Is there a recognized Government of Venezuela in the U.S. that can address the external debt crisis?

Source: Docket.

*

On January 3, 2023, the IV legislature of the National Assembly decided to dissolve the Interim Presidency. Consequently, based on Article 233 of the Venezuelan Constitution, the speaker of the National Assembly would no longer serve as the Interim President, as stipulated in the new Democratic Statute.

Since January 23, 2019, the U.S. Government has recognized the speaker of the National Assembly as the Interim President, considering that Maduro was not duly elected. Based on Article 233 of the Constitution, the IV National Assembly approved the Democratic Statute, which regulated the authority of the Interim President, specifically regarding the legal representation in the U.S. concerning external assets and the numerous claims filed by legacy creditors of the Venezuelan external debt.

However, this representation ceased due to the 2023 Democratic Statute, as acknowledged by the U.S. Government on January 3, 2023. Consequently, there was a power vacuum regarding the legal representation of the Government of Venezuela. While Maduro was still considered an illegitimate ruler, there was no officially recognized Interim President. This vacuum created further complications regarding the external debt crisis. Managing a multitude of claims estimated in tens of billions of dollars is challenging enough, but handling the crisis without a recognized Government, and therefore lacking the necessary technical capabilities, poses even greater difficulties.

In addition to these practical and relevant problems, the absence of a recognized government created a legal impediment to toll the statute of limitations on the nearly USD 60 billion bond debt, which is set to begin in October.

Ultimately, it appears that this problem is finally being resolved.

**

In one of the many claims against Venezuela to enforce an ICSID arbitration award (Saint-Gobain Performance Plastic Europe v. Venezuela, U.S. District Court, District of Columbia, Civil Docket No. 1:20-cv-00129-RC), it was necessary to serve the Republic. For this purpose, the plaintiff requested the Clerk to initiate diplomatic service through the Department of State.

On May 31, 2023, the plaintiff reported that “the State Department informed the Plaintiff’s counsel that the State Department successfully served Venezuela” the day before. The diplomatic note from the State Department confirms that the documents related to the complaint:

“were delivered in Washington, D.C., under the cover of the U.S. Department of State diplomatic note the Presidential Commissioner for Foreign Relations of the Bolivarian Republic of Venezuela, an accredited representative put forward by the National Assembly to represent the Bolivarian Republic of Venezuela to the United States.”

According to this diplomatic note, the Government of Venezuela has an accredited representative in the U.S. However, this Government is not Maduro but the IV National Assembly. Interestingly, this representative holds the title of “Presidential Commissioner.”

Under the 2019 Democratic Statute, there was a Presidential Commissioner for Foreign Relations, but this post was abolished by Article 20 of the 2023 Democratic Statute, along with all other positions, including the chief of the permanent mission in the U.S.

However, something transpired between January and May. Somehow, the IV National Assembly decided to reinstate the exercise of presidential authorities established in the Constitution, particularly regarding conducting foreign relations (Article 236.4). Under this authority, a “Presidential Commissioner” was appointed as an accredited representative put forward by the National Assembly to represent the Bolivarian Republic of Venezuela to the United States. It is unclear if this authority is based on Article 233 of the Constitution, i.e., if the speaker is acting, under specific circumstances, as the Interim President. In any case, there is currently a legal representative of the Government of Venezuela in the U.S.

***

The reinstatement of the legal representation of the Government of Venezuela in the U.S. is excellent and timely news. As I explained elsewhere, the power vacuum created by the 2023 Democratic Transition further complicated the debt crisis, especially concerning the statute of limitations. However, now it seems that the IV National Assembly, acting through executive bodies, has regained legal representation and can now sign tolling agreements to avoid the expiration of bondholders’ rights. Moreover, this legal representation is urgently needed to adopt a comprehensive strategy for the complex debt litigation, particularly concerning Citgo.

From a U.S. legal perspective, it appears that most, if not all, of the problems have been resolved. However, there is still work to be done from a Venezuela legal perspective. Although it is unclear how the IV National Assembly reinstated the legal representation of executive bodies, it is necessary to implement institutional reforms to ensure that these bodies adhere to core constitutional principles such as objectivity, efficiency, transparency, and accountability (Article 140 of the Venezuelan Constitution). It is also essential to restore the separation between the National Assembly acting as the Legislative Branch and the Executive (Article 136 of the Constitution). Furthermore, it is necessary to develop and implement the required capabilities to create a sound and transparent debt plan executed by civil officials who serve the Government and not any partisan interests (Article 145). This capability is crucial for building trust with stakeholders in the external debt.

This new debt strategy will be implemented under entirely different conditions compared to the 2019 strategy. During that time, the primary objective was to defer the most pressing risks to facilitate an imminent political transition. This included deferring the risks associated with debt claims, and in certain cases, such risks were successfully deferred through agreements with creditors. However, unfortunately, the anticipated transition never materialized. It is now evident that these risks cannot be postponed indefinitely. As we now find ourselves in 2023, the landscape has changed significantly from 2019, necessitating the inclusion of the new debt strategy within the ongoing political negotiations in Mexico. Regrettably, it seems that the current negotiations have indeed reached a standstill. However, it is possible that the debt problem itself could create incentives for the negotiations to resume in the future.

****

There is a lot of work to be done and limited time. At least, the power vacuum created by the 2023 Democratic Statute seems to have been finally resolved, paving the way for resuming a technical and sound external debt strategy following principles of transparency and accountability. The ultimate goal of this strategy should be to alleviate the suffering of the Venezuelan people.