Overview
First Tuesday Update is our monthly take on current issues in commercial disputes, international arbitration, and judgment enforcement. This month we highlight potential important changes in personal jurisdiction, updates on the Crystallex sales process and developments in litigation against Venezuela and Cuba.
Crystallex
September was a very busy month for the long-running Crystallex case in the United States District Court for the District of Delaware (see previous updates here, here, here, and here) on creditors' efforts to force the sale of shares of Citgo's parent company in a judicial sale to satisfy judgments owed by Venezuela and its state-owned oil company PDVSA, as Judge Stark held a four-day sale hearing from September 15-18. When the hearing began, the bid to be approved came from Gold Reserve, the entity the Special Master had chosen as the recommended bidder after the spring 2025 topping period, but the Special Master was seeking the court's permission to terminate the Gold Reserve Stock Purchase Agreement (SPA) and execute a new agreement with Amber Energy (a subsidiary of Elliott Capital), the new recommended bidder as of late August. Opening statements in the hearing were somewhat delayed by Venezuela's and Gold Reserve's efforts to disqualify the Special Master due to alleged conflicts on the part of the Special Master's counsel (Weil, Gotshal, & Manges LLP, who Venezuela and Gold Reserve alleged had conflicting representations for Elliott and/or its affiliates).
Witnesses – including Gold Reserve's CEO and various experts in valuation – testified for days, but on the very last morning of the hearing the proceedings were complicated when Judge Failla, in the United States District Court for the Southern District of New York, issued her opinion on the validity of the PDVSA 2020 bonds. (See our previous coverage of the PDVSA 2020 bonds here and here.) The validity of the bonds is relevant to the Crystallex sale process because the bondholders hold a 50.1% lien, as well as certain other rights. They had previously threatened to seek an injunction if Judge Stark approved a sale to Gold Reserve, because they felt Gold Reserve's financing structure (which would have required Citgo to adopt certain debt) violated their rights. Therefore, the validity of the bonds was one of the key issues separating the bids of Gold Reserve (which had a higher price point but a lower certainty of closing if the 2020 bonds turned out to be valid, largely due to the 2020 bondholders' threats) and Amber Energy (which had reached a settlement with the 2020 bondholders, at an approximately $900 million discount from the face value of their bonds, and therefore had higher certainty of closing but had a lower price). Judge Failla determined once again, as she had in her previous opinion (before the Second Circuit and the New York Court of Appeals considered the matter) that the 2020 bonds are valid under Venezuelan law. In brief, Judge Failla concluded that in order for a contract to be a contract of national public interest (requiring pre-approval by the National Assembly to be valid), the Republic of Venezuela itself must be a party to the contract. Because the pledge of the 2020 bonds involved only PDVSA (the state-owned oil company) and not the Republic, Judge Failla concluded that the pledge was not a contract of national public interest and the pre-execution approval of the National Assembly was not required—thus, the lack of such approval was not relevant, and the bonds were valid.
By the time the Crystallex sale hearing concluded on September 18, after over 15 separate closing statements from various creditors and Venezuela parties (some of which had clearly been rewritten that day to reflect Judge Failla's 2020 bond decision), Judge Stark agreed to terminate the Gold Reserve SPA and permit the Special Master to execute the Amber Energy SPA. However, Amber Energy's financing is only committed until December 1, 2025, so Judge Stark has set a schedule for briefing and argument in October that will leave him enough time to issue a decision before December 1, though he has not committed that he will do so. The next hearing dates will be on October 20 (for oral argument on Gold Reserve and Venezuela's efforts to disqualify the Special Master) and October 21 (for a hearing on the sale order), and the final post-trial briefs are due on October 28.
Venezuela
Another case involving litigation against Venezuela concerns ExxonMobil's efforts to recognize an ICSID award in the federal district court for the District of Columbia. On September 29, Judge Lamberth entered judgment in favor of certain ExxonMobil affiliates for $985,527,000, plus interest and legal fees, against Venezuela.
Following a 2014 ICSID award, a partial annulment, and a second and final ICSID award issued in July 2023, enforcement proceedings were initiated in DC. Venezuela was served but did not appear, resulting in a default. Many months later, Venezuela finally appeared. The parties then briefed motions for default judgment and summary judgment. In each, Venezuela's sole defense was that the ICSID tribunal lacked jurisdiction to determine which set of lawyers (those appointed by the Maduro regime, or those appointed by the US-recognized Guaidó regime) could represent Venezuela in the arbitration. Judge Lamberth resolved the dispute by deciding to reach the merits of the case. He granted ExxonMobil's motion for summary judgment, denied Venezuela's cross-motion for summary judgment and ExxonMobil's motion for a default judgment, and entered a final judgment in favor of the ExxonMobil affiliates.
Steptoe has had the privilege of representing ExxonMobil in this matter and in prior related actions to enforce the Company's ICC and ICSID awards following Venezuela's expropriation of ExxonMobil's assets in 2007. See Coll, Steve. Private Empire: ExxonMobil and American Power. New York, Penguin Press, 2012.
Cuba
On October 3, the Supreme Court granted two petitions for certiorari to claimants seeking relief from Cuba-owned companies for trafficking in property that was unlawfully expropriated by the Castro regime in the early 1960s.
Shortly after President Trump lifted a longstanding presidential waiver of the right to sue under the 1996 Helms-Burton Act, victims of expropriation by the Cuban state have brought claims against Cuban state-owned companies and against private companies for trafficking in their stolen properties. These claims collectively amount to billions of dollars, including interest. In one of the cases, ExxonMobil brought an action against two Cuban state-owned companies in federal district court in DC. The Cuban companies raised sovereign immunity as a defense. Exxon argued that the Helms-Burton Act, a statute that permits suits against traffickers, abrogated the Cuban instrumentalities' sovereign immunity. The District Court rejected this argument and instead required Exxon to satisfy an exception to sovereign immunity under the Foreign Sovereign Immunities Act (FSIA).
The District Court found that the "commercial activity" exception to the FSIA applied and permitted the case to proceed on the merits. Upon appeal, a divided panel of the DC Circuit rejected Exxon's argument that the Helms-Burton Act itself abrogated the Cuban instrumentalities' sovereign immunity and returned the case to the District Court for ExxonMobil to satisfy the commercial activity exception under the FSIA. Exxon sought review in the Supreme Court, supported by the United States as amicus. The court granted Exxon's petition to decide whether; in creating a federal cause of action and making it applicable to foreign agencies and instrumentalities, the Helms-Burton Act directly abrogates foreign sovereign immunity, without requiring plaintiffs to prove FSIA exceptions.
The Supreme Court also granted certiorari in a case brought against a private entity that was accused of using property expropriated from the plaintiff. Havana Docks Corp. v. Royal Caribbean Cruises Ltd. (No. 24-983). This case involves US-based cruise lines accused of "trafficking" in property (the actual docks used by the cruise lines) from 2015 to 2019. The court will review a 2024 appeals court decision that reversed a $400 million judgment against the cruise companies. Havana Docks Corporation, an American company, had a concession to build and operate piers at the Port of Havana. The appeals court ruled that since Havana Docks' concession was set to expire in 2004, it no longer had a valid property interest in the docks during the 2015–2019 period when the alleged trafficking occurred. The question presented to the court is: does the right to sue expire along with the original property interest, or does the right to a claim persist regardless of the original timeline? Resolution of this issue will help to clarify the overall breadth of what it means to "own a claim," under the Helms-Burton Act.
A schedule has not yet been set in the cases, but briefing will likely occur in 2025 with argument in early 2026.
We have had the privilege of representing ExxonMobil in its case since it was filed in 2019. We are working with Sullivan & Cromwell on the Supreme Court proceedings.
Personal Jurisdiction
The "minimum contacts" test is a well-established standard for determining whether a state's exercise of personal jurisdiction over a defendant comports with due process. Under that standard, a state may exercise specific jurisdiction (or "arising from") jurisdiction over a nonresident defendant as long as there exist "minimum contacts" between the defendant and the forum State. See WorldWide Volkswagen Corp. v. Woodson, 444 U. S. 286, 291 (1980). The defendant must take "some act by which it purposefully avails itself of the privilege of conducting activities within the forum State." Thus, litigation against foreign defendants has typically involved a rigorous analysis of the foreign defendants' contacts with the forum.
The Supreme Court's recent decision in Fuld v. Palestine Liberation Org., 606 U.S. 1 (2025), could dramatically change this analysis in a class of cases arising under federal statute, limiting the reach of this familiar "minimum contacts" due process personal jurisdiction analysis in certain cases, such as where Congress has provided a means for federal service of process. This change in law may open a new avenue to reach foreign conduct under federal law without the need to show a defendants' contacts with the United States.
In Fuld, the court unanimously held that the Promoting Security and Justice for Victims of Terrorism Act (PSJVTA) is constitutional, reversing the Second Circuit's decision. The court ruled that the PSJVTA's provision for personal jurisdiction does not violate the Fifth Amendment's Due Process Clause because it ties the exercise of jurisdiction to conduct involving the United States, linking it to foreign policy matters within the Executive and Legislative branches' purview. The court also declined to apply the Fourteenth Amendment's "minimum contacts" analysis to this Fifth Amendment case, emphasizing the distinct nature of federal statutory jurisdiction.
The court reasoned that the "minimum contacts" test is a creature of the Fourteenth Amendment due process clause, which seeks to ensure that an individual state's exercise of power over litigation defendants "is bounded by the States' respective borders." Fuld, 606 U.S. at 14. Those concerns are not necessarily present in cases arising under federal law in federal court because "the Constitution confers upon the Federal Government—and it alone—both nationwide and—extraterritorial authority." Id. at 15. Unlike with the individual states, there is no equivalent "ground for constructing an imaginary constitutional barrier around the exterior confines of the United States for the purpose of shutting that government off from the exertion of powers which inherently belong to it by virtue of its sovereignty." Id. (citation omitted).
So, when does this "more flexible" Fifth Amendment due process standard apply in a federal case? Under the Federal Rules of Civil Procedure, federal courts "ordinarily follow state law in determining the bounds of their jurisdiction over persons." Daimler AG v. Bauman, 571 U. S. 117, 125 (2014). Under Federal R. Civ. P. 4(k)(1)(A), federal courts typically ask whether a defendant is "subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located," and thus apply Fourteenth Amendment due process standard.
But under Federal R. Civ. P. 4(k), there are circumstances where the personal jurisdiction standard does not depend on state law. For instance, a federal statute may, as in Fuld, authorize the exercise of personal jurisdiction by providing for the service of process under federal law. See Fed. Rule Civ. Proc. 4(k)(1)(C). In cases where service is explicitly authorized by Congress, the "difference between the Fifth and Fourteenth Amendments is therefore implicated." Fuld, 606 U.S. at 11.
Though not at issue in Fuld, the less rigorous Fifth Amendment standard would also seem to be implicated in cases arising under Fed. R. Civ. P. 4(k)(2), which governs cases arising under federal law where the defendant is not subject to jurisdiction in any state's courts of general jurisdiction. That provision requires that the exercise of personal jurisdiction be "consistent with the United States Constitution and laws," but after Fuld, the relevant standard applicable to such cases may be the Fifth Amendment's flexible standard.
While clearly rejecting the "minimum contacts" standard in these cases, the Fuld court declined to set an outer boundary for Fifth Amendment Due Process analysis. It declined plaintiffs' invitation that the Fifth Amendment imposes no such limits on Congress' power to reach defendants outside of the territorial limits of the United States. Instead, it concluded that, where, as in Fuld, Congress "ties federal jurisdiction to conduct closely related to the United States that implicates important foreign policy concern," Fifth Amendment due process is satisfied. "It is permissible for the Federal Government to craft a narrow jurisdictional provision that ensures, as part of a broader foreign policy agenda, that Americans injured or killed by acts of terror have an adequate forum in which to vindicate their right" to compensation. Fuld, 606 U.S. at 21. Writing separately, Justice Thomas, joined by Justice Gorsuch, would have concluded that the "Fifth Amendment was never understood to constrain Congress's ability to extend federal jurisdiction" beyond the nation's shores. Fuld, 606 U.S. at 35 (Thomas, J., concurring).
Even when analyzing personal jurisdiction under the Fifth Amendment due process clause, however, "the prospect remains that the Fifth Amendment might entail a similar 'inquiry into the reasonableness of the assertion of jurisdiction in the particular case.'" Fuld, 606 U.S. at 23. This reasonableness inquiry will depend in each case "on an evaluation of several factors," including "the burden on the defendant, the interests of the forum State, and the plaintiff's interest in obtaining relief." Id. at 24 (citation omitted). The court did not decide whether such analysis is constitutionally required under the Fifth Amendment. Assuming that it would apply, the court found it easily satisfied by the statute before it.
In terms of the significance of Fuld, this could allow plaintiffs to proceed against foreign defendants, without regard to "minimum contacts," where the authority for suit comes from federal statutes – like the Foreign Sovereign Immunities Act, the ICSID Convention, or the Helms-Burton Act, as used in the above cases against Venezuela and Cuba. As to foreign sovereigns, they already do not enjoy due process protections because foreign sovereigns, like US states, are not persons for the purposes of the Due Process Clause. So, Fuld does not necessarily change the analysis with respect to foreign sovereigns but could apply to foreign sovereigns' agencies and instrumentalities, which under current law are afforded the due process protections because they retain their status as separate legal persons under the FSIA. Section 1603(b)(1); Gater Assets v Ltd. V. Moldovagaz, 2 F.4th 42 (2d Cir. 2021).
