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September 28, 2020
OFFICE OF THE SPECIAL ATTORNEY GENERAL OF
THE BOLIVARIAN REPUBLIC OF VENEZUELA
PRESIDENTIAL ADVISORY COMMITTEE FOR THE RENEGOTIATION OF DE VENEZUELAN DEBT
STATEMENT REGARDING THE PRESCRIPTION CLAUSE IN
CERTAIN GLOBAL BONDS ISSUED BY THE BOLIVARIAN REPUBLIC OF VENEZUELA AND STATUTE OF LIMITATIONS CONSIDERATIONS
On behalf of the Interim Government and the National Assembly (the “Authorities”) of the Bolivarian Republic of Venezuela (the “Republic” or “Venezuela”), the [Office of the Special Attorney of the Republic] hereby issues the following statement with respect to (i) the prescription clause (the “Prescription Clause”) contained in certain U.S. dollar denominated bonds (the “Republic Bonds”) issued by the Republic and (ii) statute of limitations considerations relating to the Republic Bonds and U.S. dollar denominated bonds issued by Petróleos de Venezuela, S.A. (“PDVSA”) and C.A. La Electricidad de Caracas (“EDC”).
The Prescription Clause in the Republic Bonds reads as follows:
Claims in respect of principal and interest will become void unless presentation for payment is made within a period of ten years in the case of principal and three years in the case of interest from the Relevant Date, to the extent permitted by applicable law. “Relevant Date” means whichever is the later of (i) the date on which any such payment first becomes due and (ii) if the full amount payable has not been received by the Fiscal Agent on or prior to such due date, the date on which, the full amount having been so received, notice to that effect shall have been given to the Bondholders. (Emphasis added.)
The Prescription Clause addresses situations where the Fiscal Agent holds amounts paid by the Republic that are unclaimed by, or otherwise not distributed to, bondholders. As the use of “the later of” formulation in the Prescription Clause makes clear, the ten- and three-year periods set out in the Prescription Clause will not begin to run unless and until (i) the Fiscal Agent receives the full amount payable by the Republic and (ii) notice to that effect is given to the bondholders.
The Authorities are not aware of a situation in which these two conditions have been satisfied in connection with an overdue amount of principal or interest payable under any of the Republic Bonds. Accordingly, it is the view of the Authorities that the contractual prescription period has not begun to run in respect of such amounts.
None of the foregoing affects the six-year statute of limitation period under New York law during which holders of the Republic Bonds may bring claims against the Republic for unpaid principal or interest.
Further, U.S. dollar-denominated bonds issued by PDVSA and EDC contain language providing that claims for the unpaid principal and interest against PDVSA and EDC (as applicable) “will be prescribed unless made within six years of the due date for payment.” (Emphasis added.) This is consistent with the statute of limitations period under New York law for this type of claim.
The National Assembly is aware that the Maduro regime has now defaulted on all of the Republic’s U.S. dollar-denominated bonds and that PDVSA and EDC are also in default on their U.S. dollar-denominated bonds. Those defaults commenced in the second and third calendar quarters of 2017 and have persisted since that time. Given the six-year statute of limitations period under New York law applicable to claims for these defaulted amounts, the Authorities do not expect that any of these claims will become time-barred in a New York court as a result of the expiration of the statute of limitations until, at the earliest, sometime in 2023.
As confirmed repeatedly by U.S. courts, under the law of the United States the Interim Government is the only recognized government of the Republic. As such, the Interim Government is the sole body with the legal authority to bind the Republic in contractual matters; the illegitimate regime of Nicolás Maduro lacks that power. In this context, the Authorities wish to reiterate that if any contractual undertakings of the Republic are in danger of becoming time-barred as a result of the running of the statute of limitations (the Authorities are not aware of any such situation at this time), the Authorities will entertain proposals to extend the statute of limitations period so as to avoid the need for the claimant to bring a lawsuit to preserve its claim. The Authorities will recommend to the ad hoc Boards of Venezuela’s other public sector obligors that they adopt a similar policy with respect to their international contracts.
The Authorities appreciate the forbearance shown by most of the Republic’s creditors in pursuing legal remedies under the defaulted bonds. That forbearance is particularly appreciated in light of the dire humanitarian crisis in Venezuela, now aggravated by the COVID-19 pandemic. Although addressing this humanitarian crisis will naturally be a first priority for the Authorities following the restoration of democracy in the country, the Authorities remain committed to pursuing an orderly, consensual restructuring of the Chávez/Maduro era legacy claims against public sector obligors once this becomes legally feasible.
