Crystallex Int'l Corp. v. Bolivarian Republic of Venez.
333 F. Supp. 3d 380
D. Del.2018Background
- Crystallex holds a $1.2 billion ICSID arbitral award against Venezuela, confirmed by the D.C. District Court and registered in Delaware; Crystallex seeks to execute on that judgment.
- The targeted assets are shares of PDV Holding, Inc. (PDVH), a Delaware corporation wholly owned by Petróleos de Venezuela, S.A. (PDVSA). PDVSA intervened to oppose attachment.
- Crystallex alleges PDVSA is the alter ego of Venezuela, so PDVSA's PDVH shares are effectively Venezuelan property and therefore subject to attachment.
- PDVSA moved to dismiss for lack of subject-matter jurisdiction and asserted FSIA execution- and jurisdiction-based immunities, and argued sanctions/OFAC actions block attachment.
- The court conducted extensive factual review (briefing, declarations, exhibits, two oral arguments) and found by a preponderance of the evidence that Venezuela extensively controls PDVSA (alter-ego on the extensive-control prong) but that Crystallex did not prove the separate fraud-or-injustice prong.
- The court held the PDVH shares are "used for commercial activity in the United States," that applicable OFAC orders/FAQs do not bar issuance of the writ, granted Crystallex's motion for a writ of attachment fi. fa., and denied PDVSA's motion to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FSIA governs and whether court has jurisdiction to enforce the D.C. judgment against Venezuela and reach PDVSA assets | Crystallex: FSIA arbitration exception (§1605(a)(6)) gives jurisdiction over Venezuela; Rule 69 garnishment/attachment allows enforcing that judgment against third-party assets if they are the debtor's assets (alter-ego) | PDVSA: Crystallex is effectively suing PDVSA and Peacock bars exercising ancillary jurisdiction to impose liability on a new party absent independent jurisdiction | Court: FSIA governs; Peacock inapplicable to a Rule 69 post-judgment garnishment where plaintiff seeks to reach debtor's assets in hands of third party; jurisdiction exists once alter-ego shown (no separate jurisdictional basis required) |
| Standard and burden to rebut Bancec presumption of separateness (alter-ego) | Crystallex: rebuttal standard is probable cause on facial attack and preponderance of evidence on factual attack | PDVSA: clear and convincing burden; Bancec requires both extensive control and fraud/injustice | Court: disjunctive Bancec test applies; evidentiary standard is probable cause for facial attack and preponderance of evidence for factual challenge; Crystallex met extensive-control prong but not fraud-or-injustice prong |
| Whether PDVSA is Venezuela’s alter ego (extent of control and fraud/injustice) | Crystallex: Venezuela appoints PDVSA leadership, directs pricing/sales, uses PDVSA assets for state purposes, extracts revenues and directs transactions — showing extensive, repeated control | PDVSA: actions are typical for national oil companies; PDVSA is a long-standing independent corporate instrumentality and was not involved in the underlying expropriation | Court: on total record (declarations, gov’t actions, corporate filings, operational facts) Crystallex proved by preponderance that Venezuela exercises extensive control over PDVSA (alter ego under extensive-control prong); fraud/injustice prong not met |
| Whether PDVH shares are subject to attachment under FSIA §1610(a)(6) and whether U.S. sanctions/OFAC bar attachment now | Crystallex: PDVH shares are used for commercial activity in U.S. (shareholder rights, control of CITGO operations), so §1610(a)(6) applies; OFAC guidance does not categorically prohibit attachment and equity issued pre-executive orders is permitted | PDVSA: shares are effectively frozen by Executive Orders and OFAC; attachment would be prejudgment against PDVSA and blocked by sanctions | Court: PDVH shares are used for commercial activity and thus attachable under §1610(a)(6); Executive Orders and OFAC FAQs do not categorically prohibit issuance of writ and OFAC would consider licenses case-by-case; not a forbidden prejudgment attachment |
Key Cases Cited
- First Nat'l City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611 (U.S. 1983) (establishes strong presumption of separateness for sovereign instrumentalities and the disjunctive test to overcome it)
- Republic of Argentina v. Weltover, Inc., 504 U.S. 607 (U.S. 1992) (defines "commercial activity" under FSIA by reference to nature of act, not purpose)
- Peacock v. Thomas, 516 U.S. 349 (U.S. 1996) (limits ancillary jurisdiction to impose new liability on third parties; does not apply to Rule 69 garnishment actions)
- IFC Interconsult AG v. Safeguard Int'l Partners, LLC, 438 F.3d 298 (3d Cir. 2006) (Rule 69 garnishment may proceed against third parties without independent basis for jurisdiction where action continues original suit)
- EM Ltd. v. Banco Central de la República Argentina, 800 F.3d 78 (2d Cir. 2015) (instrumentality treated as state alter ego may be treated as same entity for jurisdictional/enforcement purposes)
- Rubin v. Islamic Republic of Iran, 138 S. Ct. 816 (U.S. 2018) (distinguishes jurisdictional immunity from attachment/execution immunity and affirms narrower exceptions for execution)
- Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480 (U.S. 1983) (FSIA is sole basis for jurisdiction over foreign states in U.S. courts)