THE AUTHOR: Sara Ewad, Associate at Debevoise & Plimpton LLP
Who is the current President of Venezuela? Governments, courts, and tribunals alike have repeatedly had to grapple with this question since the uncertain results produced by the last round of presidential elections in January 2019. Initially, the incumbent, Nicolás Maduro, announced a landslide victory in his favour, but the fairness of the elections and the results it produced were questioned both domestically in Venezuela and internationally by the United States and the European Union, among others.
The leader of Venezuela’s National Assembly, Juan Guaidó, subsequently declared the elections as illegitimate and himself the Interim President. Over two years later, the political deadlock between the two ‘Presidents’ and their factions shows no sign of abating, resulting in numerous courts and arbitral tribunals having to decide for themselves who is duly authorised to appear on Venezuela’s behalf in ongoing litigation and arbitration proceedings.
This post will briefly examine two recent instances in which this issue has arisen: the English Court of Appeal’s judgment in The “Maduro Board” of the Central Bank of Venezuela v The “Guaidó Board” of the Central Bank of Venezuela & Ors  EWCA Civ 1249; and the Decision on Respondent’s Representation, dated 1 March 2021, in ICSID Case No. ARB/07/27 Venezuela Holdings B.V., Mobil Cerro Negro Holding LLC and Mobil Cerro Negro Ltd v Republic of Venezuela.
The Litigation in England
The English proceedings concern a dispute as to who precisely is entitled to provide instructions regarding assets belonging to the Central Bank of Venezuela, held in accounts at the Bank of England and at Deutsche Bank (the “Banks”). Each of Maduro and Guaidó had appointed a board that purported to govern the Central Bank (nominally, the “Maduro Board” and the “Guaidó Board”), with each claiming to be the entity that could give instructions in relation to the relevant assets.
In order to determine which Board was, for the purposes of English law, entitled to instruct the Banks as to the assets, the English courts were faced with a number of complex issues of public international law. This included the interrelated questions of (i) whether the UK government had formally recognised either Guaidó or Maduro as the Head of State and/or Head of Government of Venezuela; and (ii) if so, whether that required the English courts to speak with ‘one voice’ with the UK Government and uphold that recognition for the purposes of the proceedings.
In the Commercial Court at first instance, Teare J held that the UK Government had expressly recognised Guaidó as Venezuela’s Interim President, and thereby implicitly no longer recognised Maduro. Issuing statements of recognition was the sole prerogative of the Crown (acting through the UK Government), and the ‘one voice’ doctrine obliged the courts to accept that recognition as conclusive. Consequently, the Guaidó Board held the appropriate authority to instruct the Banks.
The Court of Appeal disagreed with Teare J’s findings on the question of recognition, on the basis of the following:
- Recognition of a foreign state or government could be express or implied, and could be de jure or de facto. The key difference between de jure and de facto recognition was that “a de jure government is one which  ought to possess the powers of sovereignty, though at the time it may be deprived of them. A de facto government is one which is really in possession of them, although the possession may be wrongful or precarious”. It was therefore possible for the UK Government to simultaneously recognise one leader as de jure and another leader as de facto. At the same time, whatever the form that recognition took, it had to be ‘unequivocal’ so as to be given effect by the courts (pursuant to the ‘one voice’ doctrine). If a statement of recognition was indeed unequivocal, then that would be conclusive and it would be “unnecessary to look beyond” the terms of the statement.
- The FCO had previously provided the Commercial Court with a letter declaring that the UK Government recognised Guaidó as the de jure Head of State of Venezuela. However, the Court noted that the language used in the letter did not make any statement excluding recognition of Mr Maduro in any capacity, and was ambiguous in a number of other ways. For example, the letter acknowledged that the Maduro regime exercised substantial (albeit “illegitimate”) control over the people of Venezuela. Additionally, the UK government maintained diplomatic relations with the Maduro regime, including through an ambassador accredited to Maduro as President of Venezuela, while simultaneously declining to accord diplomatic status to Guaidó’s representative in London. The Court of Appeal interpreted this ambiguity to mean that there was a possibility that the UK Government continued to recognise Maduro as the de facto Head of State.
- While noting that it should not be said that de facto recognition ‘trumped’ de jure recognition, the Court noted that if Maduro had been recognised as the de facto Head of State of Venezuela by the UK Government, then binding English precedent required that the acts of the rival, de jure, leader/government – i.e. of Guaidó and his government – be treated as a nullity and with no legal effect. While not considering this conclusion in much detail, on that basis, the Court of Appeal thought the most appropriate resolution was to remit the matter to the Commercial Court such that it could request further clarification from the FCO as to whether the UK Government’s recognition of Guaidó operated to exclude the recognition of Maduro for any purpose.
The ICSID Arbitration
The ICSID arbitration proceedings brought by subsidiaries of Exxon against Venezuela have had a long and tortured history. The original proceedings commenced in 2007, when the Exxon subsidiaries filed a Request for Arbitration under the Netherlands-Venezuela BIT, claiming that Venezuela had nationalised two oil projects in which the Claimants had interests. In an Award dated 9 October 2014, the ICSID tribunal found in favour of the Claimants, determining that there had been a direct expropriation by Venezuela of those interests, as well as breaches of other investor protections such as fair and equitable treatment and minimum standard of treatment. Consequently, the tribunal ordered Venezuela to pay damages in the sum of USD1.6 billion.
In 2017, the Award was annulled in significant part, with the ad hoc Committee finding that the tribunal had manifestly exceeded its powers in its determination and assessment of the compensation due to the Claimants, and had failed to state the reasons on which its decision was based.
The arbitration was re-submitted by the Claimants in October 2018. In December 2018, the Respondent, represented by its agent and Attorney General, Reinaldo Muñoz Pedroza, notified ICSID that Curtis, Mallet-Prevost, Colt & Mosle LLP (“Curtis”) had been instructed as legal counsel. In March 2019, Mr Pedroza notified ICSID that Curtis’ instructions had been revoked and that De Jesús & De Jesús (“De Jesús”) would appear as Venezuela’s new legal counsel. Shortly thereafter, ICSID was contacted by José Ignacio Hernández, who proclaimed to be Venezuela’s Special Attorney General as appointed by Guaidó.
The Claimants, Mr Pedroza and Mr Hernández subsequently exchanged a series of correspondence, during which it became clear that the parties could not agree as to who was entitled to appear as agent on behalf of Venezuela. The Tribunal was formally constituted in August 2020, at which stage the Claimants requested that the Tribunal determine which of Venezuela’s “purported representatives” were in fact properly authorised to represent the Respondent in the proceedings as a threshold issue. The Tribunal agreed to do so.
Matters were further complicated when, in September 2020, Enrique Sánchez Falcón contacted the Tribunal to state that he now held the position of Special Attorney General of Venezuela appointed by Guaidó (impliedly replacing Mr Hernández). He provided electronic contact details and a postal address of a location in Bolivia. Mr Falcón also notified the Claimants, Mr Pedroza and the Tribunal that he had (re)appointed Curtis as counsel for Venezuela.
Curtis argued that the Tribunal did not have jurisdiction to determine the matter, as it was principally a political question, and that a decision (whatever the outcome) would effectively amount to the recognition or otherwise of which Venezuelan government was the ‘legitimate’ one. The Tribunal disagreed, finding that the issue of Venezuela’s representation was merely a procedural issue falling within the ambit of Article 44 of the ICSID Convention. It consequently had the power to address procedural issues that arose in the course of the arbitration. The Tribunal further noted that it had no capacity to recognise a government, but had a more “limited and functional capacity consisting in deciding the issues submitted to [it] by the disputing parties”. This meant that it was empowered to decide on the representation of the parties before it to assure the proper conduct of the proceedings.
The Tribunal thus held that it had jurisdiction to determine the representation issue, and ultimately, by favouring the “status quo” position, found that Mr Pedroza, on behalf of Maduro’s government, was Venezuela’s rightful representative. Specifically, the Tribunal held reasoned that:
- Prior arbitral tribunals faced with the question of Venezuela’s representation had accorded significant weight to the maintenance of the status quo. Given that Mr Pedroza was the initial “representative of record”, it was in the interest of orderly proceedings for Mr Pedroza to remain as such.
- While the Tribunal made no comment as to the question of the legitimacy of either government, it was unconvinced that Mr Falcón’s appointment was valid under domestic Venezuelan law given the challenges in the Venezuelan courts to the relevant domestic legislation providing for Mr Falcón’s appointment. Moreover, Mr Falcón had not been shown to be the representative of an “effective government, meaning [a] government that is in control of the national territory and most, if not all, of the State apparatus”, demonstrated in part by Mr Falcón being located in Bolivia.
- It had also not been shown that the acts of Maduro or of his government in declaring victory after the January 2019 elections amounted to violations of peremptory norms of international law. Absent such violations, recognition of Guaidó and his government by other countries such as the UK did not warrant a change to the status quo
It is notable that the ICSID Tribunal made direct reference to the English Court of Appeal’s view that the UK Government’s de facto recognition of a leader may render de jure recognition a nullity. The saga in England is far from over, however, since the UK Supreme Court agreed to hear the Guaidó Board’s appeal to the Court of Appeal’s decision. The grounds of appeal include challenges to (i) the finding that the UK government’s statement recognising Guaidó was ambiguous and left open the possibilities of a continuing implied recognition of Maduro; and (ii) the determination that de facto recognition of Maduro would require the English courts to treat the acts of Guaidó as legal nullities. It is difficult to predict which side the UK Supreme Court will favour, but a closer analysis of the precise relationship between de jure and de facto recognition will be welcome. In particular, the Court of Appeal’s explanation of precisely why the acts of Guaidó’s ‘government’ constitute legal nullities in the event of Maduro’s recognition as de facto ruler are somewhat brief and focus mostly on prior precedent rather than any particular legal theory in its support.
Ultimately, however, the decisions of the Court of Appeal and of the ICSID Tribunal indicate that both courts and tribunals are willing to thoroughly engage with the complex concept of recognition in order to resolve procedural issues arising before them.
ABOUT THE AUTHOR
Sara Ewad is an associate at Debevoise & Plimpton LLP (London), practising international arbitration and commercial litigation.