Paul Hastings LLP earned a victory in the New York Court of Appeals on behalf of the Ad Hoc Board of Petroleos de Venezuela (PDVSA), Venezuela’s national oil company, appointed by the democratically-elected Venezuelan National Assembly, when the court ruled that Venezuelan law rather than New York state law governs the validity of bonds issued by PDVSA.

In Petroleos de Venezuela S.A. v. MUFG Union Bank, N.A, PDVSA sued in federal court to nullify the bonds, which had been issued by the Maduro-controlled PDVSA and secured by a controlling share of Citgo Holding, a U.S.-based refining company. The district court granted summary judgment to bondholders, ruling that New York law governed the question of the bonds’ validity.  On appeal, the Second Circuit certified to the New York Court of Appeals the question of whether, under the Uniform Commercial Code, New York or Venezuelan law determines validity of the bonds where the alleged issuance defect is a violation of a procedural requirement imposed by the Venezuelan constitution. 

On February 10, 2024, the New York Court of Appeals unanimously agreed with our position that Venezuelan law governs validity of the bonds.  The court’s decision resolves an issue of first impression under New York law, and is the first judicial decision interpreting the term “validity” in section 8-110 of the Uniform Commercial Code (which is adopted by all 50 states).  As both the New York Court of Appeals and the Second Circuit observed, this is an “important question[] about the scope of an as-of-yet uninterpreted provision of the New York Uniform Commercial Code[]” that is “important to the State’s choice-of-law regime and status as a commercial center.” The case now returns to federal courts.

"Since the outset of the case, PDVSA has argued that the validity of these bonds — a question of vital importance to Venezuela — should be decided under Venezuelan law," said Paul Hastings partner Igor Timofeyev, who argued the appeal.  "We are very pleased that the court — in a first-ever decision interpreting the term ‘validity’ in Uniform Commercial Code Section 8-110 — has agreed with us, and has recognized the importance of ensuring that sovereign debt issuers adhere by the requirements of their country’s constitution."

Co-chair of the Complex Litigation and Arbitration practice Kurt Hansson and litigation partner Igor Timofeyev led the Paul Hastings team, which included associate James Ferguson. 

More details about the decision can be found here. 

About Paul Hastings

With widely recognized elite teams in finance, mergers & acquisitions, private equity, restructuring and special situations, litigation, employment, and real estate, Paul Hastings is a premier law firm providing intellectual capital and superior execution globally to the world’s leading investment banks, asset managers, and corporations.