Tag Archives: FSIA

Case of the Day: Crystallex International v. Petróleos de Venezuela

The CITGO Sign in Kenmore Square
A Boston landmark. Credit: Lunarsurface

The case of the day is Crystallex International Corp. v. Petróleos de Venezuela (D. Del. 2016). Crystallex was a Canadian corporation that had brought an ICSID arbitration against Venezuela, relating primarily to Venezuela’s denial of a permit to allow Crystallex to mine gold deposits in the Las Cristinas area and to the decision of a state-owned economic development company, Corporación Venezolana de Guayana, to rescind a mining contract with Crystallex. The arbitration resulted in an award of more than $1.2 billion in damages to Crystallex.

In today’s case, Crystallex alleged that Venezuela, in anticipation of the award, had “orchestrated a scheme to monetize its American assets and pull the proceeds out of the United States, in order to evade potential arbitration creditors.” In particular, it alleged that Venezuela and its state oil company, Petróleos de Venezuela, cause CITGO, a subsidiary of Petróleos de Venezuela, to issue $2.8 in debt and then to pay the proceeds of the issuance to Petróleos de Venezuela in the form of a dividend. The main claim was for fraudulent transfer under the Uniform Fraudulent Transfer Act. CITGO moved to dismiss for failure to state a claim. (Note that I’m simplifying things a bit—there actually were two levels of subsidiaries, with the indirect subsidiary paying a dividend to the direct subsidiary and the direct subsidiary then paying a dividend to Petróleos de Venezuela. I’m using the name CITGO to refer to both, even though ultimately CITGO was dismissed from the case and the other subsidiary, PDV Holding, Inc., was not. This is mainly so I can use the picture of the CITGO sign, a Boston landmark).
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Congress Overrides The JASTA Veto

By lopsided votes, Congress overrode the President’s veto of JASTA, the Justice Against Sponsors of Terrorism Act. The vote in the Senate was 97 to 1, and in the House of Representatives the vote was 348 to 77. What’s done is done, but it just seems very odd to me for the country with the greatest presence in other countries around the world to be knocking holes in the doctrine of sovereign immunity.
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President Obama Vetoes JASTA

The World Trade Center on 9/11
Credit: Robert on Flikr

Since we are talking about the other branches of government getting involved in foreign sovereign immunity, here is a report on the proposed Justice Against Sponsors of Terrorism Act, S. 2040. The purpose of the bill is “to provide civil litigants with the broadest possible basis, consistent with the Constitution of the United States, to seek relief against persons, entities, and foreign countries, wherever acting and wherever they may be found, that have provided material support, directly or indirectly, to foreign organizations or persons that engage in terrorist activities against the United States.” Its immediate impetus was the plight of the 9/11 survivors, who found that they could not bring a claim against Saudi Arabia on account of that country’s foreign sovereign immunity, taken together with the fact that the United States has not opened the doors to a suit by designating Saudi Arabia as a state sponsor of terrorism.

A few days ago the President vetoed the bill. For non-American readers: when a bill passes both houses of Congress, it goes to the President for his approval. If he approves it, it becomes a law, and if not, then he returns it to Congress, which has to reconsider the bill in light of the President’s objections. If each house of Congress again passes the bill by a two-thirds majority, then it becomes a law notwithstanding the President’s disapproval. The President can also “pocket veto” a bill that reaches his desk within ten days of Congress’s adjournment by neither signing it nor returning it to Congress. Since Congress was scheduled to adjourn, it may be that the administration’s plan was to pocket veto the bill, allowing Democrats to take a politically safe vote for the bill but still allowing for an effective veto. But Congress had to remain in session to pass a continuing resolution to fund the government, and the bill was brought up in the House of Representatives on a motion to suspend the rules for the purpose of allowing the bill to be passed sooner than it otherwise could be passed. I’m not totally sure of all of the machinations, but at the end of the day, the timing for a pocket veto didn’t work out. So Congress will have the opportunity to vote on the bill again, and it may hand President Obama the first veto override of his administration.
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