Venezuela’s Lawyers Switched Sides – Now What?

I wanted to call readers attention to a particularly interesting ongoing case regarding recognition of governments in the context of Venezuela. The case (Rusoro Mining Ltd. v. Bolivarian Republic of Venezuela) revolves around damages caused to Rusoro, a Canadian company, by Venezuela’s nationalisation of the gold mining sector. In 2016, an ICSID tribunal ordered Venezuela to pay approximately one billion dollars to Rusoro, ensuing a legal battle in US courts, with Rusoro seeking to confirm the award and Venezuela opposing, claiming overreach by the ICSID tribunal. Last year, Venezuela lost before the US DC District Court and appealed. However, this past February, after the tumultuous events following Juan Guaidó’s swearing in as interim President, something unexpected happened: Venezuela’s lawyers switched sides, choosing to work with Guaidó rather than Maduro, and motioning for a 120-day stay of the proceedings “to allow the newly installed government of Juan Guaidó, Interim President of the Republic, sufficient time to evaluate its position in this and other cases involving the Republic currently pending in U.S. courts”.

The motion caused a swift response by Maduro’s new lawyers, also claiming to represent Venezuela, accepting the stay, but opposing the motion’s argument’s regarding who is the rightful President of Venezuela. According to Venezuela, under Bank of China v. Wells Fargo Bank & Union Trust Co., a case concerning competing claims to ownership of a public bank between the Republic and the People’s Republic of China in the 1950s, there would be no rule under US law stating that courts must defer to executive policy when deciding which entity to recognise as the government of Venezuela. “In any particular situation, executive policy is a fact which properly should be considered and weighed along with the other facts before the court”, it said.

This is undoubtedly a sui generis case, even more so given that, before the Guaidó saga, the practice of recognition of governments had been practically abandoned in most of the world, making the analysis particularly difficult. In fact, last year, the International Law Association’s Committee on Recognition/Non-Recognition in International Law (of which Opinio Juris’ co-founders Peggy McGuiness and Chris Borgen are members) issued a Resolution concluding that “[w]here competing regimes have sought recognition as a State’s government, the various approaches taken have not reflected firmly established criteria for assessing governmental legitimacy” and inviting “further research into evolving norms”; (in other words, it’s complicated). Conclusively resolving the dispute at hand, therefore, long exceeds the scope of a single blog post, but there may be a few general guidelines that can inform the matter at hand.

To begin, most of the uncertainty exists precisely because States no longer recognise governments, but only other states. While this may ease the job of diplomats, it complicates that of domestic courts, which now need to devise ways to find out which of two conflicting factions is preferred by their government, when the government specifically refuses to give a straight-forward answer. This was the case, for instance, in the United Kingdom, that abandoned its policy of recognition of governments in 1980. In Republic of Somalia v. Woodhouse Drake & Carey, Judge Hobhouse recalled that before 1980, deciding between two competing factions was a very straightforward endeavour: “recognition by Her Majesty’s Government was the decisive matter and the courts had no role save to inquire of the executive whether or not it had recognised the government in question” (p. 63). Now that such an inquire was not possible, he had to devise a new practical test for courts to follow. He concluded a two-pronged test: “whether the relevant regime is able of itself to exercise effective control of the territory of the state concerned and is likely to continue to do so” and “the statement as to what is to be the evidence of the attitude of Her Majesty’s Government” (Id.). The Court was clear to stress, however, that the test would be inapplicable when the Government’s choice is known, “since it would be contrary to public policy for the court not to recognise as a qualified representative of the head of state of the foreign state the diplomatic representative recognised by Her Majesty’s Government” (p. 66).

This, however, does not seem to have been the position in Bank of China, referenced affirmatively by both Guaidó’s and Maduro’s attorneys. There, the Court reserved some level of judicial oversight, while ultimately following the Government’s indication of recognition. It concluded:

“Where there only one government, in fact, of the Chinese State, or only one government in a position to act effectively for the State in respect to the matter before the Court, the Court might be justified in accepting such a government as the proper representative of the State, even though our executive declined to deal with it. Here, there co-exist two governments, in fact, each attempting to further, in its own way, the interests of the State of China, in the Bank of China. It is not a proper function of a domestic court of the United States to attempt to judge which government best represents the interests of the Chinese State in the Bank of China. In this situation, the Court should justly accept, as the representative of the Chinese State, that government which our executive deems best able to further the mutual interests of China and the United States” (underline added).

Neither Guaidó’s nor Maduro’s attorneys mentioned the work of the ILA, referenced above. This is surprising, as it contains valuable insights as to the course of action a US court could potentially follow. The Committee’s Third Report, of 2016, surveyed the most recent US practice with regards to recognition of governments, concluding that “[i]n cases where the Executive has explicitly stated that a particular government is barred from accessing U.S. courts, courts will defer to that decision” (p. 15). In fact, according to the report, only where the Executive is silent may a court determine whether to treat a specific entity as the government of a state (Id.). The Report cites to a survey conducted in 2004 by the District Court for the Southern District of New York, discerning at least four “divergent approaches” to unrecognized entities in US courts:

“1. Unrecognized entities are denied comity and therefore denied access to courts and to property held in the U.S;
2. Unrecognized entities are generally accorded de facto juridical personality for the purpose of engaging in commercial transactions, conveying private rights and giving effect to judicial and ministerial acts within the recognized entities’ territory;
3. Courts defer to the Executive policy and statements when determining the scope of sovereign immunity of unrecognized entities;
4. In the absence of an Executive policy or Statement, courts permit jurisdiction over unrecognized entities if such jurisdiction does not violate public policy or the interests of justice”.

Of course, the Report is non-binding, but it should be able to provide guidance to the Court in what surely promises to be an interesting case.