We won an across-the-board victory, affirming the validity of over $2 billion in bonds issued by a state-owned oil company

On October 27, 2026, Davis Polk won a complete victory for the trustee and collateral agent in a Second Circuit appeal arising out of the default by Venezuela state-owned oil company Petróleos de Venezuela S.A. (PDVSA) on more than $2 billion of bonds. In 2016, PDVSA offered bondholders the chance to exchange bonds maturing in 2017 for bonds maturing in 2020, secured by 50.1% of the shares of Citgo Holding. The Venezuelan National Assembly, led by opposition leader and later interim president Juan Guaidó, subsequently rejected the issuance of the 2020 bonds, and PDVSA defaulted on the bonds in October 2019. Immediately thereafter, the Guaidó-appointed ad hoc board for PDVSA filed a complaint against our clients in the Southern District of New York seeking a declaration that the agreements governing the 2020 bonds were invalid and seeking injunctive relief to prevent our clients from enforcing those agreements. The district court resolved the validity of the 2020 bonds and governing documents in favor of our clients, and PDVSA appealed to the Second Circuit. The appeal centered on complex questions of Venezuelan law and the act of state doctrine. The Second Circuit affirmed the district court’s decision, adopting the arguments we advanced on appeal. Agreeing with our arguments, the Second Circuit held that the Venezuelan Constitution supports the bonds’ validity and deemed unpersuasive the contrary interpretation offered by the Republic of Venezuela in its amicus brief. The court also held that the act-of-state doctrine does not apply to invalidate a transaction consummated in the United States.

 

The Davis Polk team included partners Masha Hansford (who argued the appeal) and Kannon Shanmugam. All members of the Davis Polk team are based in the Washington DC office.

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