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OFAC Issues New Venezuela-Related License, Guidance

The Office of Foreign Assets Control this week issued new General License 42, which authorizes certain transactions involving the IV Venezuelan National Assembly, its “Delegated Commission,” any entity established by the assembly to “exercise its mandate,” or “any person appointed or designated by, or whose appointment or designation is retained by” such an entity. Those transactions include any that are “ordinarily incident and necessary to the negotiation of settlement agreements” involving any debt of the Venezuelan government, its state-owned energy company Petroleos de Venezuela, S.A., or any entity PdVSA owns 50% or more.

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OFAC also issued three new frequently asked questions. In one new FAQ, the agency stressed the license does not authorize “the entry into settlement agreements.” Companies that have negotiated a settlement agreement under the license will need a specific license for “entry into that agreement,” OFAC said, but added that it will “implement a favorable licensing policy” for those applications. “[A]s with all OFAC licenses and statements of licensing policy, specific licenses will only be granted after due diligence as to the parties and transaction,” the agency said.

Another FAQ addresses how parties can “enforce bondholder rights to the shares of CITGO Holding serving as collateral” for the PDVSA 2020 8.5 percent bond, “pending the outcome of ongoing litigation.” OFAC said it won’t take enforcement action “against any person for taking steps to preserve the ability to enforce bondholder rights” in this scenario. But the agency stressed this “non-enforcement policy governs OFAC sanctions only” and doesn’t “relieve persons of obligations to comply with any other applicable regulatory requirements, reviews, or approvals that may be necessary to finalize any sale.”

In another FAQ, OFAC said it won’t take enforcement action relating to certain activities stemming from a U.S. court order in Crystallex Int’l Corp. v. Bolivarian Republic of Venezuela, which confirmed an “arbitral award against Venezuela.” People and companies can participate “with the prefatory steps set out in the court’s Sale Procedures Order,” OFAC said, and engage in certain transactions that comply with the steps relating to the “judicial sale of such shares.”

But, as “recognized by the judge in the Crystallex case, an additional license will be required before any sale is executed,” OFAC said. The agency said it plans to implement a “favorable licensing policy” surrounding these license applications but will “engage in due diligence about the identity of a potential purchaser and will consider relevant details of the proposed transaction. Before a potential purchaser has been identified, it would be premature to issue any such license or express a definitive view on the issuance of a specific license in a future scenario.”