Venezuela may have sanctions on its assets according to Delaware court

International economist Francisco Rodríguez has published a thread on his Twitter account where he reveals that Venezuela could present sanctions in a lawsuit related to its assets thanks to a decision by a Delaware court.
“The court decided that an OFAC statement on its FAQ site “lacks the force of law and is not entitled to deference,” Rodríguez mentions in his tweet. 

Rodríguez also explains in the same thread that sanctions by US laws and regulations are often a bit vague and can have multiple interpretations. That is why, by reading it correctly, companies can come into play, since none of them want to be found violating the sanctions. 

1. A Delaware court decision in litigation related to Venezuela's assets abroad can have wide-ranging implications for sanctions enforcement. The court decided that an OFAC statement in its Frequently Asked Questions site "lacks the force of law and is not entitled to deference." pic.twitter.com/Ht83U53DQC
– Francisco Rodríguez (@frrodriguezc) March 3, 2022

The economist explained that one of the ways to resolve this uncertainty is through the interpretation of the Office of Foreign Assets and Control (OFAC) with the implementation of its own rules, and like any other page, OFAC has a list of questions that are regularly consulted by compliance officials inside and outside the US, as this allows them to ensure that they are interpreting the sanctions regulation correctly.  
The aforementioned Delaware litigation "creditors are trying to advance the sale of CITGO, a Venezuelan-owned refining company, to pay government debts related to the expropriation of Canadian mining company Crystallex's investments in Venezuela," the publication says. . 

4. In the Delaware litigation, creditors are trying to advance the sale of CITGO, a Venezuelan-owned refining company, to pay for government debts related to the expropriation of Canadian miner Crystallex's investments in Venezuela. pic.twitter.com/kgVS9ggYPH
– Francisco Rodríguez (@frrodriguezc) March 3, 2022

Despite this, Venezuela is indebted and the Court has decided that creditors can collect this debt through the sale of CITGO shares, since these shares are blocked because they are owned by a sanctioned entity, that is, the Venezuelan state oil company. Petróleos de Venezuela better known as PDVSA.
The most frequently asked questions among officials is whether the creditors can certainly proceed with the sale or whether the court can prepare for the sale, but in 2019 OFAC published in its list of frequently asked questions that it clearly stated that they could not, since they “must obtain a specific license from OFAC before…taking other specific steps to promote an auction or sale.”

6. So can creditors proceed with the sale? Can the court prepare for the sale? In December 2019 OFAC issued a FAQ clearly stating that they could not. They “must obtain a specific license from OFAC prior to … taking other concrete steps in furtherance of an auction or sale.” pic.twitter.com/MP9nShOYYk
– Francisco Rodríguez (@frrodriguezc) March 3, 2022

But this Thursday “the Delaware District Court firmly rejected the argument that the OFAC statement has any force. Judge Leonard Stark has ordered that the court proceed with the sale even if OFAC has stated that it should not do so,” Rodríguez said. 
This means that Judge Stark only orders the pre-sale steps to be carried out. For the Court, these steps are consistent with the law as long as the sale is not closed.
What is key in this case is that the Court ruled that OFAC FAQ 809 has no force and is even incorrect: “”The Court has performed its review function, does not agree with FAQ 809 and does not find any basis for it to grant any deference to FAQ 809″, Rodríguez makes clear through an image in the Twitter thread. 
But this is not all, because the Court declared that whether the sale of a private property can proceed is "outside the 'substantive expertise'" of OFAC and the Treasury is not reflected in the "fair and considered judgment" of the agency .
That is why “The power to enforce sentences, according to the Delaware Court, is “among the basic functions of the federal judiciary”, and the executive branch lacks the authority to prevent it from doing so, at least in the absence of a clear order from Congress”, detailed the economist. 
The key factor in this case is that the judiciary recently issued "a strong rebuke to OFAC's attempt to regulate through targeting." This is when the executive branch has a duty to use its explicit legal authority or ask Congress to legislate where existing laws are ambiguous. 
“In the short term, this decision increases the incentives for over-enforcement and regulatory uncertainty, as it is far from clear that OFAC guidance is truly informative about what sanctions regulations allow and what they prohibit,” the tweet states. 

13. In the near term, this decision increases incentives for overcompliance and regulatory uncertainty, as it is far from clear that OFAC guidance is truly informative about what sanctions regulations allow and what they forbid.
– Francisco Rodríguez (@frrodriguezc) March 3, 2022

However, in the medium term, it is expected that these decisions will be promoted by the executive and legislative powers in order to draft norms and sanctioning laws in a more explicit way and thus reduce the existing spaces of my life.
In the last tweet of this thread, the economist emphasizes that “Surprisingly, OFAC has yet to remove or modify FAQ 809 even though a court ruled that it exceeded its authority by trying to “create a new de facto regulation "through an interpretive guide". 

Miami Daily
Author: Natasha Palís 10:05 am

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