The Third Circuit is deciding whether companies who have lost assets to Venezuelan government expropriation can obtain compensation from Citgo, a US-based wholly owned subsidiary of the Venezuelan state oil company, PdVSA. The district court decided that Citgo can be forced to make compensation, but it is now up to the appellate court. The decision could have implications for US foreign policy, the future of Juan Guaido’s power as the interim president of Venezuela and the future of other US-based wholly owned subsidiaries of foreign state firms.
Guaido’s attorneys apparently sided with Citgo’s and the Venezuelan government’s argument that those harmed by Venezuela should not be able to force compensation from Citgo. But if the Third Circuit decides that Citgo is distinct from the Venezuelan government for purposes of this suit, Guaido might lose any chance of exerting power over it while he is still only an opposition leader, in a practical sense. If the appellate judges decide that the corporate structure and legal entity create some barrier between the government and the American-based Citgo, then perhaps it is not enough for the US to recognize Guiado’s administration for him to take control of Citgo. Already he has appointed new Citgo board members, but he does not have access to Citgo revenue. He should want the courts to see no separation between the Venezuelan government (which, in the US opinion, is led by him) and control of Citgo.
This decision may have more extensive implications as well. Saudi Aramco is the state oil company in Saudi Arabia, and it has wholly owned subsidiaries in the US, including Aramco Services Company and Motiva Enterprises, as well as other assets. In 2016, the US Congress passed a law called JASTA and overrode a veto by President Obama, with the intention of allowing US citizens to sue foreign countries—most specifically Saudi Arabia—for connection to terrorist acts such as the September 11, 2001 attacks. In 2017, a class action suit was filed against Saudi Arabia based on an alleged connection to that attack. The lawyers for the plaintiffs in that case are surely watching to see what happens with the Citgo case.