Second Quarter Report July 2019


This section highlights excerpts of relevant press releases and brief comments on our views regarding such.

“Guaido’s Counsel intend to void the arbitration with ConocoPhillips”

The General Attorney appointed by the National Assembly, José Ignacio Hernández, is seeking to void arbitration award of USD 8,7 billion to ConocoPhillips since the method used to determine that amount was allegedly erroneous.


“PDVSA’s Venezuelan fleet operator seeks to arrest three tankers”

Bernhard Schulte Shipmanagement (BSM) has taken actions to legally arrest three of PDVSA’s tankers: Arita in Singapore, Río Arauca and El Parnaso in Portugal; in order to collect a debt for services rendered to the state-owned company. BSM redelivered 4 vessels to PDVSA and had plans to redeliver another nine in June.


“Citgo Petroleum Negotiates with Aruba for Refinery Contract”

Citgo Petroleum Corp stated it is in conversations with the government of Aruba to operate its refinery in the future, which has been inactive since 2012. However, the First Minister of Aruba Evelyn WeverCroes, informed that the government foresees “three possible scenarios for the refinery: (i) continue working with the oil company, (ii) negotiate the end of the contract, or (iii) use the site for a different activity.”


“Citgo Gets U.S. Subpoena Related to Venezuela Bribery Probe”

Citgo Petroleum Corp received a subpoena from the U.S Department of Justice from an investigation about bribery in Venezuela. The subpoena is related to accusations against individuals that have continued for years, and involve bribery plans with PDVSA to obtain contracts with the state-owned company. However, CITGO did not identify the reason for the subpoena, but has committed to cooperate with the investigation.


“Russia Squeezing Embattled Venezuela for TaxFree Gas Expansion”

Rosneft PJSC, Russia’s state-controlled oil company, is entering into the natural gas market in Venezuela through concessions granted to produce and export gas from the Patao and Mejillones fields. The parties signed an accord which guarantees Rosneft tax breaks to develop such activities and a “fair market price in the event of expropriation”. According to Russian media, Rosneft owns the entire project and could export all the gas from both deposits.




This section comments on relevant case law during the corresponding quarter and our brief comments to it

Decision by the Constitutional Chamber of the Supreme Court of Justice dated May 23, 2019 in the matter of the State of Emergency requested by Nicolas Maduro

Under Decree N° 3.844 dated May 9 2019, Maduro declared a State of Emergency and Economic Hazard in all the National Territory for 60 days extendable for 60 more. Such Decree was subject to the review of the Constitutional Chamber for it to be declared within constitutional rules.   The provisions of the Decree awarded the Maduro with full powers to undertake extraordinary, exceptional and necessary measures to preserve internal order and security, to guarantee the population with free use of their rights and uninterrupted access to goods and services.   In addition, the Supreme Court of Justice declared void and non-existent any action or statement from the National Assembly, which disapproves this Decree.

Decision by the Political and Administrative Chamber of the Supreme Court of Justice dated May 21, 2019 in the matter Mantenimiento Casalbeach, C.A. v. The Bolivarian Republic of Venezuela represented by the National Antidrug Office (ONA)

The Chamber accepts the possibility of moral damages to companies and entities within its jurisdiction. In order to establish the liability and the amount to be granted under this concept there are three prongs to consider:

  1. The reputation of the company before the incident.
  2. The impact of the transgression in the company’s market.
  3. Any other reason that may link the compensation requested to the transgression suffered by the plaintiff. 

Decision by the Civil Chamber of the Supreme Court of Justice dated June 28, 2019 in the matter of Mar Obras, S.A.

The Civil Chamber of the Supreme Court of Justice issued a ruling on the appeal filed by Mar Obras, S.A, on the judgment handed down by the Maritime Court of First Instance based in the city of Caracas. Mar Obras sued Seguros Pirámide, C.A., for the latter to comply with the provisions in the insurance contract and indemnify same for the loss that the barge Travelca 01 suffered. The dispute was to determine if the barge was seaworthy at the moment in which the loss took place. The barge had several expired certificates at the moment of the loss. Article 406 of the Maritime Commercial Law states:

«In a term policy, there is no guarantee that the ship will be seaworthy at any stage of the expedition. When, with the knowledge of the insured, the vessel has sailed in unseaworthy conditions, the insurer shall not be liable for any loss attributable to such defective state

A ship is seaworthy, when it is conditioned in all aspects to face the ordinary risks of the waters in which the insured expedition takes place».

The Appellate Judge determined that it is considered that a ship is seaworthy when it has all the structural, documentary and optimal elements to face the risks that may occur during the expedition. Thereby, the vessel must carry on board all certificates that state its seaworthiness and compliance with the law. The Civil Chamber confirmed this criteria, on the basis that the vessel, having her certificates expired, is not seaworthy. Second

Decision by the Maritime Court of Appeals, Judicial Circumscription of the state of Sucre, April 22, 2019 in the matter Transpesca 09 C.A. v. UMAY Tug

The UMAY tug was the subject of a judicial precautionary measure prohibiting her from sailing. Defendants claimed that the service provided by the tug constitutes a public service according to Venezuelan legislation, and as such the tug cannot be jeopardized by individual interests.

The Court asserted that the precautionary measure was granted because the lack of evidence indicating that the UMAY actually performed the alleged service, and that even if that was the case, there are other tugboats fit to complete the task so the public service is not interrupted.


This section expands on National and International Legislation adopted in the country and relevant to the industry.

National Decree N° 3.875 dated 12 June 2019.

The new Board of Directors of the State-owned Company Petroleos de Venezuela S.A. was appointed as follows:

National Decree N° 3.845 dated 10 April 2019.

Appointing César Vladimir Romero Salazar Vice Minister of the Aquatic Transportation Ministry.

Resolution of the Venezuelan Central Bank dated 2 May 2019.

Banking institutions are now performing as foreign currency operators. These are now able to engage with their clients in order to sell or buy foreign currency on their own terms.

The institutions that perform this kind of transactions shall publish their average conversion rate at the end of the day, and must inform the Venezuelan Central Bank of such rate for it to be published on its website.

National Decree N° 3.837 dated 30 April 2019

The Decree sets a special work schedule for the private and public workers, from 8:00 am to 2:00pm. Until further decision by the Executive Government.

Provision issued by the Superintendence of Crypto-assets dated 3 April 2019

This provision defines the licenses for operators who will engage in exchange involving any crypto currency; as well as the role of the Superintendence to supervise this activity and the possible sanctions operators will face if violating the law that regulates the matter.

Circular N° 008 and 002 from the National Institute of Aquatic Spaces.

The National Institute of Aquatic Spaces implemented the ISO 9001 Quality Management Systems Standards which apply to products and services of any type of organization. The rule came into force on June 30, 2019 and comprises a series of stages to be implemented trough 2019 and 2020. This requirement is essential so that Naval Production Centers, Shipping Agencies, Cargo Agencies, Stevedores, Multimodal Transport, Maritime Brokerage, Services of Aquatic Security and others can operate before the Institute.

Marine Safety Advisory N° 17-19 from the Republic of Marshall Islands dated 03 June 2019.

The Maritime Administrator of the Republic of Marshall Islands issued a Marine Safety Advisory No. 17-19 after the United States designated PDVSA as a «Specially Designated National and Blocked Person», which prohibits its national to engage any dealings with the company or its subsidiaries. Although the sanction only applies to US persons, foreign persons can also be object of secondary sanctions if they have provided material support, goods or services to PDVSA. In consequence, the Maritime Administrator of the Republic of Marshall will suspend vessels under charter, control or trading with PDVSA, since it is unable to provide services to those vessels.


This section lists draft regulations/bills being proposed to and/or discussed in Congress or relevant institutions.

The First Draft of the Law on Hydrocarbons was presented to the National Assembly

The Permanent Commission of Energy and Oil of the National Assembly presented before the Subcommittee on Energy and Oil the preliminary draft of the new Law on Hydrocarbons, which intends to increase the oil production, recover the national oil industry and to encourage any type of association with the private sector since the current law reserves the primary activities to the State.

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