Brit Court Overturns Exxon $12 B Venezuelan Asset Freeze

Exxon $12 Billion Venezuela Asset Freeze Overturned
By James Lumley and Caroline Binham
Bloomberg
March 18, 2008
http://www.bloomberg.com/apps/news?pid=20601086&sid=aDifcPcoLV8Y&refer=latin_america

Exxon Mobil Corp.'s freeze on $12 billion of assets belonging to Venezuela's state oil company was overturned by a U.K. court in a setback for the U.S. energy company in its dispute with President Hugo Chavez.

A London court today said that an injunction freezing assets belonging to Petroleos de Venezuela SA, known as PDVSA, should be thrown out. Judge Paul Walker disclosed the ruling without giving his reasoning.

Exxon, the world's largest oil company, sought freeze orders in several countries to keep Venezuela from shifting assets out of the reach of an international arbitration commission that's handling claims against Chavez's government for last year's takeover of an oil field. PDVSA had argued that U.K. courts didn't have jurisdiction to intervene in the dispute.

``The judge hasn't allowed his court or his country to be an instrument'' of Exxon, Samuel Moncada, Venezuela's ambassador to the U.K., said in an interview. ``This decision should have an effect on any reasonable court in the world.''

A message left with Irving, Texas-based Exxon's press office before office hours wasn't immediately answered. Catharine Otton- Goulder, a lawyer for Exxon, also declined to comment. The company can appeal today's ruling.

Courts in the U.K., Netherlands and Netherlands Antilles issued orders freezing PDVSA assets, Exxon said last month. The decisions kept PDVSA from moving assets, while allowing it to do business, according to court papers.

The orders obtained outside the U.K. are still in place, said PDVSA lawyer George Kahale.

Legal Fees, Damages

Exxon must pay 380,000 pounds ($767,000) of PDVSA's legal fees within 21 days, said Gordon Pollock, another lawyer for PDVSA. The Venezuelan company will also seek compensation for damages suffered because of the freeze by June 18, he said.

During the hearing, Pollock said that PDVSA couldn't complete a $1 billion refinancing on an oil refinery in Venezuela until the judge made a decision in the case.

``It is that sort of thing,'' from which PDVSA will be calculating damages, Pollock said.

At a U.K. court hearing lawyers for the Venezuelan oil company also argued that the $12 billion was more than Exxon had sought in private settlement negotiations to resolve the case.

`Settling Amicably'

``Exxon has to learn the lesson of settling amicably,'' Moncada said. ``We are always happy to talk, but with respect.''

Exxon won a U.S. court order Feb. 13 that extended a freeze on as much as $315 million that would have been transferred to PDVSA in a bond buyback transaction.

The U.K. freeze obtained by Exxon involved PDVSA holdings in refineries in Dundee, Scotland, and Ellesmere Port, England, and bank accounts related to those businesses, according to a court filing in the U.S. case.

The order also listed six U.K.-listed companies in which PDVSA has interests: Nynas Ltd., Eastham Refinery Ltd., Nynas Bitumen Ltd., Nynas Naphthenics Ltd., Bitor Energy Plc and Bitor Energy Ltd., according to the U.S. court filings.

The dispute stems from a 1997 agreement between Mobil Corp. and PDVSA to form a joint venture to explore for extra-heavy crude in the Orinoco oil belt. Exxon, which later acquired Mobil, claimed PDVSA agreed to indemnify Mobil if it later expropriated Mobil's interests.

As part of Chavez's efforts to implement ``21st century socialism'' in Venezuela, the government took control of four joint ventures in the country's Faja del Orinoco region in 2007.

I think we were shocked when Exxon got permission originally to freeze funds! SHOCKED.

This is so apprpriate. Looking forward to reading more and more about it. Thanks, magbana.