20/12/2021
Appeal victory for Guaidó in Venezuelan gold dispute
In a landmark judgment, a unanimous Supreme Court has upheld the UK Government’s recognition of Juan Guaidó as the interim President of Venezuela, confirmed that the UK Government does not recognise Nicolás Maduro as President of Venezuela for any purpose and clarified the very limited ability of an English Court to entertain challenges to the validity of Mr Guaidó’s presidential acts of appointment of officials to represent the Venezuelan Central Bank in respect of its assets in England.
Beyond its immediate relevance to the present dispute, the decision is of major importance, both in clarifying the proper approach for courts to take when interpreting a statement of recognition made by the UK Government, as well as clarifying the scope and operation of the foreign act of state doctrine.
The case concerns the battle for control of billions of dollars’ worth of assets in London, administered by the Venezuelan Central Bank (the BCV). The Bank of England holds gold reserves of about US$1.95 billion for the BCV, while Deutsche Bank has paid the proceeds of a gold swap contract owed to the BCV in the sum of about US$120 million to court-appointed receivers to hold on behalf of the BCV.
There are two rival boards of the BCV: the “Maduro Board” appointed by Mr Maduro; and the “Guaidó Board” appointed by Mr Guaidó. An important step in resolving their competing claims to authority is to establish which of Mr Guaidó or Mr Maduro is to be regarded as the President of Venezuela.
The judgment of Lord Lloyd-Jones JSC, with whom Lords Reed, Hodge, Hamblen and Leggatt agreed, has now confirmed that for the purposes of legal proceedings in this jurisdiction, Mr Guaidó is recognised by the UK Government as the interim President of Venezuela and Mr Maduro has no recognised status as President “for any purpose”. This was the effect of the UK Government’s executive certificate declaring its recognition of Mr Guaidó, by which the Court was bound under the “one voice” doctrine.
The Supreme Court thus rejected the argument of the Maduro Board that the UK Government continued impliedly to recognise Mr Maduro as the de facto President, including through the maintenance by the UK of diplomatic relations with Venezuela. Indeed, the Supreme Court dismissed the very concept of implied recognition and consigned to history the confusing distinctions between de jure and de facto recognition.
Although the Court of Appeal had perceived there to be ambiguity in the executive certificate, the Supreme Court held it was wrong to do so: the meaning of the certificate had been clear and it was not open to a Court to find ambiguity by reference to extrinsic evidence where none was present on the face of the certificate. The Foreign Secretary had in any event intervened before the Supreme Court to reaffirm the UK Government’s recognition of interim President Guaidó, putting the point beyond any possible doubt.
An important consequence of this “unambiguous and unqualified” recognition of Mr Guaidó was that his presidential appointments of public officials were held by the Court to be “sovereign acts of the Venezuelan state”. The next question was whether such acts engaged the foreign act of state doctrine so as to be immune from challenge as to their validity under Venezuelan law before an English Court and whether they must be treated as valid and effective without inquiry.
The Maduro Board advanced various arguments in support of its contention that the foreign act of state doctrine should not apply, including: that the doctrine itself was incoherent (and so should not be extended beyond the existing jurisprudence); that it was a narrow rule about state confiscation of property; that insofar as the disputed appointments felt their effects in London, they fell outside the territorial scope of the doctrine; and that the doctrine could never require an English Court to treat as valid and effective an executive act which was unlawful and invalid under its own law.
The Supreme Court rejected all of the Maduro Board’s arguments in this regard. In so doing, the Supreme Court resolved the uncertainties left open by Belhaj v Straw [2017] UKSC 3, [2017] AC 964 in which the foreign act of state doctrine had been debated before the Supreme Court in a radically different factual context of allegations of torture and rendition.
The Supreme Court emphatically endorsed the analysis of Lord Sumption in Belhaj (whose judgment had been marginalised by the Court of Appeal in the present case as “a minority view on a point which did not need to be decided”). The Court held that Lord Sumption had been correct to describe the foreign act of state doctrine as extending beyond property cases to embrace all types of foreign executive act within the foreign territory. Crucially, this included foreign executive acts even if they were asserted to be unlawful under their own law. Contrary to the Maduro Board’s submission, the act of state doctrine was distinct from ordinary choice of law rules. As now explained by the Supreme Court, accepting the Guaidó Board’s central submission, the doctrine operates “not by reference to law but by reference to the sovereign character of the conduct which forms the subject matter of the proceedings”.
In principle, therefore, interim President Guaidó’s appointments to the BCV were foreign acts of state which an English Court would not question. The one qualification was the possibility of an English Court affording recognition to certain judgments of Venezuela’s highest court (the “STJ”) which had purported to strike down Mr Guaidó’s appointments. The Supreme Court considered that if a foreign executive act had been quashed by the judiciary of that state, pursuant to a judgment which was entitled to recognition in England, then the foreign act of state doctrine was not engaged. The underlying rationale for the act of state doctrine (by which one state would refrain from intruding into the internal affairs of another) did not require legal effect to be given to an act which the judicial branch of the foreign state had quashed.
The effect and status of the STJ judgments was outside the scope of the appeal, the Guaidó Board’s pleaded case being that the STJ judgments were issued in violation of principles of due process and that the STJ was not impartial and independent but rather was acting corruptly to support Mr Maduro. The case was therefore remitted to the Commercial Court to consider whether, according to private international law principles for the recognition of foreign judgments and the public policy of the forum, the STJ judgments relied upon by the Maduro Board should be recognised.
Andrew Fulton QC and Mark Tushingham appeared for the Guaidó Board, instructed by Arnold & Porter. Sir Daniel Bethlehem QC also advised and participated in the preparation of the written submissions on behalf of the Guaidó Board.
Sir Michael Wood and Belinda McRae appeared for the Foreign Secretary.
“Guaido Board” of the Central Bank of Venezuela v “Maduro Board” of the Central Bank of Venezuela [2021] UKSC 57
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