Venezuela US SRL v Bolivarian Republic of Venezuela

Core issue

At the forefront of this case is a perceived conflict, arising from very particular facts, between the doctrine of recognition of foreign governments and the enforcement of arbitral awards under the New York Convention.

Venezuela argued, both before the District Court and on appeal, that recognition and enforcement of the award would be tantamount to recognition of the Maduro government. That, Venezuela said, would contradict the President’s exclusive constitutional power to grant or withdraw recognition of foreign governments, and therefore, the argument goes, satisfy the public-policy exception under Article V(2)(b)2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: (b) The recognition or enforcement of the award would be contrary to the public policy of that country. of the New York Convention.

A bit of context

In May 2018, Venezuela held presidential elections. Maduro claimed victory, and the National Assembly disputed the result. On 23 January 2019, the National Assembly declared the election invalid and selected Juan Guaidó as Interim President. On the same day President Trump officially recognised Guaidó as Interim President of Venezuela and treated the National Assembly as Venezuela’s only legitimate branch of government.

The United States also maintained and expanded sanctions against Maduro-aligned officials and entities, including PDVSA shortly after recognition.

Maduro nevertheless continued to exercise considerable power inside Venezuela. That created a recurring problem in Venezuela related arbitrations: which side had recognised representative authority for the State? The U.S.-recognised government, or the Maduro side that continued to control state institutions on the ground?

This case arose from a PCA-administered UNCITRAL arbitration. A related version of the same representation problem had already appeared in In Valores Mundiales, S.L. v. Bolivarian Republic of Venezuela, Ministerio del Poder Popular para Relaciones Exteriores, 87 F.4th 510 (D.C. Cir. 2023), which concerned ICSID awards.

Valores, revisited

At the start of the arbitration, Curtis represented Venezuela, at a time when Maduro was still the U.S.-recognised government. After the United States recognised Guaidó, the Maduro-led government replaced Curtis with Guglielmino & Associados. Guglielmino later presented Venezuela’s case in the damages phase. Venezuela’s enforcement argument was that, by permitting that change in counsel, the tribunal treated the Maduro side as having authority to represent the State. Recognition and enforcement of the resulting award, Venezuela said, would therefore contradict the President’s recognition decision.

The D.C. Circuit rejected that argument. Senior Judge Randolph wrote the majority opinion, joined by Judge Rao. Judge Walker dissented. The majority treated Valores as "relevant, well-reasoned, convincing, and binding".

Venezuela tried to distinguish Valores because it involved ICSID awards, not a New York Convention award. The court agreed that it did, but only in one sense: ICSID awards are given the same full faith and credit as final state-court judgments, while the New York Convention awards remain subject to Article V refusal grounds, including public policy.

But the majority held that the difference did not matter. Valores had already rejected the proposition that enforcing an arbitral award against Venezuela is equivalent to recognising Maduro, bluntly referring to that argument as a non sequitur.

It appears that the logic went as follows: Valores had already held that enforcement of arbitral awards against Venezuela was not equivalent to recognition of the Maduro government. If enforcement is not recognition, then it does not impinge on the President’s recognition power. And if it does not impinge on that power, there is no conflict with U.S. public policy for Article V(2)(b) purposes.

The road not taken

The first issue that comes to mind when hearing about lack of proper representation in arbitration is due process. Under the New York Convention, that kind of argument belongs under Article V(1)(b)1. Recognition and enforcement of the award may be refused [...]: (b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case;, which covers a party that was unable to present its case.

But the majority did not decide the case on that basis. Venezuela proceeded under Article V(2)(b), the public-policy exception, and expressly disclaimed reliance on inadequate representation as a separate Convention defence. The majority therefore refused to recast the case as an Article V(1)(b) challenge.

Result

The D.C. Circuit affirmed recognition and enforcement of the award. The court did not decide whether recognition power could ever support a New York Convention public-policy objection. It held only that this award could be enforced because enforcement did not amount to recognition of Maduro, did not approve the tribunal’s representation decision, and did not force the Executive to contradict its recognition of Guaidó.

At any rate, the text of the decision is a captivating read in its own right, so if the issue is of interest, it is worth reading in full.