Rosneft Trading resorted to the arguments of the Court of Appeal
Rosneft's "daughter" asked to reject the claims of Crystallex and ConocoPhillips
Rosneft Trading believes that the Delaware court must release it from the claims of Crystallex and ConocoPhillips. Those accused "daughter" of Rosneft in the "fraudulent" receipt of a pledge of 49.9% stake in the American CITGO

Photo: Maksim Shemetov / Reuters
Swiss trading company Rosneft Trading SA, which is 100% owned by Rosneft, asks the District Court in Delaware to reject the lawsuits filed against it by Canadian Crystallex International and American ConocoPhillips, follows from court documents studied by RBC.

Rosneft Trading was named as a defendant, along with the Venezuelan state oil company PDVSA and its daughter company in Delaware PDVH, for two similar claims in October 2016 and January 2017 (RBC wrote about them here and here ). Crystallex and ConocoPhillips have accused PDVSA, PDVH and Rosneft Trading of fraudulent transfer of an asset to themselves - a 49.9% stake in the American oil refining company CITGO. The plaintiffs are seeking compensation from Venezuela for billions of dollars for nationalized assets and believe that Venezuela through a series of deals involving CITGO shares purposefully took money out of sight of creditors.

US Court of Appeals Helped

Protection Rosneft Trading refers to the decision of the Court of Appeals of the Third Circuit of the United States of January 3, 2018, arguing that after this decision, the claim to the structure of Rosneft was completely groundless. The Court of Appeal dealt with whether the concept of a fraudulent transfer of an asset as defined in the Delaware Act to the disputed Crystallex transaction between PDVH (registered in Delaware, owned by PDVSA and owned by CITGO), its parent company in Venezuela and its "daughter" in the United States , in which CITGO's money through dividends was first transferred to PDVH, and then withdrawn outside the United States.

The court applied a formal approach, although recognizing that such a transfer sought to prevent Venezuela's lenders from reaching out to its assets, the appellate court ruled that under Delaware's law "fraudulent transfer" can only be carried out by the debtor, and PDVH is not formally such - it is a corporation that does not responsible for the debts of the state.

"The [Delaware] court must ... apply the position of the Court of Appeal and adjudge on the removal of the requirements for Rosneft Trading SA," says the defense of the company (its position is set forth in a letter to Judge Leonard Stark on January 10, which RBC acquainted). The same opinion partner of law firm Abrams & Bayliss John Simen, representing the interests of Rosneft Trading, also sent a lawsuit to ConocoPhillips (Judge Stark leads both of these disputes, which are essentially identical). "The Court of Appeal has clearly established that the transfer of the asset can not give rise to prosecution if it is not directly carried out by the debtor," indicates the defense of Rosneft Trading. Since in the transaction where Rosneft received 49.9% of CITGO as collateral in exchange for the financing provided to Venezuelans, the transfer of the asset was also made by PDVH, and not by the debtor state, this transaction should also be withdrawn from the article on "fraudulent transfer" of the law Delaware, according to representatives of Rosneft. The representative of Rosneft declined to comment.

Chances of Crystallex

Crystallex has already told the court of its intention to appeal to the appellate court on January 17 to review its findings - in this case, the appellate court, if it agrees, will consider the case in its expanded format, Crystallex will be able to present new arguments. But Rosneft Trading believes that "Crystallex's request for a repeat hearing of the case with high probability will not be satisfied." The Canadian company has another chance: it can return to the Delaware District Court and try to file an amended complaint against the PDVSA and its co-defendants, according to Cleary Gottlieb lawyers Richard Cooper and Boaz Moragh (. Pdf ). To do this, Crystallex will first need to prove that the commercial activities of the state PDVSA in the US remove its sovereign immunity from it, and then convince the court that the PDVSA is the "alter ego" of the Venezuelan state, and therefore can answer for its debts (Venezuela by decision International arbitration should Crystallex $ 1.2 billion for the nationalization of the gold project in 2011).

In any case, the January decision of the Court of Appeal "puts a barrier on the efforts of Crystallex to abolish transfers of assets that it considers fraudulent," write lawyers Cleary Gottlieb.

Rosneft Trading received collateral rights for 49.9% of CITGO shares in autumn 2016 as collateral for a loan granted to PDVSA (the loan amount, according to Crystallex, was $ 1.5 billion). US congressmen have repeatedly voiced fears that Venezuela's default on this loan could lead to the fact that Rosneft will become the owner of almost half of the large operator of refineries in the US. But the head of Rosneft Igor Sechin said that the company did not intend to and does not intend to receive CITGO in management. In July 2017, Reuters reported , citing sources, that Rosneft is negotiating with PDVSA to exchange its security interests in CITGO shares for shares in oil fields and an agreement on the supply of fuel.

Phantom reconciliation

All claims of Crystallex to PDVSA and its "daughters" (including the lawsuit in which Rosneft Trading appears) had to be suspended, and eventually withdrawn if the amicable agreement that Crystallex and Venezuela had suddenly concluded in mid-November 2017 entered into force. This would not have affected ConocoPhillips' parallel lawsuit regarding the transfer of security rights to CITGO shares (as opposed to the ruling of the Court of Appeal, which affects both claims, casting doubt on them). The terms of the agreement between Crystallex and Venezuela were confidential, the total amount that Venezuela agreed to pay was not disclosed. But from the materials of the Canadian court that approved this agreement (RBC has these materials), it followed that Venezuela pledged to pay the first tranche of $ 25 million until November 30 and the second tranche for $ 15 million - until December 31, 2017.

Venezuela could not transfer Crystallex even the first payment, the settlement agreement never came into force, it follows from the materials of the Delaware court. "It is not clear whether it will enter into force at all," the PDVSA and PDVH lawyers wrote on December 22. Representatives of Crystallex said on December 20 in the court of the Canadian province of Ontario that Venezuela initiated an initial payment, but in the conditions of "hunting" of creditors for Venezuela and US economic sanctions such payments can take from three to four weeks. Representatives of PDVSA did not respond to RBC's request, and Crystallex lawyers refused to comment on the settlement agreement.

Author: Ivan Tkachev.
With the participation: Alina Fadeeva.
Tags: Rosneft , Venezuela , Citgo

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