Tue | May 11, 2021

Jamaica pulled into ConocoPhillips, Venezuela battle

Interim receiver appointed for PetroCaribe funds

Published:Friday | April 9, 2021 | 12:14 AMHuntley Medley - Associate Business Editor

An interim receiver has been appointed by the courts over some Venezuelan assets in Jamaica at the request of ConocoPhillips as part of a long-running, multi-jurisdictional bid by the American oil giant to get compensation for the expropriation of...

An interim receiver has been appointed by the courts over some Venezuelan assets in Jamaica at the request of ConocoPhillips as part of a long-running, multi-jurisdictional bid by the American oil giant to get compensation for the expropriation of its assets in Venezuela 14 years ago.

In the order by the Supreme Court dated February 26, Kenneth Tomlinson of Business Recovery Services Limited was named interim receiver over monies owed by the Jamaican Government to PDVSA for oil delivered to the island under the PetroCaribe Agreement signed in 2005.

The court case sought to secure any Venezuelan assets in Jamaica that may be the subject of future proceedings locally, to enforce a 2018 decision and award of an arbitration panel under the International Chamber of Commerce, ICC, that Venezuela, then under the leadership of the late Hugo Chavez, had illegally taken over the joint-venture operations with ConocoPhillips in 2007.

The applications were filed last year by Phillips Petroleum Company Venezuela Limited and ConocoPhillips Petrozualta BV, through Kingston law firm Nigel Jones & Company on behalf of the oil company’s London-based attorneys, Kobre & Kim. The interim receivership covers the Jamaican assets of Venezuelan government corporations Petróleos de Venezuela SA, better known by its acronym PDVSA; and PDVSA Petróleo SA, none of which were represented in the court proceedings. A court decision regarding the third firm named in the court filings, Corpoguanipa SA, was said to be pending.

At the initial filing of the court documents last July, the judge ordered that the arbitration award be registered in the Supreme Court and that the Venezuelan corporations be given 28 days to apply for the registration to be set aside.

Charge d'affaires at the Venezuelan Embassy in Jamaica Antonio Sanchez told the Financial Gleaner this week that the embassy was unaware of the court case and judgment.

The receivership assets within Jamaica have been identified by the court as: “including but not limited to any right to receive principal and interest debt repayment owed now or in the future by the State of Jamaica, the Government of Jamaica, any department of the Government of Jamaica or the PetroCaribe Development Fund under the PetroCaribe Energy Co-operation Agreement made in or about November 2005 between Jamaica and the Bolivarian Republic of Venezuela, and specifically includes any such funds which have so originated but which have been assigned by PDVSA Petróleo SA to Banco Central de Venezuela or any other party”.

The receivership order, however, excludes funds being held by the Jamaican Government that is due to PDV Caribe SA for that company’s 49 per cent stake in the Petrojam oil refinery, which the Holness administration compulsorily acquired two years ago. However, the judgment did not disclose the size of the payment.

The Venezuelans have claimed some US$250 million for the shares and dividends they said was owed by Jamaica. At the invitation of the court, the office of the Attorney General confirmed that compensation for the shares is currently being held in escrow, but did not give a figure.

“I have not been satisfied on a balance of probabilities that the compensation for the shares in Petrojam Limited which were previously held by PDV Caribe SA are funds or other property, which the court, in the course of the enforcement action, will have the means of distributing to the claimants or any of them,” Justice Kissock Laing said in his ruling that granted the interim receivership.

“Accordingly, I find that such funds do not constitute property which can properly be the subject of a receivership order,” the judge said.

The order made by Justice Laing covers monies owed by Jamaica to Venezuela for oil supplied under the PetroCaribe oil deal that gave huge concessions to the island at the height of global oil price turbulence. The existence of the funds was confirmed in a sworn affidavit by Darlene Morrison, the financial secretary in the Ministry of Finance, who said funds owed to PDVSA are earmarked to be paid, on Venezuela’s instructions, to Banco Central de Venezuela.

No amount was given, but lawyers for ConocoPhillips assert that the figure is at least US$115 million. They were provided with information from the Ministry of Science, Energy and Technology, in response to their application under the Access to Information Act, showing liabilities of the PetroCaribe Development Fund to PDVSA for 2018 totalling just over US$98.8 million.

The matters brought to the Jamaican court for determination included recognition and enforcement of the arbitration award, appointment of the receiver in protection of the assets, whether the applicants will be entitled to claim the assets during subsequent enforcement proceedings, and whether there was a real risk of dissipation of assets which are currently the subject of sanctions imposed by a third-party state – the United States.

Jamaica’s payments to Venezuela for oil supplied on credit under the PetroCaribe Agreement that Venezuela also signed with several other Caribbean and Latin American countries, were stalled after the US imposed sanctions on the South American country, now led by Nicholas Maduro, who continues to have a testy relationship with the US and other western governments.

The PetroCaribe payments due to Banco Central de Venezuela were said to have been hindered by the inability to utilise normal US-based intermediary banks for Venezuelan transactions, hence the decision to place the funds in escrow.

More than US$1.6 billion in the PetroCaribe Fund was incorporated into Jamaica's Consolidated Fund when the PetroCaribe Fund ceased to exist as a statutory body in early 2019, in fulfilment of an undertaking given under the International Monetary Fund rescue programme for Jamaica in September 2017. At the time, Jamaica owed some US$120 million to Venezuela.

The PetroCaribe Fund was created in 2006 as a largely independent and self-financing entity, whose profits serviced Jamaica's oil debt to Venezuela, and whose inflows were invested via loans and grants in development projects. The fund pumped some $335 billion into the Jamaica economy through project loan financing, equity investments, and social and economic development grants.

huntley.medley@gleanerjm.com