment by attaching assets from the state-owned oil giant Petroleos de Venezuela.
PDVSA, as the company is otherwise known, made an unsuccessful bid for sovereign immunity but is fighting now for the Third Circuit to overturn last year’s writ of attachment.
“Crystallex failed to show that Venezuela used Petroleos to intentionally defraud Venezuela,” said the company’s attorney, Joseph Pizzurro, of Curtis Mallet-Prevost Colt & Mosle.
“Petroleos, as an instrumentality, is entitled to a presumption of its own separateness and is entitled to its own judgment,” Pizzurro added.
U.S. Circuit Judge Thomas Ambro, who took the lead for the three-person panel in questioning Monday, asked Pizzurro to comment on material where PDVSA said it was “controlled” by the Venezuelan government. Ambro noted as well that all of the company’s profits go to the state, and that it pays the state taxes on its profits.
“That’s not relevant,” Pizzurro said. “That has nothing to do with whether Crystallex can assert an alter ego claim.”
Pizzurro also disagreed when U.S. Circuit Judge Joseph Greenaway Jr. questioned what would stop foreign governments from creating foreign entities, transferring their assets to them as the need arises, to avoid international law.
“None of that conduct is related to Crystallex’s claim,” he said, maintaining that PDVSA did not injure the Canadian company.
“Petroleos is entitled to a presumption of separateness and a presumption of sovereign immunity itself — not derivative of Venezuela,” Pizzurro continued.
The panel also heard arguments Monday from Sullivan and Cromwell attorney Amanda Davidoff, who represents 2020 bondholders with Blackrock Fin Management who own 51 percent of PDVSA.
“The creditors are lining up at the courthouse to come after Petroleos,” Davidoff said.
They didn’t bargain to be competing with Venezuela for Petroleos’ assets, she added.
Venezuela’s attorney, Kent Yalowitz of Arnold and Porter, meanwhile noted that circumstances in Venezuela have changed from the time the writ of attachment was entered.
“Things that were attributable to the republic when they were going on in 2018 are no longer attributable to the republic,” Yalowitz said. “There’s a radically new environment.”
Crystallex’s Estrada emphasized, however, that neither the new or the old Venezuelan government would be likely to pay their credit to Crystallex.
“The judgment has to be looked at on the basis that it was filed as the district court heard it,” Estrada said. “We could be in the District Court with no way of knowing whether the record is any more certain than it is today or when the district court heard this.”
The court did not indicate when it intends to rule.