Overview
First Tuesday Update is our monthly take on current issues in commercial disputes, international arbitration, and judgment enforcement. This month we provide updates on Venezuelan creditors' enforcement efforts in the long-running Crystallex and PDVSA 2020 bond cases, and two recent actions from the US Supreme Court.
First, we return to the Crystallex case where creditors are seeking approval of a sale of the debtors' stake in CITGO for the benefit of a small list of approved Venezuela creditors, including those holding claims under the PDVSA 2020 bonds. After a lengthy sale process was approved by the District Court of Delaware, the case is now on appeal where a number of issues have been raised, including issues arising from the January 2026 ouster of Nicolás Maduro by the United States military.
We last discussed the interplay between the Crystallex case (Crystallex International Corp. v. Bolivarian Republic of Venezuela, No. 17-mc-151 in the District of Delaware, before Judge Stark) and the PDVSA 2020 bond case (Petróleos de Venezuela S.A. v. MUFG Union Bank, N.A., No. 19-cv-10023 in the Southern District of New York, before Judge Failla) in depth in March 2024. For nearly a decade, creditors of Venezuela and Petróleos de Venezuela S.A. (PDVSA) have sought to force a judicial sale of PDVSA's shares in PDV Holding, Inc. (PDVH) (which ultimately owns CITGO) to satisfy their judgments in the Crystallex case. In 2016, shortly before the Crystallex case began, PDVSA issued several billion dollars in bonds secured by PDVH's equity in CITGO. Litigation over the validity of those bonds began in 2019 in New York, and became a central issue in the Crystallex case: if the bonds were valid, then the bondholders had a senior claim to 50.1% of the equity, and any prospective purchaser of CITGO risked incurring a significant liability with that purchase.
Over the spring and summer of 2025, the Crystallex court was faced with a choice between a bidder (Amber Energy, a subsidiary of Elliott Investment Management) who had reached a deal with the majority of the 2020 bondholders, and a bidder (Gold Reserve) who had a higher sticker price but a smaller certainty of closing because that transaction did not resolve the claims of the 2020 bondholders, as we discussed in detail here. In fall 2025, after Judge Failla determined that the 2020 bonds were valid, Judge Stark approved the sale to Amber Energy, and both cases went up on appeal.
The Second Circuit appeal on the 2020 Bonds was argued in May 2026, but the Third Circuit appeal was delayed for several months after Maduro's removal from power, as Venezuela and PDVSA changed attorneys and the argument was only held last month. (After the January 2026 ouster of Nicolás Maduro, the United States recognized Delcy Rodríguez as the legitimate authority in Venezuela, and the Rodríguez regime replaced most of the attorneys and law firms who had been representing Venezuela and PDVSA in US courts.) The Second Circuit opinion affirming the validity of the PDVSA 2020 bonds was issued late last month, just a few days after the Third Circuit argument.
The Second Circuit affirmed that the 2020 bonds were valid under Venezuelan law, and that the act-of-state doctrine does not apply. Petroleós De Venezuela, S.A. v. MUFG Union Bank, N.A., No. 25-2652, 2026 WL 3210845, at *21 (2d Cir. Oct. 27, 2026) ("Under Article 150 of the Venezuelan Constitution, the National Assembly's pre-approval was not required to validate PDVSA's Exchange Offer, and the Governing Documents are thus valid. And the act-of-state doctrine does not require us to give the Resolutions their purported extraterritorial effect. We thus AFFIRM the partial final judgment of the district court.").
Amber Energy had gambled on the validity of the bonds and obtained consent from the bondholders to the CITGO transaction—as well as a discount of hundreds of millions of dollars from the bonds' face value if the bonds proved valid—while Gold Reserve gambled on the invalidity of the bonds and sought to leverage the value of CITGO to finance the purchase. Last month's ruling by the Second Circuit confirms Amber Energy appears to have made the better price-vs.-certainty bet, but if the sale does not close by April 2027, then Amber's settlement deal with the bondholders will be terminated.
The Third Circuit is cognizant of the deadline. At last month's oral argument on the validity of the sale, the Third Circuit peppered Venezuela and Crystallex with questions regarding whether state or federal law applies in the judgment execution context. Venezuela focused on the invalidity of the attachment under Rule 69, arguing that Delaware law applied rather than federal common law (i.e., Bancec) for purposes of deciding alter ego in the context of judgment execution since Bancec was not a judgment case. The panel raised the question of how to handle different standards being applied in different states; Venezuela conceded state law would be more "unwieldy" than a universal federal standard, but argued that's how the system is set up, while Crystallex argued the consistent federal rule should apply. Venezuela also argued that Delaware law required fraud, and there was none, so the veil could not have been pierced down to PDVSA and PDVH.
The panel then took up a number of other issues. The panel appeared somewhat skeptical of Gold Reserve's and Venezuela's efforts to disqualify Judge Stark and the Special Master, including whether it matters if a judge's advisers on a complex judicial sale like this are more like auctioneers or more like law clerks. The panel questioned the parties regarding whether "highest bidder" means just the bid with the highest dollar value or whether that actually has to take into consideration certainty of close and other factors. On the valuation point, PDVSA argued that the stalking horse bidder's valuation took place when Citgo's earnings were at their lowest, and Judge Stark should have waited for the earnings to go up, and also should have asked for an updated valuation from his advisor. Crystallex noted that for purposes of a bond in Delaware Chancery Court, PDVSA had valued the shares at $7.25 billion in the summer of 2023, so the valuation was appropriate.
No matter what the Third Circuit ultimately rules, no sale can close without a specific license from OFAC, and the executive branch has explicitly declined repeated invitations from the District of Delaware and the Third Circuit to share its position on anything relating to the sale. Public statements from the Trump administration regarding the potential restructuring of Venezuelan debt do not provide any meaningful clues regarding how OFAC will come out on the license question. The saga continues as we await decisions from the Third Circuit and OFAC.
SCOTUS Developments
In addition, on November 6, the Supreme Court granted certiorari regarding the Fourth Circuit's denial of Goldman Sachs' efforts to force arbitration of collection disputes for debtors in bankruptcy. Credit card agreements included mandatory arbitration, and Goldman Sachs sought to arbitrate disputes with two credit card debtors in bankruptcy. The debtors argued that the automatic stay applied, so despite the arbitration provisions in the card agreements, the adversary bankruptcy process was the proper approach.
The Court also vacated a Third Circuit decision that had narrowed the reach of a federal court's jurisdiction over arbitration motions. On October 19, the Court granted certiorari in Burford German Funding LLC v. financialright claims GmbH, No. 25-1269, and then vacated the judgment, and remanded for further consideration in light of Jules v. Andre Balazs Properties, 608 U.S. 200 (2026). We discussed Jules in our August update. In Jules, the Court held that a federal court that stays a case under FAA Section 3 retains jurisdiction to decide later motions to confirm or vacate the resulting award. Jules also rejected the view that Badgerow v. Walters, 596 U.S. 1 (2022), which we covered when it was pending, requires an independent jurisdictional basis for every FAA motion.
In Burford, financialright claims GmbH filed a Section 1782 application in the District of Delaware. It sought discovery from its litigation funders for use in German litigation, where it has alleged that Burford and the law firm Hausfeld had undisclosed financial/ownership ties (through German Litigation Solutions LLC) that created a de facto contingency fee arrangement illegal under German law. The Burford entities moved to stay under FAA Section 3 and to compel arbitration under Section 4, invoking the arbitration clause in their funding agreement. The district court denied the motion for lack of jurisdiction. A divided Third Circuit panel affirmed, holding that Section 1782 applications are not "civil actions" for purposes of Section 4's look-through provision and so do not "qualify for arbitration." Burford argued that the decision rested on a misreading of Badgerow. It reasoned that a court with jurisdiction over a matter has jurisdiction to decide all motions filed in it, including motions under the FAA.
The Court's order—known as a "GVR" (grant, vacate, and remand)—is not a ruling on the merits, and the remand may prove academic. Burford had brought an arbitration against financialright claims GmbH in London. On October 2, before the Supreme Court acted, the arbitral tribunal issued a partial final award rejecting Burford's arbitration request, finding no arbitral jurisdiction over the Section 1782 application. Financialright argued to the Court that the award moots the petition. Burford answered that the award did not address subject-matter jurisdiction and does not change the case for a GVR. The broader point stands: after Jules, a federal court that properly has a matter before it should not need a separate jurisdictional hook to hear a motion to stay or compel arbitration of that matter.
