Paul Hastings LLP secured a complete victory in the U.S. Court of Appeals for the Second Circuit on behalf of the Ad Hoc Board of Petróleos de Venezuela S.A. (PDVSA), Venezuela’s national oil company, when the court overturned the enforcement of nearly $2 billion in bonds issued by the Maduro-controlled PDVSA.

PDVSA contested the validity of the bonds, arguing they were invalid from inception due to non-compliance with Venezuela’s constitutional requirement mandating National Assembly approval for their issuance. A district court, however, upheld the bonds’ validity under New York law and allowing for the enforcement of nearly $2 billion in principal and interest.

Undeterred, Paul Hastings and PDVSA appealed the decision to the Second Circuit, which subsequently referred a critical legal question to the New York Court of Appeals:  Whether Venezuelan or New York law governs the bonds’ validity, given their noncompliance with the procedural requirement of Venezuelan constitutional law.

On February 20, 2024, the New York Court of Appeals issued a unanimous decision in favor of PDVSA, affirming that Venezuelan law governs the validity of the bonds. This pivotal decision marked a significant turning point in the legal battle, prompting the case’s return to the Second Circuit for further proceedings.

Following supplemental briefing in light of the Court of Appeals’ ruling, the Second Circuit issued its ruling on July 3, 2024. The court of appeals vacated the district court decision in its entirety, remanding the case for reconsideration under Venezuelan law and the act of state doctrine.

“PDVSA, PPSA, and PDVH are pleased with the Second Circuit’s decision, which vacates the district court’s 2020 judgment and returns this case to where it began — with the need to assess the legality of the 2020 bonds as a matter of Venezuelan law,” said Kurt W. Hansson, Co-chair of the Complex Litigation and Arbitration practice, on behalf of PDVSA, along with counsel for PDVH. “We look forward to demonstrating the illegality of these instruments on remand.”

Hansson and litigation partner Igor V. Timofeyev led the Paul Hastings team, which also included associates James L. Ferguson and Ben Gilberg.

The victory was recognized by The American Lawyer, earning Igor Timofeyev and the entire Paul Hastings team the “Litigator of the Week” honor.

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