The Second Circuit on Wednesday overturned the enforcement of nearly $2 billion in defaulted bonds issued by Venezuela’s state-owned oil company. This decision followed a ruling from New York’s highest court, determining that Venezuelan, not New York, law governs the validity of the bonds.
$2B Venezuelan Bonds Overturns : Key Decision
The circuit court concluded that U.S. District Judge Katherine Polk Failla made an error in October 2020 when she ruled that Venezuelan law was “ultimately irrelevant” in the case.
“Given the Court of Appeals’ conclusion, the district court erred, and we therefore vacate its decision and remand so that the district court can, in the first instance, determine whether the 2020 notes and associated instruments were issued in violation of the Venezuelan Constitution and are thus invalid,” stated the court’s decision.
Bonds Issued Under Scrutiny
Venezuela argues that the $2B bonds, issued by the administration of Venezuelan President Nicolás Maduro, are illegal. The contention is that they pledged as collateral a 50.1% stake in Citgo Holding Inc., the parent company of Citgo Petroleum Corp. This move allegedly violated the Venezuelan Constitution, as Maduro did not obtain permission from the Venezuelan National Assembly, thus potentially exposing Citgo to creditors.
