Crystallex Int'l Corp. v. Bolivarian Republic De Venezuela (In Re De Venezuela)

PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

________________

Nos. 18-2797 & 18-3124

________________

CRYSTALLEX INTERNATIONAL CORPORATION

v.

BOLIVARIAN REPUBLIC OF VENEZUELA

PETROLEOS DE VENEZUELA, S.A. (Intervenor in D.C.),

Appellant

________________

Appeal from the United States District Court

for the District of Delaware

(D.C. Civil Action No. 1-17-mc-00151)

District Judge: Honorable Leonard P. Stark

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No. 18-2889

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In re: PETROLEOS DE VENEZUELA, S.A.,

Petitioner

________________

On Petition for Writ of Mandamus

from the United States District Court

for the District of Delaware

(Related to D.C. Civil Action No. 1-17-mc-00151)

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Argued April 15, 2019

Before: AMBRO, GREENAWAY, JR.,

and SCIRICA, Circuit Judges

(Opinion filed: July 29, 2019)

Samuel Taylor Hirzel, II

Heyman Enerio Gattuso & Hirzel

300 Delaware Avenue, Suite 200

Wilmington, DE 19801

Kevin A. Meehan

Julia Mosse

Juan O. Perla

Joseph D. Pizzurro (Argued)

Curtis Mallet-Prevost Colt & Mosle

101 Park Avenue, 35th Floor

New York, NY 10178

Counsel for Intervenor-Appellant

Miguel A. Estrada (Argued)

Matthew S. Rozen

2

Lucas C. Townsend

Gibson Dunn & Crutcher

1050 Connecticut Avenue, N.W.

Washington, DC 20036

Rahim Moloo

Jason W. Myatt

Robert L. Weigel

Gibson Dunn & Crutcher

200 Park Avenue, 47th Floor

New York, NY 10166

Travis S. Hunter

Jeffrey L. Moyer

Raymond J. DiCamillo

Richards Layton & Finger

920 North King Street

One Rodney Square

Wilmington, DE 19801

Counsel for Appellee

E. Whitney Debevoise, II

Stephen K. Wirth

Samuel F. Callahn

Arnold & Porter Kaye Scholer LLP

601 Massachusetts Avenue, N.W.

Washington, DC 20001

Paul J. Fishman

Arnold & Porter Kaye Scholer LLP

One Gateway Center, Suite 1025

Newark, NJ 07102

3

Kent A. Yalowitz (Argued)

Arnold & Porter Kaye Scholer LLP

250 West 55th Street

New York, NY 10019

Counsel for Intervenor-Appellant

Bolivarian Republic of Venezuela

Amanda F. Davidoff (Argued)

Sullivan & Cromwell LLP

1700 New York Avenue, N.W., Suite 700

Washington, DC 20006

Sergio Galvis

Joseph E. Neuhaus

Andrew G. Ditderich

Sullivan & Cromwell LLP

125 Broad Street

New York, NY 10004

Carl N. Kunz, III

Lewis H. Lazarus

Morris James LLP

500 Delaware Avenue, Suite 1500

Wilmington, DE 19801

Counsel for Amicus Appellants

Blackrock Financial Management Inc.;

Contrarian Capital Management LLC

4

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OPINION OF THE COURT

________________

AMBRO, Circuit Judge

Crystallex International Corp., a Canadian gold mining

company, invested hundreds of millions of dollars to develop

gold deposits in the Bolivarian Republic of Venezuela. In

2011, Venezuela expropriated those deposits and transferred

them to its state-owned oil company, Petróleos de Venezuela,

S.A. (“PDVSA”). To seek redress, Crystallex invoked a

bilateral investment treaty between Canada and Venezuela to

file for arbitration before the International Centre for

Settlement of Investment Disputes. The arbitration took place

in Washington, D.C., and Crystallex won; the arbitration panel

awarded it $1.2 billion plus interest for Venezuela’s

expropriation of its investment. The United States District

Court for the District of Columbia confirmed that award and

issued a $1.4 billion federal judgment. Now Crystallex is

trying to collect.

Unable to identify Venezuelan-held commercial assets

in the United States that it can lawfully seize, Crystallex went

after U.S.-based assets of PDVSA. Specifically, it sought to

attach PDVSA’s shares in Petróleos de Venezuela Holding,

Inc. (“PDVH”), its wholly owned U.S. subsidiary. PDVH is

the holding company for CITGO Holding, Inc., which in turn

owns CITGO Petroleum Corp. (“CITGO”), a Delaware

Corporation headquartered in Texas (though best known for

the CITGO sign outside Fenway Park in Boston).

5

This attachment suit is governed by the Foreign

Sovereign Immunities Act of 1976, 28 U.S.C. §§ 1602–1611

(the “Sovereign Immunities Act”). Under federal common law

first recognized by the Supreme Court in First National City

Bank v. Banco Para El Comercio Exterior de Cuba

(“Bancec”), 462 U.S. 611 (1983), a judgment creditor of a

foreign sovereign may look to the sovereign’s instrumentality

for satisfaction when it is “so extensively controlled by its

owner that a relationship of principal and agent is created.” Id.

at 629.

Interpreting Bancec, the District Court, per Chief Judge

Stark, concluded that Venezuela’s control over PDVSA was

sufficient to allow Crystallex to attach PDVSA’s shares of

PDVH in satisfaction of its judgment against the country.

PDVSA and Venezuela, along with PDVSA’s third-party

bondholders as amici (the “Bondholders”), challenge this

ruling.

Venezuela and the Bondholders do not substantially

contest the District Court’s finding that it extensively

controlled PDVSA. Rather, they raise various jurisdictional

and equitable objections to the attachment. Likewise, PDVSA

primarily contends that its tangential role in the dispute

precludes execution against its assets under Bancec

irrespective of the control Venezuela exerts over it.

We affirm the District Court’s order granting the writ of

attachment and remand for further proceedings consistent with

this opinion.1

1

We also deny PDVSA’s petition for a writ of mandamus and

dismiss as moot its second appeal.

6

I. Background

Factual background

In 2002, Crystallex contracted with Corporación

Venezolana de Guayanaan, an organ of the Venezuelan

government, for the right to develop and extract exclusively for

20 years the gold deposits at Las Cristinas, Venezuela. See

Crystallex Int’l Corp. v. Bolivarian Republic of Venezuela

(“D.C. Crystallex I”), 244 F. Supp. 3d 100, 105–06 (D.D.C.

2017). The deposits are among the world’s largest. Per the

contract, Crystallex spent hundreds of millions of dollars

developing the Las Cristinas site. Id. at 106. It also performed

various other obligations under the contract. Id.

In 2011, Venezuela nationalized its gold mines and

seized the Las Cristinas works without providing

compensation. As Crystallex asserts and PDVSA does not

dispute, Venezuela then gave the mining rights at Las Cristinas

to PDVSA for no consideration, and PDVSA subsequently

“sold to the Venezuelan Central Bank 40% of its shares in the

affiliate that was created to exercise those mining rights.” J.A.

1194.

Later that year, Crystallex filed for arbitration under a

bilateral investment treaty between Canada and Venezuela

before the International Centre for Settlement of Investment

Disputes. As noted earlier, the arbitration took place in

Washington, D.C., and Crystallex won an arbitration award of

$1.2 billion plus interest.

Crystallex had its award. Now it had to collect.

7

Crystallex’s collection efforts

Confirmation proceedings in the District

of Columbia

Crystallex filed an action to confirm its award in the

U.S. District Court for the District of Columbia. It properly

served Venezuela, who appeared to defend it. The Court

confirmed the award and entered a federal judgment in favor

of Crystallex. D.C. Crystallex I, 244 F. Supp. 3d at 122–23.

After Venezuela failed to satisfy the judgment within 30 days,

the Court ruled that Crystallex could execute on it. Crystallex

Int’l Corp. v. Bolivarian Republic of Venezuela, No. CV 16-

0661 (RC), 2017 WL 6349729, at *1 (D.D.C. June 9, 2017).

However, the Court expressly declined to address whether

Crystallex could attach assets held by PDVSA and its

subsidiaries. Id. at *2. Venezuela appealed the ruling, and the

D.C. Circuit affirmed it. Crystallex Int’l Corp. v. Bolivarian

Republic of Venezuela, No. 17-7068, 2019 WL 668270, at *2

(D.C. Cir. Feb. 14, 2019).

Delaware Uniform Fraudulent Transfer

Act proceedings

While arbitration was pending and then after the award

was announced, Crystallex brought suits against CITGO,

CITGO Holding, PDVH, and PDVSA in the Delaware District

Court. See Crystallex Int’l Corp. v. PDV Holding, Inc. (1:15-

CV-1082); Crystallex Int’l Corp. v. PDV Holding, Inc. (1:16-

CV-1007). It claimed that Venezuela refused to pay its

arbitration award and “thwart[ed] enforcement” by transferring

its assets among several entities—PDVSA, PDVH, and

CITGO— allegedly in violation of the Delaware Uniform

Fraudulent Transfer Act, 6 Del. C. §§ 1301–11. Crystallex

Int’l Corp. v. Petróleos de Venezuela, S.A., 879 F.3d 79, 82 (3d

Cir. 2018). The Court denied PDVH’s motion to dismiss, but

8

we reversed and held that a transfer from a non-debtor could

not be a “fraudulent transfer” under the Act. Id. at 81 (“While

we do not condone the debtor’s and the transferor’s actions, we

must conclude that Crystallex has failed to state a claim under

[the Act].”). That panel noted explicitly but reserved judgment

on the question now before us—whether PDVSA could be

liable for the arbitration award as an “alter ego” of Venezuela.

Id. at 84 n.7.

Proceedings in this appeal

While the award-confirmation appeal was pending in

the D.C. Circuit, Crystallex followed up its judgment by filing

an attachment action against Venezuela in the Delaware

District Court. Under Federal Rule of Civil Procedure 69(a),

Crystallex attempted to attach PDVH shares owned by

PDVSA. That rule provides: “A money judgment is enforced

by a writ of execution, unless the court directs otherwise. The

procedure on execution—and in proceedings supplementary to

and in aid of judgment or execution—must accord with the

procedure of the state where the court is located,” here

Delaware, “but a federal statute governs to the extent it

applies.” Delaware law permits a judgment creditor to obtain

a writ of attachment (known by its Latin name, fieri facias, or

simply fi. fa.) over various forms of property belonging to the

debtor, including its shares in a Delaware corporation. See 10

Del. C. § 5031; 8 Del. C. § 324(a).

Though not named in the attachment proceeding,

PDVSA intervened in the District Court. It moved to dismiss

the proceeding on the ground of sovereign immunity under the

Sovereign Immunities Act.

After several rounds of briefing and hearings, the

District Court concluded that PDVSA was Venezuela’s “alter

ego” under Bancec. Crystallex Int’l Corp. v. Bolivarian

9

Republic of Venezuela (“Del. Crystallex”), 333 F. Supp. 3d

380, 414 (D. Del. 2018). The Court held (1) it had jurisdiction

to order attachment against PDVSA’s U.S.-based commercial

assets, and (2) Crystallex could attach PDVSA’s shares of

PDVH to satisfy the judgment against Venezuela. A follow-

up order, dated August 23, 2018, directed the Clerk to issue the

writ and have it served in furtherance of an execution through

a public sale of PDVH stock. PDVSA appealed both of these

orders (docketed in our Court as Nos. 18-2797 & 18-3124), and

also filed a petition for a writ of mandamus (No. 18-2889) to

prevent completion of the sale during this appeal. We

consolidated all three appeals for oral argument and resolution.

While they were pending before us, Venezuela moved

to intervene and to stay these appeals for 120 days so that it

could further evaluate its legal position. By order dated March

20, 2019, we granted Venezuela’s motion to intervene and

participate in oral argument. We also permitted it to file

supplemental briefing. We did not rule on its motion to stay

but stated we would consider that motion at oral argument. At

that argument, Venezuela chose to forgo further pursuit of a

stay. Oral Arg. Tr. at 180:1–7 (Apr. 15, 2019).

Relationship between Venezuela and PDVSA

The District Court’s primary ruling was that PDVSA is

Venezuela’s “alter ego” under Bancec. Numerous facts are

relevant to that determination, as discussed in more detail

below. In general, it is undisputed the relationship between

PDVSA and Venezuela has tightened significantly since 2002,

when then-President Hugo Chávez fired roughly 40% of the

PDVSA workforce for protesting increased Venezuelan

control over the company. Since then PDVSA’s presidents

have generally been senior members of the Venezuelan

president’s cabinet, including members of the Venezuelan

military. Venezuela has also passed various laws that require

10

PDVSA to fund both government initiatives and discretionary

government funds. Venezuela controls PDVSA’s domestic oil

production, sales, and pricing. It also requires that PDVSA

supply Venezuela and its strategic allies with oil at below-

market rates.

The Bondholders’ interests

Also relevant to this appeal are the various bonds that

PDVSA has issued over the past decade or so. Several holders

of PDVSA bonds due to mature in 2020 moved to intervene as

amici in this appeal. They include BlackRock Financial

Management, Inc. and Contrarian Capital Management, LLC.

Their bonds have an outstanding face value of approximately

$1.684 billion and are secured by a 50.1% collateral interest in

PDVH’s shares of Citgo Holding, Inc. as security for the

bonds. According to the Bondholders, PDVSA has also issued

roughly $25 billion in bonds to U.S. and non-U.S. capital

markets investors.

U.S. policy towards Venezuela and PDVSA

President Nicolas Maduro became the President of

Venezuela in 2013. This year Juan Guaidó, Venezuelan’s

opposition leader and president of the National Assembly, has

made efforts to oust Maduro and take control of the

Venezuelan government. The United States Government

recognized Guaidó as the rightful leader of Venezuela on

January 23, 2019.2

2

As a practical matter, there is reason to believe that Guaidó’s

regime does not have meaningful control over Venezuela or its

principal instrumentalities such as PDVSA. Nonetheless,

under Guaranty Trust Co. v. United States, 304 U.S. 126, 138

11

Five days later, as part of a broader effort to convince

the Maduro regime to cede power, the Office of Foreign Assets

Control of the U.S. Department of the Treasury (“OFAC”)

imposed new sanctions against PDVSA by adding it to the List

of Specially Designated Nationals and Blocked Persons. As

discussed further below, the U.S. Government has also

promulgated several executive orders limiting transfer of

Venezuelan or PDVSA-controlled assets in the United States.

II. Jurisdiction and standard of review

The parties dispute whether the District Court had

jurisdiction to attach PDVSA’s property to satisfy the

judgment against Venezuela. The Court held that it had both

ancillary jurisdiction to enforce the judgment and an

independent basis for jurisdiction per 28 U.S.C. § 1330 and 28

U.S.C. § 1605(a)(6) because PDVSA was Venezuela’s alter

ego. Section 1330 grants federal-court jurisdiction over “any

nonjury civil action” against a foreign sovereign, so long as the

sovereign is properly served under 28 U.S.C. § 1608 and is not

entitled to sovereign immunity. See 28 U.S.C. § 1330(a)–(b).

Under 28 U.S.C. § 1604, foreign sovereigns and their

instrumentalities are entitled to sovereign immunity in U.S.

courts except as provided in 28 U.S.C. §§ 1605–1607. Section

1605(a)(6), the immunity exception applied by the District

Court in this case, provides an exception to immunity for

actions seeking to compel arbitration pursuant to an agreement

or to enforce arbitration awards that meet certain criteria.

We have jurisdiction to review the District Court’s

denial of PDVSA’s motion to dismiss as an immune sovereign

(1938), we recognize Guaidó’s regime as authorized to speak

and act on behalf of Venezuela in these appeals.

12

and the grant of Crystallex’s motion for a writ of attachment

under Federal Rule of Civil Procedure 69. We have

jurisdiction to review the former under the collateral order

doctrine. See Fed. Ins. Co. v. Richard I. Rubin & Co., 12 F.3d

1270, 1279–82 (3d Cir. 1993).3 Our jurisdiction exists for the

latter because it amounted to a final judgment under 28 U.S.C.

§ 1291 by leaving the District Court “nothing left to do but

execute[.]” Bryan v. Erie Cnty. Office of Children and Youth,

752 F.3d 316, 321 (3d Cir. 2014).

We review questions of law de novo and findings of fact

for clear error, and we review de novo the ultimate

determination whether to treat PDVSA as Venezuela’s alter

ego. See Clientron Corp. v. Devon IT, Inc., 894 F.3d 568, 575

(3d Cir. 2018).

III. Analysis

The parties raise a host of issues. We group them into

three core inquiries: (A) whether the Bancec “alter ego”

doctrine determines the District Court’s jurisdiction to attach

PDVSA’s assets (it does), (B) the scope of the Bancec inquiry

and whether its factors are satisfied here (they are), and (C)

3

The collateral order doctrine allows us to exercise jurisdiction

over interlocutory appeals, such as this one, when the order

“conclusively determines the disputed question, resolves an

important issue completely separate from the merits of the

action, and is effectively unreviewable on appeal from a final

judgment.” Fed. Ins. Co., 12 F.3d at 1279–80 (brackets and

internal quotation marks omitted); see also Cohen v. Beneficial

Industrial Loan Corp., 337 U.S. 541, 545–47 (1949)

(articulating the doctrine).

13

whether PDVSA’s shares of PDVH are immune from

attachment under the Sovereign Immunities Act (they are not).

Bancec controls the jurisdictional inquiry here.

The District Court had jurisdiction over

Venezuela.

As noted, Crystallex confirmed its arbitration award

against Venezuela in the U.S. District Court for the District of

Columbia, which yielded a federal judgment. It then registered

that judgment for enforcement in the Delaware District Court

under 28 U.S.C. § 1963. That section provides that a judgment

so registered “shall have the same effect as a judgment of the

district court of the district where registered and may be

enforced in like manner.” Id. After registering the judgment,

Crystallex moved to enforce it by attaching assets under

Federal Rule of Civil Procedure 69(a).

As a threshold question, we consider whether the

District Court in Delaware had jurisdiction over Venezuela, the

only party named as a defendant here. It is undisputed that the

D.C. District Court had jurisdiction over Venezuela under the

Sovereign Immunity Act’s arbitration exception, 28 U.S.C. §

1605(a)(6). It is well established that federal courts have

ancillary jurisdiction to enforce their judgments. See IFC

Interconsult, AG v. Safeguard Int’l Partners, LLC, 438 F.3d

298, 311 (3d Cir. 2006). That jurisdiction applies to “a broad

range of supplementary proceedings involving third parties to

assist in the protection and enforcement of federal

judgments—including attachment . . . [and] garnishment.”

Peacock v. Thomas, 516 U.S. 349, 356, 359 & n.7 (1996).

Furthermore, ancillary enforcement jurisdiction—or its

functional equivalent—has been routinely applied to post-

judgment enforcement proceedings against a foreign

sovereign. See First City, Texas Houston, N.A. v. Rafidain

14

Bank, 281 F.3d 48, 53–54 (2d Cir. 2002); Peterson v. Islamic

Republic of Iran, 627 F.3d 1117, 1123 (9th Cir. 2010);

Transaero, Inc. v. La Fuerza Aerea Boliviana, 30 F.3d 148,

150 (D.C. Cir. 1994). In other words, when a party establishes

that an exception to sovereign immunity applies in a merits

action that results in a federal judgment—here, the exception

for confirming arbitration awards, 28 U.S.C. § 1605(a)(6)—

that party does not need to establish yet another exception

when it registers the judgment in another district court under

28 U.S.C. § 1963 and seeks enforcement in that court. Rather,

the exception in the merits action “sustain[s] the court’s

jurisdiction through proceedings to aid collection of a money

judgment rendered in the case . . . .” First City, 281 F.3d at

53–54.

According to Venezuela, we should forbid Crystallex

from using the § 1963 procedure in this case, as that procedure

for registering a judgment cannot be applied to a foreign

sovereign at all because it is “preempted by [the Sovereign

Immunities Act].” (Venezuela Br. at 9–16.)4 Venezuela

presents this position as a two-pronged jurisdictional

argument. First, it contends that § 1963 does not confer

personal jurisdiction over it because the only method for

establishing jurisdiction is by making proper service under the

Sovereign Immunities Act’s service provisions, 28 U.S.C.

§ 1608. (Venezuela Br. at 9–12.) We disagree: § 1608 applies

only to the “summons and complaint,” id., whereas “[s]ervice

of post-judgment motions is not required.” Peterson, 627 F.3d

at 1130.

Second, Venezuela asserts that § 1963 does not create

subject matter jurisdiction over foreign sovereigns and cannot

4

We note that, as a doctrinal matter, “preemption” generally

refers to the effect of a federal statute on state law rather than

on other federal statutes.

15

be used to “piggyback” on the subject-matter jurisdiction of the

court that rendered the judgment being enforced. (Venezuela

Br. at 12–16.) Regardless whether § 1963 separately confers

subject-matter jurisdiction over foreign sovereigns, a district

court has jurisdiction to enforce a federal judgment against a

foreign sovereign when it is registered under § 1963. This is

so, as noted, because the jurisdictional basis from the action

resulting in the judgment carries over to the post-judgment

enforcement proceeding in a manner akin to the ordinary

operation of a district court’s enforcement jurisdiction over

post-judgment proceedings. See First City, 281 F.3d at 53–54;

Peterson, 627 F.3d at 1123; Transaero, 30 F.3d at 150.

A recent decision by the Supreme Court reinforces our

rejection of Venezuela’s novel § 1963 argument. See Republic

of Sudan v. Harrison, 139 S. Ct. 1048, 1054 (2019). It involved

a § 1963 proceeding against the instrumentalities of a foreign

sovereign—the same procedural posture we have here. The

Court resolved that case on a ground not relevant here, but,

notably, it expressed no concern about the use of a § 1963

proceeding against a foreign sovereign. If Venezuela’s view

of § 1963 were correct, Harrison would presumably have said

so.5

In short, before the Delaware District Court and us is a

continuation of the action in the D.C. District Court. As the

latter had jurisdiction over Venezuela—by virtue of the

Sovereign Immunities Act’s arbitration exception, 28 U.S.C.

§ 1605(a)(6)—both Courts that follow, the Delaware District

Court and our Court, also have jurisdiction.

5

Indeed, Justice Thomas would have affirmed the Second

Circuit’s exercise of jurisdiction—implicitly concluding there

was no § 1963 jurisdictional problem. Id. at 1066 (Thomas, J.,

dissenting).

16

The District Court properly used Bancec

to extend its jurisdiction to assets held

nominally by PDVSA.

Taking a different tack, PDVSA concedes the District

Court had jurisdiction over Venezuela but believes that Bancec

cannot be used to extend that jurisdiction to reach the assets of

PDVSA, a non-party to the merits action. We part company

again.

To reach this conclusion, we first consider our decision

in Federal Insurance, 12 F.3d at 1287. There we joined other

circuits in holding that, although the Bancec doctrine came in

a case involving the shifting of substantive liability, it also

applied to extend a district court’s jurisdiction over a foreign

sovereign to reach an extensively controlled instrumentality.

See id. (collecting cases). On a straightforward application of

Federal Insurance, the District Court’s jurisdiction over

Venezuela would extend to PDVSA so long as it is

Venezuela’s alter ego under Bancec. See De Letelier v.

Republic of Chile, 748 F.2d 790, 795 (2d Cir. 1984) (applying

Bancec in post-judgment enforcement proceeding); Alejandre

v. Telefonica Larga Distancia de Puerto Rico, Inc., 183 F.3d

1277, 1288 (11th Cir. 1999) (same).

That potential application of Federal Insurance

deserves a closer look. The decision was in the context of a

merits action—it did not address the post-judgment

enforcement setting we have here. 12 F.3d at 1287. According

to PDVSA, that distinction makes all the difference. It claims

that a district court cannot exercise post-judgment enforcement

jurisdiction over a party other than the judgment debtor based

17

on a theory of “alter ego” or “veil piercing”6 unless it has an

“independent basis” for jurisdiction over the third party.

(PDVSA Br. at 24–27.) For that proposition, PDVSA cites

Peacock, 516 U.S. at 357, in which a plaintiff who had

obtained a federal judgment against his employer under the

Employee Retirement Income Security Act of 1974 (“ERISA”)

filed a new action in a federal court against a shareholder of the

employer seeking to hold him liable by “piercing the corporate

veil.” Id. at 353. The Court ruled that action was not within

the district court’s ancillary enforcement jurisdiction because

it does not extend to “a subsequent lawsuit to impose an

obligation to pay an existing federal judgment on a person not

already liable for that judgment.” Id. at 357.

According to PDVSA, Peacock precludes the District

Court from exercising ancillary enforcement jurisdiction over

this action because it seeks to “shift liability for payment of an

existing judgment to a third party that is not otherwise liable

on the judgment.” (PDVSA Br. at 24 (citing Peacock).) That

reading of Peacock misfires. It was not a case involving

foreign sovereigns or the Sovereign Immunities Act. The Act

is a specialized jurisdictional statute designed to address a

specific problem—the extent to which foreign sovereigns and

their instrumentalities are immune from suit and attachment in

our courts. And the Bancec doctrine—the applicability of

which is the core question here—is a federal common-law

outgrowth of that specialized statute. It (the doctrine) exists

specifically to enable federal courts, in certain circumstances,

to disregard the corporate separateness of foreign sovereigns to

6

These terms in legal context mean that if an entity’s separate

form (typically as a subsidiary corporation) is so disregarded

by the one who controls it (the “parent”), the “corporate veil”

can be “pierced,” that is, separateness is ignored.

18

avoid the unfair results from a rote application of the immunity

provisions provided by the Sovereign Immunities Act.

Nothing in Peacock leads us to believe the Supreme Court

expected or intended its decision in that case to restrain the

application of Bancec in post-judgment proceedings.

Moreover, in Rubin v. Islamic Republic of Iran, 138 S.

Ct. 816, 823 (2018), the Supreme Court all but confirmed that

Bancec can indeed be used to reach the assets of a foreign

sovereign’s extensively controlled instrumentality through

post-judgment attachment proceedings. The Court examined

28 U.S.C. § 1610(g), a provision of the Sovereign Immunities

Act related to attachments of assets held by agencies and

instrumentalities of states that have sponsored terrorism. Id. It

observed that § 1610(g)(1), which was added to the Sovereign

Immunities Act by congressional amendment in 2008,

“incorporate[s] almost verbatim the five Bancec factors [they

are noted below], leaving no dispute that, at a minimum, §

1610(g) serves to abrogate Bancec with respect to the liability

of agencies and instrumentalities of a foreign state where a

[terrorism-related-judgment] holder seeks to satisfy a

judgment held against the foreign state.” Id. We take from this

the implication that in ordinary FSIA attachment

proceedings—i.e., those that do not involve judgments based

on state-sponsored terrorism—the judgment holder may reach

the assets of the foreign judgment debtor by satisfying the

Bancec factors. See id. Indeed, the Court expressly stated that,

where 28 U.S.C. § 1610(g) does not apply, a plaintiff with a

judgment against the sovereign would need to satisfy the

Bancec factors if it sought, for example, “to collect against

assets located in the United States of a state-owned

telecommunications company.” Id. at 23–24 (citing Alejandre,

183 F.3d 1277) (emphasis added).

These analyses confirm the relevance of Bancec here:

so long as PDVSA is Venezuela’s alter ego under Bancec, the

19

District Court had the power to issue a writ of attachment on

that entity’s non-immune assets to satisfy the judgment against

the country. See Hercaire Int’l, Inc. v. Argentina, 821 F.2d

559, 563–65 (11th Cir. 1987) (looking to the Sovereign

Immunities Act and Bancec to determine “whether the assets

of a foreign state’s wholly-owned national airline are subject

to execution to satisfy a judgment obtained against the foreign

state, where the airline was neither a party to the litigation nor

was in any way connected with the underlying transaction

giving rise to the suit”); Arriba Ltd. v. Petroleos Mexicanos,

962 F.2d 528, 532–38 (5th Cir. 1992) (doing the same to

determine whether the district court had jurisdiction to conduct

a garnishment proceeding against a foreign instrumentality,

where the purported basis for jurisdiction was solely the

actions of the instrumentality’s agents).

Whether Venezuela is PDVSA’s alter ego under

Bancec

“Due respect for the actions taken by foreign sovereigns

and for principles of comity between nations” caused the

Supreme Court to conclude in Bancec that “government

instrumentalities established as juridical entities distinct and

independent from their sovereign should normally be treated

as such.” 462 U.S. at 626–27. Recognizing the respect due to

foreign sovereigns, the Court adopted a “presumption of

independent status” for instrumentalities. Id. at 627. PDVSA,

as an instrumentality of Venezuela separately formed in 1976,

is accorded that presumption. It is not to be taken lightly, as

the District Court noted. Del. Crystallex, 333 F. Supp. 3d at

396 (D. Del. 2018) (citing Arch Trading Corp. v. Republic of

Ecuador, 839 F.3d 193, 201 (2d Cir. 2016)); see also De

Letelier, 748 F.2d at 795 (“[B]oth Bancec and the [Sovereign

Immunities Act’s] legislative history caution against too easily

overcoming the presumption of separateness.”).

20

Extensive control standard under Bancec

In Bancec the Supreme Court allowed a U.S. bank to

recover assets from a Cuban instrumentality to satisfy a debt

owed by the Republic of Cuba. Bancec, 462 U.S. at 613. It

held that while there exists a strong presumption that

government instrumentalities have a separate legal identity

(along with limited liability) from their “parent” governments,

this presumption can be overcome in certain situations—for

example, “where a corporate entity is so extensively controlled

by its owner that a relationship of principal and agent is

created, we have held that one may be held liable for the

actions of the other.” Bancec, 462 U.S. at 629 (citing NLRB v.

Deena Artware, Inc., 361 U.S. 398, 402–404 (1960)). “In

addition,” it recognized “the broader equitable principle that

the doctrine of corporate entity, recognized generally and for

most purposes, will not be regarded when to do so would work

fraud or injustice.” Id. (quoting Taylor v. Standard Gas Co.,

306 U.S. 307, 322 (1939)). Thus we recognize Bancec

establishes a disjunctive test for when the separate identities of

sovereign and instrumentality should be disregarded: when

there is “extensive[] control,” and when not disregarding

separate identities would work a “fraud or injustice.” Rubin,

138 S. Ct. at 823.

Bancec did not develop a “mechanical formula” for

determining when these exceptions should apply, however,

which left “lower courts with the task of assessing the

availability of exceptions on a case-by-case basis.” Rubin, 138

S. Ct. at 823. In ensuing decades district and circuit courts

applied the Bancec extensive-control test in various contexts.

Several multi-factor tests emerged in that period—the Second

Circuit, for example, had a non-exhaustive five-factor test, see

EM Ltd. v. Banco Cent. De La Republica Argentina, 800 F.3d

21

78, 91 (2d Cir. 2015), which the District Court applied here.7

By and large the multi-factor tests for extensive control

percolating through the federal courts covered similar ground,

see, e.g., Walter Fuller Aircraft Sales, Inc. v. Republic of

Philippines, 965 F.2d 1375, 1380 n.7, 1381 (5th Cir. 1992)

(identifying five extensive-control factors), though at least one

court has piled on the factors, see Bridas S.A.P.I.C. v. Gov’t of

Turkmenistan, 447 F.3d 411, 418 (5th Cir. 2006) (recognizing

21 factors relevant to extensive control);

In Rubin, the Supreme Court recently provided a further

gloss on the Bancec factors, which we believe clarifies the

analysis of the extensive-control prong here. The plaintiffs

there held a § 1605A-judgment against the Islamic Republic of

Iran and attempted to attach and execute against certain Iranian

artifacts on loan to the University of Chicago. Rubin, 138 S.

Ct. at 820. In the course of addressing whether that attachment

7

These factors include:

whether the sovereign nation: (1) uses the

instrumentality’s property as its own; (2) ignores

the instrumentality’s separate status or ordinary

corporate formalities; (3) deprives the

instrumentality of the independence from close

political control that is generally enjoyed by

government agencies; (4) requires the

instrumentality to obtain approvals for ordinary

business decisions from a political actor; and (5)

issues policies or directives that cause the

instrumentality to act directly on behalf of the

sovereign state.

EM Ltd., 800 F.3d at 91; Del. Crystallex, 333 F. Supp. 3d at

401.

22

was proper (it was not), the Court identified five “Bancec

factors” to aid circuit courts in their analysis:

(1) the level of economic control by the

government;

(2) whether the entity’s profits go to the

government;

(3) the degree to which government

officials manage the entity or otherwise

have a hand in its daily affairs;

(4) whether the government is the real

beneficiary of the entity’s conduct; and

(5) whether adherence to separate

identities would entitle the foreign state to

benefits in United States courts while

avoiding its obligations.

Id. at 823 (quoting Walter Fuller Aircraft Sales, Inc., 965 F.2d

at 1380 n.7). We use these factors identified in Rubin to

structure our analysis here. At the same time, we recognize

that they, like the other extensive control tests our sister circuits

have adopted,8 are meant to aid case-by-case analysis rather

8

We follow Crystallex’s suggestion to apply the Rubin factors,

and neither Venezuela nor PDVSA indicates a preference

between them and those the District Court applied. Either

inquiry compels the same result. See generally Del. Crystallex,

333 F. Supp. 3d at 406–14. But an unresolved point of

ambiguity remains: whether the Rubin factors apply only to the

extensive-control inquiry (as in Walter Fuller) or to both

disjunctive tests. The parties do not address this issue, and so

we leave it for a future panel.

23

than establish a “mechanical formula” for identifying extensive

control. Bancec, 462 U.S. at 633.

Bancec’s scope

PDVSA and the Bondholders raise together six

challenges to the District Court’s inquiry under Bancec: that (i)

a sovereign’s extensive control, alone, cannot allow courts to

ignore the separateness of a corporation from the country it is

in, (ii) Crystallex must show PDVSA acted as Venezuela’s

agent against Crystallex, (iii) we must consider the third-party

interests of PDVSA’s bondholders, (iv) extensive control must

be shown by clear and convincing evidence, (v) the Bancec

inquiry must be examined in light of current circumstances,

particularly the limited control of the Guaidó regime over

PDVSA; and (vi) Bancec requires that courts also balance

equities when they consider whether to discard an

instrumentality’s presumption of separateness. We address

each argument in turn.

i. Bancec’s extensive control prong does

not require a nexus between the

plaintiff’s injury and the

instrumentality.

PDVSA contends that there must be some connection

between the sovereign’s abuse of its instrumentality’s

corporate form and the plaintiff’s injury. Indeed PDVSA

declined our numerous invitations at oral argument to argue

that any of the extensive control factors cut against Crystallex’s

position. It reiterated its position that each is irrelevant here

because Crystallex also needed to show that PDVSA did

something to cause the plaintiff’s injury. Oral Arg. Tr. at

97:22–104:12 (Apr. 15, 2019). We differ.

24

First, though Bancec involved the “fraud or injustice”

prong rather than the “extensive control” prong, no nexus

existed between the dominated instrumentality and the

plaintiff’s injury. Cuba had established in 1960 Banco Para El

Comercio Exterior de Cuba (Bancec), “[a]n official

autonomous credit institution for foreign trade . . . with full

juridical capacity . . . of its own . . . .” Bancec, 462 U.S. at 613.

Bancec was a creditor of Citibank and sued the bank to collect

on a letter of credit. Days later, the Cuban government seized

all of Citibank’s Cuba-based assets. Id. It also dissolved

Bancec after that proceeding began, and the remainder of its

case was handled by the Cuban Ministry of Foreign Trade. Id.

at 615. Despite no link between Bancec and Cuba’s seizure of

Citibank’s assets, the Supreme Court held Citibank could

offset its debt to Bancec with the value of the expropriated

assets. “Giving effect to Bancec’s separate juridical status in

these circumstances” would cause an injustice. Id. at 632. In

recounting the case’s history, the Court also expressly noted

that the Second Circuit, from where the case came, had applied

a nexus requirement and then did not adopt one itself. See id.

at 619 (quoting the Second Circuit as saying the presumption

of separate identities may be overcome only “when the subject

matter of the counterclaim assertible against the state is state

conduct in which the instrumentality had a key role”).

Like Bancec, not a single factor recognized in Rubin

suggests any link between the dominated instrumentality and

the injury to the plaintiff. The Rubin Court’s brief discussion

of the hypothetical plaintiff seeking to collect against “the

assets located in the United States of a state-owned

telecommunications company,” and citation to Alejandre

(which in turn involved no connection between the

telecommunications agency and the plaintiff’s injury), likewise

suggest no tying requirement. Rubin, 138 S. Ct. at 824.

Similarly, the vast majority of circuits have required no link

between the abuse of the corporate form and the plaintiff’s

25

injury under the first Bancec path for veil-piercing. See, e.g.,

EM Ltd. v. Republic of Argentina, 473 F.3d 463, 478 (2d Cir.

2007); Flatow v. Islamic Republic of Iran, 308 F.3d 1065,

1071–73 (9th Cir. 2002); Transamerica Leasing, Inc. v. La

Republica de Venezuela, 200 F.3d 843, 848 (D.C. Cir. 2000);

Hercaire Int’l, Inc. v. Argentina, 821 F.2d 559, 565 (11th Cir.

1987).9

Second, as Crystallex observes, requiring an

independent nexus requirement would likely read the Bancec

extensive-control test out of the doctrine. When pressed at oral

argument to identify the circumstances where Bancec could be

applied, PDVSA offered two: under Bancec’s “fraud or

injustice” prong (i.e., where a sovereign uses its

instrumentality’s separate status to perpetuate a fraud or

injustice) or where the instrumentality was itself “responsible

on the arbitration award as a participant in the events.” Oral

Arg. Tr. at 91: 7–18. But if the instrumentality were directly

liable for the award, there would be no need to invoke Bancec

at all. PDVSA thus tries to read the extensive control prong

out of Bancec. We cannot.

The District Court concluded correctly that Bancec does

not require a connection between a sovereign’s extensive

control of its instrumentality and the plaintiff’s injury. Control

9

One panel of the Fifth Circuit has suggested that Bancec’s

alter ego standards are the same as common state-law

requirements, many of which include a nexus requirement. See

Bridas S.A.P.I.C. v. Gov’t of Turkmenistan, 447 F.3d 411, 416

(5th Cir. 2006). But see First Inv. Corp. of Marshall Islands v.

Fujian Mawei Shipbuilding, Ltd., 703 F.3d 742, 752–53 (5th

Cir. 2012), as revised (Jan. 17, 2013).

26

alone, if sufficiently extensive, is an adequate basis to

disregard an instrumentality’s separate status.10

ii. Bancec does not require a principal-

agent relationship.

PDVSA also argues that the requirement in Bancec of

extensive control such “that a relationship of principal and

10

At oral argument, PDVSA stressed that Bancec clearly

assumed for “extensive control” a connection between the

abused form and the plaintiff’s injury when it cited to the 1974

edition of W.M. Fletcher, Cyclopedia of the Law of Private

Corporations. Oral Arg. Tr. at 77: 9–11 (“Fletcher says

domination and control [are] not enough. You need to have an

abuse of the form that results in an injury to the plaintiff.”).

But the excerpt Bancec quotes squarely contradicts such a

narrow view: “[A] corporation will be looked upon as a legal

entity as a general rule, and until sufficient reason to the

contrary appears; but, when the notion of legal entity is used to

defeat public convenience, justify wrong, protect fraud, or

defend crime, the law will regard the corporation as an

association of persons.” Bancec, 462 U.S. 611, 630 n.19

(quoting 1 W.M. Fletcher, Cyclopedia of the Law of Private

Corporations § 41 (rev. perm. ed. 1974)). Further, Bancec

does not even cite to Fletcher to support the proposition that

extensive control can be sufficient to disregard corporate

formalities. For this, it cited to N.L.R.B. v. Deena Artware,

Inc., 361 U.S. 398, 402 (1960), where the Court held that the

National Labor Relations Board was entitled to seek discovery

on an alternative theory of liability—“that these separate

corporations are not what they appear to be, that in truth they

are but divisions or departments of a ‘single enterprise.’” Id.

at 402.

27

agent is created” requires the instrumentality to act as the

sovereign’s agent with respect to the events in dispute. Bancec,

462 U.S. at 629. Before Rubin, courts struggled with how to

give meaning to Bancec’s apparent reference to a principal–

agent relationship. See, e.g., Doe v. Holy See, 557 F.3d 1066,

1080 (9th Cir. 2009). The most persuasive interpretation of the

various approaches is by the D.C. Circuit, which recognized

that “[c]ontrol by the sovereign is relevant in two distinct

contexts[.]” Transamerica Leasing, 200 F.3d at 848. “First, .

. . when it significantly exceeds the normal supervisory control

exercised by any corporate parent over its subsidiary and,

indeed, amounts to complete domination of the subsidiary.”

Id. “Second, . . . when the sovereign exercises its control in

such a way as to make the instrumentality its agent; in that case

control renders the sovereign amenable to suit under ordinary

agency principles.” Id. at 849. These examples of control are

disjunctive. Only one method of domination needs to be

shown, and Crystallex opts to pursue the former. Thus further

discussion of a principal-agent relationship is not necessary.

iii. Bancec does not require consideration

of the third-party bondholders.

Amici bondholders of PDVSA contend Bancec’s

extensive-control analysis requires consideration of the

interests of other creditors of the judgment debtor’s alleged

alter ego, both as a matter of doctrine and of equity. That

argument, plausible on its face, does not prevail here. As a

doctrinal matter, the overarching framework of the extensive-

control test tells us that third-party creditors’ interest is a

reason for—not a separate criterion of—the analysis. Bancec

explained that those creditors’ interests are part of the reason

the presumption of separate juridical status is so difficult to

overcome: “Freely ignoring the separate status of government

instrumentalities would result in a substantial uncertainty over

whether an instrumentality’s assets would be diverted to satisfy

28

a claim against the sovereign, and might thereby cause third

parties to hesitate before extending credit to a government

instrumentality without the government’s guarantee.” 462

U.S. at 626. For that reason (among others), Bancec counsels

courts not to ignore separate status. See also De Letelier v.

Republic of Chile, 748 F.2d 790, 795 n.1 (2d Cir. 1984) (noting

that abuse of the corporate form of the type identified in

Bancec “must be clearly demonstrated to justify holding the

‘subsidiary’ liable for the debts of its sovereign ‘parent,’

particularly where, as here, LAN apparently has non-party

private bank creditors”). To add to this analysis an additional

unspecific consideration of third-party interests would double-

count the creditors’ concern in an arena of many competing

concerns.

The difficulty of overcoming the Bancec presumption is

also practical comfort: where there is extensive control, we can

expect reasonable third parties to recognize the risks of

extending credit. Here, for example, Venezuela’s relationship

to PDVSA was clearly disclosed to any prospective holder of

the latter’s bonds in the offering circular for that issuance: “We

are controlled by the Venezuelan government”; obligations

imposed by the government “may affect our . . . commercial

affairs”; and “we cannot assure you that the Venezuelan

government will not, in the future, impose further material

commitments upon us or intervene in our commercial affairs.”

JA-608. Perhaps recognizing that risk, the Bondholders

protected their extension of credit to PDVSA by obtaining as

collateral a 50.1% security interest in PDVH’s shares of Citgo

Holding, Inc., which, of course, will not be impaired by the

District Court’s writ of attachment.

29

iv. Timeframe: What is the appropriate

point of reference for the extensive-

control analysis?

Venezuela argues that the relevant time for a Bancec

analysis of the relationship between a sovereign and its

instrumentality is the moment the writ is issued. But it points

to no authority for that proposition, and it does not explain why

our review of the District Court’s Bancec analysis would be

any different than in the normal course, where we render our

decision based on the record before the district court and “do[]

not purport to deal with possible later events.” Standard Oil

Co. v. United States, 429 U.S. 17, 18 (1976) (per curiam);

Rubin, 12 F.3d at 1284; Fassett v. Delta Kappa Epsilon (New

York), 807 F.2d 1150, 1165 (3d Cir. 1986). We follow the

standard practice. On remand, Venezuela may direct to the

District Court credible arguments to expand the record with

later events.

v. The burden of proof is preponderance

of the evidence.

PDVSA contends that the District Court erred by

reviewing the parties’ evidence under a “preponderance of the

evidence” rather than a “clear and convincing” burden of

proof. We disagree, but also note that our decision as to the

burden of proof has no effect on the outcome of our Bancec

analysis; indeed, the implications of this question matter little

to this appeal. PDVSA conceded as much at oral argument that

our decision as to burden of proof has no effect on the outcome

of our Bancec analysis. Oral Arg. Tr. at 95–96: 20–14 (Apr.

15, 2019).

PDVSA points to our ruling in Trustees of Nat. Elevator

Indus. Pension, Health Benefit & Educ. Funds v. Lutyk, 332

F.3d 188, 194 (3d Cir. 2003), an ERISA veil-piercing case,

30

where at summary judgment we re-affirmed that “evidence

justifying piercing the corporate veil must be ‘clear and

convincing.’” Id. (quoting Kaplan v. First Options of Chicago,

Inc., 19 F.3d 1503, 1522 (3d Cir. 1994), aff’d, 514 U.S. 938

(1995)). Should this federal common law be applied here? We

think not.

The Sovereign Immunities Act is the exclusive basis for

finding jurisdiction in suits involving foreign sovereigns and

instrumentalities, and Bancec is binding federal common law

for disputes under the Act. Neither indicates that plaintiffs

must show clear and convincing evidence, while many courts

have applied a preponderance-of-the evidence standard to

inquiries under it. See, e.g., Owens v. Republic of Sudan, 864

F.3d 751, 784 (D.C. Cir. 2017); Sachs v. Republic of Austria,

737 F.3d 584, 589 (9th Cir. 2013), rev’d on other grounds sub

nom. OBB Personenverkehr AG v. Sachs, 136 S. Ct. 390

(2015); S & Davis Int’l, Inc. v. The Republic of Yemen, 218

F.3d 1292, 1300 (11th Cir. 2000); Kirschenbaum v. 650 Fifth

Ave., 257 F. Supp. 3d 463, 472 (S.D.N.Y. 2017) (requiring

preponderance of the evidence for Bancec inquiries); First Inv.

Corp. of the Marshall Islands v. Fujian Mawei Shipbuilding,

Ltd. of People’s Republic of China, 858 F. Supp. 2d 658, 668

n.54 (E.D. La. 2012) (also conducting a Bancec extensive

control inquiry), aff’d 703 F.3d 742 (5th Cir. 2012); In re 650

Fifth Ave. & Related Properties, 881 F. Supp. 2d 533, 544

(S.D.N.Y. 2012) (same); Kensington Int’l Ltd. v. Republic of

Congo, No. 03 CIV. 4578 LAP, 2007 WL 1032269, at *5

(S.D.N.Y. Mar. 30, 2007) (same). Further, no case cited by the

parties suggests that the Bancec extensive-control inquiry

requires clear and convincing evidence.

Lutyk drew from our Court’s existing precedent holding

that, where a plaintiff relies on a fraud theory for alter ego, it

must be shown by clear and convincing evidence. See Kaplan,

19 F.3d at 1522. But here Crystallex does not attempt, nor

31

need, to satisfy an element of fraud.11 Further distinguishing

Lutyk or Kaplan, it here seeks to survive a factual challenge

under Rule 12(b)(1), which generally requires the plaintiff to

establish jurisdiction by a preponderance of the evidence. See,

e.g., Makarova v. United States, 201 F.3d 110, 113 (2d Cir.

2000).

We also see scant policy reason to depart from existing

caselaw and require plaintiffs to make a clear and convincing

showing. The difficulties of marshaling evidence sufficient to

show a Bancec relationship present “a substantial obstacle to

[Sovereign Immunities Act] plaintiffs’ attempts to satisfy

judgment.” Estate of Heiser v. Islamic Republic of Iran, 885

F. Supp. 2d 429, 435 (D.D.C. 2012), aff’d 735 F.3d 934 (D.C.

Cir. 2013). In addition to the initial information imbalance

between the judgment creditor and the foreign sovereign, the

creditor must gather evidence related to events, witnesses, and

relationships between a foreign sovereign and its own

instrumentality, the bulk of which is often within the territorial

control of the sovereign itself, making discovery a particularly

onerous task. Given the difficulties inherent in this evidence

gathering,12 the preponderance standard is “the measure of

respect due foreign sovereigns.” Bank of New York v.

Yugoimport, 745 F.3d 599, 614 (2d Cir. 2014). A more

onerous requirement would tip the balance too far in favor of

11

Even if it did, as the Supreme Court has observed, the

traditional state-law presumption in favor of clear and

convincing evidence for fraud claims has not always extended

to Congress, which frequently has required preponderance of

the evidence for federal fraud claims. See Grogan v. Garner,

498 U.S. 279, 288–89 (1991).

12

The parties here rely chiefly on expert affidavits, publicly

available corporate documents, and news articles.

32

the foreign sovereign at the expense of Bancec’s other core

concern—ensuring that foreign states not dodge their

obligations under international law. Thus we conclude that

preponderance of the evidence is the appropriate burden of

proof under Bancec.

vi. Is there an equitable component to the

“extensive control” prong of Bancec?

PDVSA proposes that an “equitable basis” is required

“to rebut the presumption of separateness” under Bancec’s

extensive-control prong. The District Court observed that even

though Bancec’s two prongs are disjunctive, the extensive-

control inquiry “inherently assumes that some element of

unfairness would result if the Court fails to treat one entity as

the alter ego of the other.” Del. Crystallex, 333 F. Supp. 3d at

397 n.15. We need not determine whether this is an

independent or necessary factor in an extensive-control

inquiry. The test discussed in Rubin appears to treat it as such,

and, as discussed below, it is easily satisfied here.

Extensive control determination under Bancec

Having clarified the contours of the Bancec extensive-

control inquiry, our applying that analysis here is

straightforward. Though the factors the District Court applied

differ slightly from those in Rubin, they are similar enough that

its factual findings, which we review for clear error, direct the

same result under either approach to the Bancec inquiry. While

PDVSA effectively conceded that Crystallex satisfied each

factor under Rubin at oral argument, we summarize the

evidence for the sake of clarity, as the facts are paramount in

determining when control is so extensive that entity

separateness fades away as a legal distinction.

33

Factor 1: the level of economic control by

the government

Venezuela wields extensive economic control over

PDVSA. Venezuela’s bondholder disclosures in 2011 and

2016 stated: “[G]iven that we are controlled by the Venezuelan

government, we cannot assure you that [it] will not, in the

future, impose further material commitments upon us or

intervene in our commercial affairs in a manner that will

adversely affect our operations, cash flow and financial

results.” JA-645; 1921. They leave no doubt Venezuela has

the power to intervene and mandate PDVSA’s economic

policies. In 2011 PDVSA disclosed that “the Venezuelan

government required us to acquire several electricity

generation and distribution companies, as well as certain food

companies . . . [,] and required . . . us to acquire the assets of

[another Venezuelan company] at a price to be determined in

the future.” JA-608–09. The District Court found that

Venezuela requires PDVSA to fund

Venezuelan programs that have nothing to do

with its business, causing PDVSA to take on

additional debt. Such programs include PDVSA

Agricola S.A., which subsidizes Venezuela’s

agriculture, industrial infrastructure, and

produce sectors, and PDVSA Desarrollos

Urbanos S.A., which subsidizes Venezuela’s

housing projects. . . . PDVSA’s total

contributions to the Venezuelan budget between

2010 and 2016 were in excess of $119 billion.

Del. Crystallex, 333 F. Supp. 3d at 409. In 2014 and 2015,

PDVSA was required to contribute U.S. $974 million and U.S.

$3.3 billion, respectively, to social programs and projects. Id.

34

As its 2011 offering circular to prospective bondholders

explains, PDVSA’s legal obligations stem in part from the

Venezuelan constitution, which endows the State with

significant control over PDVSA and the oil industry in the

country. Article 12 provides hydrocarbon deposits within the

territory of the state are the property of the Republic, JA-1722,

and Article 302 reiterates “the State reserves to itself, through

the pertinent organic law, and for reasons of national

convenience, petroleum activity,” id. at 1558. Article 303

addresses the state’s control over PDVSA specifically: “For

reasons of economic and political sovereignty and national

strategy, the State shall retain all shares in Petroleos de

Venezeula, S.A.” E.g., JA-350; 386. In addition, as PDVSA

disclosed to bondholders, under Article 5 of the Organic

Hydrocarbons Law, its revenues “are required to be used to

finance health and education, to create funds for

macroeconomic stabilization and to make productive

investments, all in favor of the Venezuelan people. Those

social commitments may affect our ability to place additional

funds in reserve for future uses and, indirectly, our commercial

affairs.” Id. at 608.

The District Court also found that Venezuela exercises

its economic control over PDVSA by dictating to whom

PDVSA must sell oil to and at what price. The 2011 circular

explains that “[t]he Venezuelan government, rather than the

international market, determines the price of products . . . sold

by us through our affiliates in the domestic market.” Id. at 643.

Thus Venezuela “dictates the severely discounted price at

which PDVSA must sell its product to Venezuelan citizens”

and “forces PDVSA to ‘sell’ oil to third parties for no, or de

minimis, consideration.” Del. Crystallex, 333 F. Supp. 3d at

408 (internal quotation marks and citations omitted). Per

Venezuela’s “Petrocaribe” agreements with its allies, PDVSA

must provide oil to member states at a steep discount on price,

along with a two-year grace period for payments, on a payment

35

schedule up to 25 years in length with interest rates as low as

1% (with the option, on Venezuela’s part, to accept deferred

payments directly in the form of goods and services). JA-928.

Under the agreement, Venezuela “may acquire at preferential

prices . . . sugar, bananas, or other goods or services to be

determined, which are adversely affected by trade policies of

rich countries.” Id. In other words, as the District Court found,

PDVSA provides oil while Venezuela maintains the right to

accept payment. PDVSA’s financial reports show that, from

2010 to 2016, it contributed approximately USD $ 77 billion

under the Petrocaribe agreements. Id. at 1178.

The District Court wasn’t finished: “Venezuela

manipulates PDVSA’s conversion of U.S. Dollars to

Venezuelan Bolivars to leverage PDVSA’s revenues. . . .

PDVSA is required to convert foreign currency into

Venezuelan Bolivars at an artificially low U.S. Dollar to

Bolivar exchange rate (which is approximately 1/500th of the

market rate).” Del. Crystallex, 333 F. Supp. 3d at 410 (internal

quotation marks omitted).

Finally, Venezuela controls PDVSA’s debt structure.

Dr. Roberto Rigobon’s supplemental declaration states that in

November 2017 President Maduro decreed that Venezuela

would restructure the external debt of both Venezuela and

PDVSA. JA-2013. He also provided evidence that Venezuela

made a $1.2 billion payment on a 2017 PDVSA bond. Id. at

2014.

Factor 2: whether the entity’s profits go to

the government

As PDVSA’s lone shareholder, all profit ultimately runs

to the Venezuelan government. In addition, PDVSA pays

Venezuela taxes and royalties on the oil it produces. The

Rigobon Declaration contends that PDVSA pays

36

“extraordinary taxes,” i.e., taxes at an artificial rate designed to

collect more of PDVSA’s revenues. Id. at 1172.

Factor 3: the degree to which government

officials manage the entity or otherwise

have a hand in its daily affairs

The Venezuelan government exercises direct and

extensive control over PDVSA. President Maduro appoints

PDVSA’s president, directors, vice-presidents, and members

of its shareholder council. Del. Crystallex, 333 F. Supp. 3d at

407–08. Crystallex introduced a declaration from Jose Ignacio

Hernandez, a Venezuelan legal academic, which notes that it

has been “commonplace” since 2002 for PDVSA’s president

also to serve as Venezuela’s oil minister. JA-1195. “This

arrangement allowed the Government to control the daily

operations of PDVSA.” Id. PDVSA and Venezuela’s Ministry

of Petroleum and Mining share physical office space for its

headquarters. Id. at 1196 & n.51. In a 2014 speech discussing

the state of Venezuelan control over PDVSA since this

reorganization, then-PDVSA President Rafael Ramirez

Carreño, and the country’s Vice Minister for Petroleum, stated

that “we are one of the few oil producing countries in the world

that has a strict and tight control over the sovereign

management of its natural resources.” Id. at 594.

The military increasingly exercises control over

PDVSA. In November 2017, President Maduro appointed

Major General Manuel Quevedo as Petroleum Minister and

PDVSA president. Id. at 2018. Earlier that year, he also

created a new post—Executive Vice-President of PDVSA—

and appointed Vice-Admiral Maribel del Carmen Parra de

Mestre to the position. Id. at 1198.

Venezuela has also wielded substantial influence over

PDVSA’s employees through a series of politically motivated

37

firings. The highest profile of these occurred in 2002, when

President Chávez fired roughly 40% of the PDVSA workforce

in response to a strike protesting his regime. Id. at 1054.

Employees continue to face pressure from the state today. The

District Court found that, “[a]s recently as July 2017,

Venezuela continued to threaten to terminate PDVSA

employees who were opposed to the governing regime.” Del.

Crystallex, 333 F. Supp. 3d at 407. Employees face pressure

to attend Socialist Party rallies and have been threatened with

termination unless they voted in elections. Id. at 408.

Factor 4: whether the government is the

real beneficiary of the entity’s conduct

The District Court found that PDVSA’s cheap oil to

Venezuela’s strategic allies also creates a mechanism whereby

Venezuela extracts value from PDVSA’s oil without paying

the company. “Venezuela also uses PDVSA to achieve its

foreign policy goals by committing PDVSA to sell oil to

certain Caribbean and Latin American nations at substantial

discounts, without PDVSA’s consent. . . . Even when those oil

debts are repaid, the money is given to Venezuela, not PDVSA.

. . .” Id. at 410.

PDVSA’s actions with respect to this litigation also

show how Venezuela is the real beneficiary of PDVSA’s

conduct. For example, “it is undisputed that PDVSA paid the

administrative fees Venezuela incurred in connection with the

arbitration with Crystallex, which amounted to around

$249,000.” Id. And, when Venezuela expropriated the La

Cristinas mines, it gave to PDVSA for no consideration a

number of mining rights, including rights in Las Cristinas that

it had expropriated from Crystallex. JA-1194. This seamless

transfer of value between PDVSA and Venezuela also suggests

an alter ego relationship.

38

Factor 5: whether adherence to separate

identities would entitle the foreign state to

benefits in United States courts while

avoiding its obligations

Venezuela owes Crystallex from a judgment that has

been affirmed in our courts. Any outcome where Crystallex is

not paid means that Venezuela has avoided its obligations. It

is likewise clear from the record that PDVSA, and by extension

Venezuela, derives significant benefits from the U.S. judicial

system. Its 2020 bonds are backed by the common stock and

underlying assets of U.S.-based corporations, and hence

disputes stemming from default will be subject to U.S. laws

and presumably be resolved through the U.S. legal system.13

See, e.g., Bayrock Exhibit 6 at 131–32, Crystallex Int’l Corp.

v. Bolivarian Republic of Venezuela, F. Supp. 3d 380 (D. Del.

2018), ECF No. 99-1. Indeed, it is probable the U.S. legal

13

Crystallex has not identified any Venezuelan commercial

assets in Delaware or the District of Columbia and may be

unable to find satisfaction if attachment of PDVSA property is

impermissible. See Crystallex Int’l Corp. v. Bolivarian

Republic of Venezuela, No. CV 16-0661 (RC), 2017 WL

6349729, at *2 (D.D.C. June 9, 2017) (“Petitioner has been

unable to identify any commercial assets belonging to

[Respondent] in the District of Columbia but believes that

Respondent possesses assets elsewhere in the United States,

including in Delaware. . . . The assets Petitioner identifies are

connected to Respondent through a variety of corporate

structures . . .[,] in particular [Respondent’s] indirect

subsidiaries, PDVH, CITGO Holding, and CITGO Petroleum

. . . .”) (citations and internal quotations omitted).

39

system is the backstop that gives substantial assurance to

investors who buy PDVSA’s debt.

Nor does ignoring separate identities run against the

equities here. PDVSA profited directly from Crystallex’s

injury: Venezuela transferred the rights to the expropriated

mines to PDVSA for no consideration. Hence this factor too

is satisfied.

PDVSA’s Shares of PDVH are attachable under

the Sovereign Immunities Act.

Crystallex must also show that the particular property at

issue in the attachment action—the PDVH stock—is not

immune from attachment under the Sovereign Immunities Act.

It provides that “the property in the United States of a foreign

state shall be immune from attachment arrest and execution”

unless one of the Act’s statutory exceptions is met. 28 U.S.C.

§ 1609. The exception Crystallex invokes states that the

“property in the United States of a foreign state . . ., used for a

commercial activity in the United States, shall not be immune

from attachment in aid of execution, or from execution, upon a

judgment entered by a court of the United States” based on an

order confirming an arbitral award rendered against the foreign

state. 28 U.S.C. § 1610(a)(6) (emphasis added).14

The Act defines “commercial activity” as “either a

regular course of commercial conduct or a particular

commercial transaction or act. The commercial character of an

14

Section 1610(b) governs execution of a foreign

instrumentality’s property, but only section 1610(a) is relevant

because the jurisdictional immunity is overcome for

Venezuela, not PDVSA, who only enters the picture as

Venezuela’s alter ego.

40

activity shall be determined by reference to the nature of the

course of conduct or particular transaction or act, rather than

by reference to its purpose.” 28 U.S.C. § 1603(d). The

Supreme Court in Republic of Argentina v. Weltover, Inc., 504

U.S. 607, 613 (1992), stated that the phrase “commercial

activity” captures the “distinction between state sovereign acts,

on the one hand, and state commercial and private acts, on the

other.” Id. “[W]hen a foreign government acts, not as a

regulator of a market, but in the manner of a private player

within it, the foreign sovereign’s actions are ‘commercial’

within the meaning of the [Sovereign Immunities Act].” Id. at

614. Commercial actions include those that “(whatever the

motive behind them) are the type of actions by which a private

party engages in ‘trade and traffic or commerce.’” Id. (quoting

Black’s Law Dictionary) (emphasis in original).15

PDVSA contends that the commercial activity

exception requires current commercial use (i.e., at the moment

the writ is executed), which PDVSA contends is impeded by

the current U.S. sanctions regime. There is some support for

PDVSA’s interpretation. See Aurelius Capital Partners v.

Republic of Argentina, 584 F.3d 120, 130 (2d Cir. 2009)

(“[T]he property that is subject to attachment and execution

must . . . have been ‘used for a commercial activity’ at the time

the writ of attachment or execution is issued.”) (emphasis in

original). But narrowing the temporal inquiry to the day the

writ is executed unnecessarily leaves room for manipulation,

as any jurisdictional determination under the Sovereign

Immunities Act is immediately appealable for interlocutory

review, and courts (like the District Court here) may elect not

to issue the writ alongside analysis of the jurisdictional and

15

Weltover involved the commercial-activity exception to

jurisdictional immunity, 28 U.S.C. § 1605(a), but its

interpretation of “commercial” would apply equally here.

41

execution immunity. A strict day-of-writ inquiry could allow

parties to avoid execution by freezing assets or otherwise

ceasing commercial use when the appeal decision is handed

down. Instead, a totality-of-the-circumstances inquiry seems

more appropriate, as the Fifth Circuit aptly described: “This

analysis should include an examination of the uses of the

property in the past as well as all facts related to its present use,

with an eye toward determining whether the commercial use of

the property, if any, is so exceptional that it is ‘an out of

character’ use for that particular property.” Af-Cap Inc. v.

Republic of Congo, 383 F.3d 361, 369 (5th Cir. 2004). And “it

would be appropriate for a court to consider whether the use of

the property in question was being manipulated by a sovereign

nation to avoid being subject to garnishment under [the

Sovereign Immunities Act].” Id. at 369 n.8.

But whether we apply the date the writ was issued—

August 23, 2018—or the date of the August 9 opinion, PDVH

shares are not immune from attachment. PDVSA argues that

the shares cannot be used in commerce because they are subject

of sanctions contained in two Executive Orders. See Exec.

Order. No. 13835, 83 Fed. Reg. 24,001 (May 21, 2018) (“E.O.

13835”); Exec. Order No. 13808, 82 Fed. Reg. 41, 155 (Aug.

24, 2017) (“E.O. 13808”).

This argument fails because the sanctions regime

prohibits only some commercial uses of the shares; other

commercial uses continue to be exercised by Venezuela.

Section 1(a)(iv) of E.O. 13808 bars PDVH from paying

dividends or other distribution of profits to the Government of

Venezuela,16 and section 1(b) prohibits the “purchase, directly

16

The Executive Orders of our Government define “the

Government of Venezuela” as specifically including PDVSA.

42

or indirectly, by a United States person or within the United

States, of securities from the Government of Venezuela.” In

addition, Section 1(a)(iii) of E.O. 13835 precludes United

States persons or those within the United States from engaging

in any transactions, provisions of financing, and other dealings

related to “the sale, transfer, assignment, or pledging as

collateral by the Government of Venezuela of any equity

interest in any entity in which [it] has a 50 percent or greater

ownership interest.”

However, the shares can still be used by PDVSA to run

its business as an owner, to appoint directors, approve

contracts, and to pledge PDVH’s debts for its own short-term

debt. Venezuela illustrates its continued use of this power,

noting that President Guaidó in February 2019 appointed an ad

hoc administrative board to represent PDVSA in its capacity as

sole shareholder of PDVH for appointing a new board of

directors of that entity. These actions are available to the sole

shareholder of a company, and so the shares continue to be

used in commerce.

This is not to say that the sanctions of PDVSA assets

play no role in whether Crystallex ultimately recovers.

According to a Treasury Department Frequently Asked

Question, any attachment and execution against PDVSA’s

shares of PDVH would likely need to be authorized by the

Treasury Department. See Del. Crystallex, 333 F. Supp. 3d at

420–21. In a case like this, “[Treasury’s Office of Foreign

Asset Control, called by its acronym OFAC] would consider

license applications seeking to attach and execute against such

E.O. 13808, 82 Fed. Reg. 41156 (“[T]he term . . . means the

Government of Venezuela, any political subdivision, agency or

instrumentality thereof, including . . . [PDVSA] . . .”); E.O.

13835, 83 Fed. Reg. 24001–02 (same).

43

equity interests on a case-by-case basis.” Id. at 421. Whether

that FAQ is legally binding, Crystallex has committed that it

“will seek clarification of the current license . . . and/or the

issuance of an additional license to cover the eventual

execution sale of the shares of PDVH once the [attachment

w]rit has issued.” Id. at 421 n.40 (internal quotation marks

omitted) (ellipsis in original).

Though the U.S. State Department has not sought to

provide a statement of interest, it is nonetheless conceivable

that short- or long-term U.S. foreign policy interests may be

affected by attachment and execution of PDVSA’s assets. The

Treasury sanctions provide an explicit mechanism to account

for these. Whether the Treasury Department permits execution

in this case, it is clear that the sanctions do not make the PDVH

shares immune from attachment under the Sovereign

Immunities Act.

IV. Conclusion

Under the Foreign Sovereign Immunities Act, there is a

strong presumption that a foreign sovereign and its

instrumentalities are separate legal entities. But the Supreme

Court made clear in Bancec and Rubin that in extraordinary

circumstances—including where a foreign sovereign exerts

dominion over the instrumentality so extensive as to be beyond

normal supervisory control—equity requires that we ignore the

formal separateness of the two entities. This clears that bar

easily. Indeed, if the relationship between Venezuela and

PDVSA cannot satisfy the Supreme Court’s extensive-control

requirement, we know nothing that can.

The District Court acted within its jurisdiction when it

issued a writ of attachment on PDVSA’s shares of PDVH to

satisfy Crystallex’s judgment against Venezuela, and the

44

PDVH shares are not immune from attachment. Thus we

affirm.

45