March 21, 2022
Canadian mining company Crystallex International Corporation recently took another big step towards enforcing its $1.202 billion judgment against Venezuela. Yet its recovery still awaits the final verdict of the Treasury Department’s Office of Foreign Assets Control (“OFAC”).
The hard-fought dispute started in 2011, when Venezuela followed through on its threats to nationalize Crystallex’s valuable gold mining operations in Las Cristinas, one of the largest mining concessions in the world. Crystallex subsequently won an award of $1.202 billion against Venezuela from an international panel of arbitrators in April 2016 and confirmed that award in the district court in Washington, D.C. Crystallex then brought enforcement proceedings in Delaware in pursuit of Venezuela’s most valuable overseas asset, Citgo Petroleum Corporation, eventually attaching the shares of Citgo’s holding company after some early setbacks.
The proceedings have repeatedly broken new ground on a host of novel issues under the Foreign Sovereign Immunities Act, attachment immunity, corporate alter egos, and fraudulent transfers. In its latest ruling, issued on March 2, 2022, the district court tackled perhaps the most novel issue of all: to what extent can the courts lay the groundwork for the sale of valuable assets in satisfaction of a judgment when the executive branch has forbidden the sale of those assets?
That quandary arose in January 2019, when the United States recognized the government of Juan Guaidó, rejecting the legitimacy of the existing Maduro regime. To preserve Citgo for the Guaidó government, OFAC issued a series of sanctions forbidding any transfer of Citgo’s or its parents’ assets, including the very shares attached by the court to satisfy Crystallex’s judgment. OFAC then rejected Crystallex’s entreaties to issue a license allowing the sale to proceed.
All parties agreed that the OFAC sanctions prohibited the closing of any sale of those shares. But what about marketing, auctioning, bid solicitation, and other preliminary steps in what the district court rightly labeled a “monumental and challenging” task? Could any of these arduous and time-consuming steps proceed with OFAC’s sanctions still in effect?
The district court ruled that they could, overruling Venezuela’s objections to the “Sale Procedures Order” that will govern the sale. That order includes a unique provision creating a “six-month window” in which the Special Master assigned to assist the district court will “attempt to obtain greater clarity from OFAC” in order to (hopefully) reassure potential buyers that OFAC will eventually let the sale proceed.
Acknowledging that OFAC still has the final say, the district court nevertheless firmly declared that it “has an obligation to work toward execution of Crystallex’s judgment, and it will continue do so.” Recognizing the difficulty and novelty of these issues, however, the court also took the rare step of stating in advance that it would likely grant permission for Venezuela to take an interlocutory appeal to the Third Circuit.
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