A US federal appeals court on Tuesday upheld the validity of bonds issued by Venezuela’s state-owned oil company Petróleos de Venezuela (PDVSA)
A US federal appeals court on Tuesday upheld the validity of bonds issued by Venezuela’s state-owned oil company Petróleos de Venezuela (PDVSA) that defaulted in 2019, ruling that the transaction did not require prior approval from the country’s National Assembly.
The US District Court for the Southern District of New York ruled in favour of the creditors in September 2025. Because the bonds are secured by a 50.1% equity interest in CITGO Holding, the parent company of US oil refiner CITGO Petroleum, potentially allowing creditors to pursue the collateral to recover their dues, the ruling is significant. The doctrine’s territorial limitation therefore prevented its application to the dispute, the court said.
The US Court of Appeals for the Second Circuit affirmed a lower court judgment that found the bonds enforceable under Venezuelan law. It concluded that the transaction was valid under Venezuelan law and that the act-of-state doctrine did not apply. The Second Circuit upheld that judgment. In examining Venezuelan constitutional law, the appeals court relied on interpretations by Venezuela’s Constitutional Chamber indicating that national public interest contracts requiring legislative approval are those entered into by the Republic or competent organs of the National Executive. PDVSA, as a state-owned enterprise within the country’s decentralised public administration, did not fall within that category, the court concluded. The appeals court also agreed that the act-of-state doctrine did not invalidate the transaction. It noted that the relevant agreements were executed in the United States, payments were due in New York and the collateral was held there.
A court-approved plan for the sale and resolution of creditor claims commits more than $2 billion towards extinguishing at least two-thirds of the 2020 notes, according to the Second Circuit’s opinion. The case forms part of broader litigation over PDVSA’s ownership interests in CITGO and other claims against Venezuela. A separate proceeding in Delaware concerns the proposed sale of PDV Holding, which owns CITGO Holding.