Updated: Aug 22, 2021
Expert: With the interim government, PDVSA's alter ego character is maintained with respect to Venezuela
Guaidó's arrival on the political stage in 2019 and his fight against the Maduro regime for control of PDVSA, not only maintained his status as an alter ego vis-ed venezuela, but deepened it further, he says. There has been no change in the "alter ego" character that Petróleos de Venezuela S.A. (PDVSA) maintains with respect to Venezuela with the interim government in the hands of the president of the National Assembly, Juan Guaidó, an argument that could help strengthen the sale of shares of the republic's assets to meet the obligations that have not been paid. On February 19, 2021, Manuel A. Gómez, Professor of Law and Associate Dean of Graduate Studies and Global Engagement at Florida International University with experience in the resolution of transnational disputes in international and comparative law, testified under penalty of perjury in the District Court of Delaware, in support of the Motion for Relief filed by Northrop Grumman Ship Systems Inc. against the Ministry of Defense of Venezuela. Gomez refers in his statement that he was hired by Northrop attorney Grumman Ship Systems Inc., formerly known as Ingalls Shipbuilding Incorporated and now known as Huntington Ingalls Incorporated, for the purpose of analyzing certain matters related to Venezuela in support of a fieri facias attachment injunction related to the actions of PDV Holding Inc. (PDVH) , a Delaware corporation wholly owned by Petróleos de Venezuela SA (PDVSA), Venezuela's state-owned oil company and debtor alter ego. He explains that this is his professional opinion based on his knowledge and familiarity with the Venezuelan legal system and its current political reality; the analysis of the facts and circumstances of the case based on the review of a series of documents; and in its analysis of laws and other regulations, government reports, court decisions, news articles, and academic publications. He then quotes the two questions that he was asked to answer, which are: a) Whether PDVSA remains Venezuela's alter ego — as this Court determined in August 2018 — so PDVSA's assets in the United States are still subject to Venezuela's widespread control. b) Whether the circumstances of the Court's alter ego analysis regarding PDVSA have changed since the U.S. decision in January 2019 to transfer its recognition to Venezuela's legitimate government headed by Juan Guaidó instead of Nicolas Maduro. You clarify that your opinion is not subject to any outside influence, pressure or interest in the outcome of any dispute, potential or present, between any and all parties involved in the case. The considerations and conclusions expressed in this report reflect my professional opinion on specific matters to which they refer. In this regard, he refers, firstly, that according to his professional criteria, first, PDVSA remains the alter ego of Venezuela and its assets and interests in the United States are still subject to the widespread control of Venezuela's political leaders; and second, the circumstances considered by the Court to consider PDVSA as Venezuela's alter ego have been accentuated in relation to the broad control exercised by the country's political leaders since the United States recognized Juan Guaidó as Venezuela's interim president in January 2019.
Venezuela and PDVSA as one over the past two decades
Remember that PDVSA was originally created in 1975 as a state holding company to carry out government policies on the distribution and marketing of hydrocarbons in Venezuela. However, it warns that, despite having been constituted as a private commercial corporation subject to the laws and regulations applicable to all commercial firms, the oil company is under the control and supervision of the Executive, through the Ministry of Energy and Mining. He stressed that the corporate form gave PDVSA a degree of flexibility and operational independence, while Venezuela, as the sole shareholder, maintained a certain level of oversight. He added that with hydrocarbons being the main pillar of the Venezuelan economy, PDVSA has always had a strategic importance for the government. He warned that, at least until the early 2000s, the level of government intervention in PDVSA's operations was limited to what was required by different government statutes and regulations, with minimal political interference in the controlling entities. In his statement to the Delaware Court, Manuel A. Gómez points out that 2003 was the year that became the breaking point in the relationship between Venezuela and PDVSA, beginning a new relationship between the two, characterized by the erosion that the former began to cause in the independence of PDVSA. Following a national oil strike that paralyzed the country's industry and economy in February of that year, the government of Hugo Chávez made the dramatic decision to summarily lay off some 18,000 employees who made up 40 percent of the company's workforce. Since then, Gomez says, PDVSA has increasingly become a political instrument of the Chavista government and the vacancies left by the layoffs have been filled with political supporters from Chávez's party. It argues that, in economic terms, PDVSA became the main financier of government programs and activities that, in many cases, are even unrelated to the hydrocarbon marketing business. Similarly, he said that, as later revealed, PDVSA became a chavista government bribery fund to finance political campaigns, buy votes and achieve geopolitical prominence around the world through a series of social programs called Bolivarian Missions Gomez warns that the change of broad government control was not limited to PDVSA and its affiliates, but to all assets, regardless of whether they were located at home or abroad. He argues that Nicolás Maduro's administration has continued to openly treat PDVSA and its affiliates as an appendage of the Venezuelan government. Recall that on January 23, 2019, Juan Guaidó, president of the Legislative Branch, the National Assembly, was sworn in as interim president of the country in the face of the constitutional crisis generated by President Maduro's refusal to resign despite the expiration of his mandate. An appointment based on an interpretation of article 233 of the Constitution. This is because the 2018 elections were illegitimate in part because opposition parties were disqualified from participating. The United States was the first nation to recognize Guaido as interim president and has pledged to support his efforts to pressure Maduro to step down, so that free and fair elections can be held and the country can regain its institutional stability. But despite repudiation by many foreign governments and multilateral organizations, Maduro and his officials remain in office and in effective control of the government and territory. Guaido, for his part, has made key appointments — most of them people outside Venezuela — who work ad honorem in critical areas such as foreign relations, economic development, debt restructuring, asset recovery, legal representation, as well as in the management of state entities such as PDVSA and affiliates. He noted that, for more than a year, tension between Guaidó and Maduro has created an unprecedented institutional tug-of-war, with two presidencies, two legislatures and two Supreme Courts. Both have used their political influence to maintain broad control over all foreign assets held by Venezuelan-owned entities, especially PDVSA and its affiliates, and have had no qualms about treating those assets as the direct property of Venezuela. Venezuela's political control over PDVSA intensifies According to Manuel A. Gómez, he points out that one of the first official acts of the National Assembly, after the inauguration of Juan Guaidó as interim president, was the issuance of an emergency act, on February 5, 2019, called "Statute that governs the Transition to democracy to restore the validity of the Constitution of the Bolivarian Republic of Venezuela" , known as the Transitional Statute, which, in article 34, expressly annulled PDVSA's ordinary corporate regime by empowering the interim chairman to appoint a special Board of Directors to exercise his rights as a shareholder of PDV Holding, including the selection of members of its board of directors, CITGO and other affiliates. This statute was annulled by the Maduro-controlled Supreme Court of Justice. The expert believes that the subjection of PDVSA's own assets to the extraordinary control of the interim government of Juan Guaidó and their treatment as property of the Venezuelan state, is also reflected in the limitation imposed by Article 36 of the Transitional Statute that excludes the use of any fund belonging to PDVSA or any other state entity until after the regime of Nicolás Maduro cedes power. But in addition to the aforementioned legal acts, the interim government of Juan Guaidó has issued repeated public statements in which it claims that the assets of PDVSA, PDV Holding and CITGO are the property of Venezuela and the Venezuelan people, and that the appointment of members of pdvsa's special board of directors and related entities and other measures taken are part of the strategy to preserve the property of all Venezuelans. Thus, based on the above, Manuel A. Gómez considers that it is clear that PDVSA remains the alter ego of Venezuela, so that the assets of the state oil company in the United States are still subject to the widespread control of Venezuela. A control that has intensified since the decision of the United States to recognize as the legitimate government of Venezuela, headed by Juan Guaidó and not that of Nicolás Maduro.