Court Opinion

ID: 8213795
Source: CourtListenerOpinion
Date Created: 2022-10-13 16:00:13.064274+00
Date Added: 2024-06-11T16:42:25.111876
License: Public Domain

20-3858-cv (L)
PDVSA, et al. v. MUFG Union Bank, GLAS Americas

                                            In the
                   United States Court of Appeals
                               For the Second Circuit
                                       ______________

                                      August Term, 2021

             (Argued: January 26, 2022               Decided: October 13, 2022)

                               Docket Nos. 20-3858, 20-4127
                                    ______________

PETRÓLEOS DE VENEZUELA S.A., PDV HOLDING, INC., PDVSA PETRÓLEO
                              S.A.,

                             Plaintiffs-Counter-Defendants-Appellants,

                                              –v.–

                 MUFG UNION BANK, N.A., GLAS AMERICAS LLC,

                             Defendants-Counter-Claimants-Appellees.

                                       ______________

       Before:        LEVAL, LOHIER, and ROBINSON, Circuit Judges.
                                   ______________

             Appeal from a judgment entered in the United States District Court
       for the Southern District of New York (Failla, J.) declaring valid and
       enforceable against Appellants instruments governing a debt issue—notes,
       indenture, and pledge agreement. The district court granted Appellees’
       motion for summary judgment, holding the notes, pledge agreement, and
       indenture valid and enforceable under New York law, and denied
       Appellants’ cross-motion, which argued the documents were void under the
law of Venezuela, the jurisdiction of the issuer of the notes, and that the
court should decline to enforce the notes on the basis of the act-of-state
doctrine. Because the choice-of-law determination may depend in this case
on the act-of-state analysis, and existing New York law does not clearly
settle choice-of-law issues in this dispute, we certify questions on the issue
to the New York Court of Appeals.

      DECISION RESERVED AND QUESTIONS CERTIFIED.

                           ______________

                          MICHAEL J. GOTTLIEB, Willkie Farr & Gallagher
                          LLP, Washington, D.C.; JAMES R. BLISS, Paul
                          Hastings LLP, New York, N        Y        (Nicholas
                          Reddick, Kyle A. Mathews, Kristin E. Bender,
                          Willkie Farr & Gallagher LLP, Washington, D.C.;
                          Jeffrey B. Korn, Willkie Farr & Gallagher LLP, New
                          York, NY; Kurt W. Hansson, Paul Hastings LLP,
                          New York, NY; Igor V. Timofeyev, Paul Hastings
                          LLP, Washington, D.C., on the brief), for Plaintiffs-
                          Counter-Defendants-Appellants.

                          WALTER RIEMAN, Paul, Weiss, Rifkind, Wharton &
                          Garrison LLP, New York, NY (William A.
                          Clareman, Jonathan Hurwitz, Shane D. Avidan,
                          Paul, Weiss, Rifkind, Wharton & Garrison LLP,
                          New York, NY; Roberto J. Gonzalez, Paul, Weiss,
                          Rifkind, Wharton & Garrison LLP, Washington,
                          D.C.; Christopher J. Clark, Matthew S. Salerno,
                          Sean H. McMahon, Latham & Watkins LLP, New
                          York, NY, on the brief), for Defendants-Counter-
                          Claimants-Appellees.

                          DONALD B. VERRILLI, JR., Munger, Tolles & Olson
                          LLP, Washington, D.C. (Elaine J. Goldenberg,
                          Munger, Tolles & Olson LLP, Washington, D.C.;
                          George M. Garvey, Munger, Tolles & Olson LLP,

                                   2
                                Los Angeles, CA, on the brief), for Amicus Curiae the
                                Bolivarian Republic of Venezuela.

                                Douglass Mitchell, Previn Warren, Jenner & Block
                                LLP, Washington, D.C., for Amici Curiae David
                                Landau, Nelson Camilo Sanchez Leon, Mila Versteeg,
                                Diego Zambrano.
                                 ______________

ROBINSON, Circuit Judge:

      In 2016, Venezuela’s state-owned oil company, Petróleos de Venezuela, S.A.

(“PDVSA”), announced a proposed bond swap through which noteholders could

tender unsecured notes due in 2017 in exchange for new notes due in 2020 and

secured by a controlling interest in CITGO Holding, Inc. CITGO is owned by

PDVSA through a series of subsidiaries and is considered one of Venezuela’s most

important strategic assets abroad. At the time of the exchange, the regime of then-

President Nicolás Maduro controlled PDVSA’s Board of Directors.

      Article 150 of the Venezuelan Constitution vests the country’s National

Assembly with the power to approve “national public interest contracts.”

Although the democratically elected National Assembly passed two separate

resolutions in 2016 that purported to assert its constitutional authority over

national public interest contracts—including explicitly rejecting the plan to pledge

                                         3
control of CITGO—PDVSA nevertheless executed the bond swap and issued the

CITGO-secured debt.

      Following recognition of Venezuela’s Interim President Juan Guaidó by the

United States in early 2019, Guaidó appointed another Board of Directors, which

was recognized in the United States as the legitimate Board (although it does not

exercise any influence or control over PDVSA within Venezuela). In October 2019,

that Board, in the name of the PDV Entities, caused

      this suit to be brought in the Southern District of New York. The PDV

Entities seek declarations that the entire bond transaction is void and

unenforceable and preventing the creditors from executing on the CITGO

collateral. Plaintiffs argue the bond transaction was a contract of national public

interest under Venezuelan law and PDVSA lacked authority to execute it without

approval of the National Assembly pursuant to Article 150. And they contend

separately that the withholding of Article 150 approval and the National Assembly

resolutions constituted sovereign acts that rendered the bond exchange void and

were entitled to legal deference under the act-of-state doctrine.

      This case raises important questions about the scope of an as-of-yet

uninterpreted provision of the New York Uniform Commercial Code, and about

potential common law exceptions to New York’s general approach to enforcing

                                         4
contractual choice-of-law elections. Because the New York Court of Appeals has

not addressed these issues and they are important to the State’s choice-of-law

regime and status as a commercial center, we CERTIFY questions to the New York

Court of Appeals.

                                      BACKGROUND 1

I.       The Parties

         The plaintiffs-appellants in this case are the issuer, guarantor, and pledgor

of the secured notes due in 2020 (the “2020 Notes”).

         PDVSA is the issuer of the 2020 Notes. PDVSA is Venezuela’s state-owned

oil company, and as required under Article 303 of the Venezuelan Constitution, is

wholly owned by the Venezuelan government. PDVSA is incorporated under

Venezuelan law and is considered part of the government’s “Decentralized Public

Administration.”

         PDVSA Petróleo S.A. is the guarantor of the 2020 Notes. It is also

incorporated in Venezuela and is a wholly owned subsidiary of PDVSA.

         PDV Holding, Inc. is incorporated in Delaware and has its principal place

of business in Texas. It is wholly owned by PDVSA. PDV Holding is the sole

1   This account is drawn from the summary judgment record and is essentially undisputed.

                                                5
owner of CITGO Holding, Inc., which in turn owns CITGO Petroleum

Corporation.    CITGO Holding and CITGO Petroleum are incorporated in

Delaware and maintain their principal places of business in Texas. PDV Holding

pledged 50.1% of its equity interest in CITGO Holding as security for the 2020

Notes.

      We refer to these three entities—PDVSA, PDVSA Petróleo, and PDV

Holding—collectively as “The PDV Entities.”

      The defendants-appellees to this action are MUFG Union Bank, N.A. and

GLAS Americas LLC.        MUFG Union Bank is a federally chartered national

banking association with offices in New York City. It is the trustee for the 2020

Notes. GLAS Americas is a New York limited liability company. It is the collateral

agent for the 2020 Notes. We refer to these two entities collectively as “The

Creditors.”

II.   The Exchange Offer

      In April 2007, PDVSA issued $3 billion of notes with the principal to come

due in April 2017. In October 2010 and January 2011, PDVSA issued a combined

$6.15 billion of notes with the principal to come due in November 2017. We refer

to this debt in aggregate as the “2017 Notes.”

                                         6
      Between 2007 and 2016, various rating agencies downgraded PDVSA’s

credit rating. As of September 2016, the 2017 Notes had an outstanding principal

balance of $7.1 billion.

      In early September 2016, the PDVSA Board approved the transaction at the

heart of this dispute: a bond exchange through which holders of the 2017 Notes

could tender their 2017 Notes in exchange for new notes with principal due in

2020. Unlike the 2017 Notes, which were unsecured, PDVSA offered the 2020

Notes secured by a pledge from PDV Holding of a 50.1% equity interest in CITGO

Holding. We refer to this tender offer—and ultimately the closed transaction—as

the “Exchange Offer.”

      PDVSA’s Board approved the Exchange Offer on September 7, 2016, in

accordance with the corporate formalities of the company’s certificate of

incorporation and by-laws, including approval by the company’s sole shareholder,

the Venezuelan government, on September 8, 2016. The PDV Petróleo Board

similarly approved the Exchange Offer on September 7th in accordance with

applicable corporate formalities. PDV Holding’s Board approved the CITGO

pledge the following week on September 15. PDVSA announced the Exchange

Offer within the next few days and filed an offering circular with the U.S.

Securities and Exchange Commission.

                                       7
       Ultimately, 2017 Noteholders representing 39 percent of the aggregate

principal amount outstanding, $2,799,272,267, decided to participate in the deal

and tender their 2017 Notes. Depending in part on when they tendered, 2017

Noteholders received between $1,120 and $1,220 of 2020 Notes for every $1,000 of

2017 Notes exchanged. As noted above, the 2020 Notes were secured by PDV

Holding’s pledge of 50.1% of its equity in CITGO Holding. The Exchange Offer

closed, and PDVSA issued the 2020 Notes on October 28, 2016. The relevant

documents for the closed transaction, referred to collectively as the “Governing

Documents,” are the Indenture, 2 the 2020 Notes, 3 and the Pledge Agreement. 4

       Much of the activity around the transaction involved contacts in New York.

For example, the PDV Entities engaged a New York-based financial advisor and

an American law firm with New York partners to advise on the structure of the

deal. The financial advisor solicited participation in the Exchange Offer from at

least ten 2017 Noteholders who were based in New York. Signature pages were

2 The Indenture was executed by (i) PDVSA, as issuer, (ii) PDVSA Petróleo, as guarantor, (iii)
MUFG Union Bank, as trustee, (iv) GLAS Americas, as collateral agent, (v) Law Debenture Trust
Company of New York, as registrar, transfer agent, and principal paying agent, and (vi) Banque
Internationale à Luxembourg, Société Anonyme, as Luxembourg paying agent.
3 The 2020 Notes were issued in global form through a number of Global Notes registered in the

name of Cede & Co. as nominee of the Depository Trust Company, which represent the total debt
issued. For simplicity, this opinion will refer generally to the “2020 Notes.”
4 The Pledge and Security Agreement dated October 28, 2016, was between PDV Holding, Inc. as

pledgor, PDVSA as issuer, PDVSA Petróleo as guarantor, the collateral agent, and the trustee.

                                              8
exchanged between the entities in New York in connection with the signing and

closing of the Governing Documents. The 2020 Notes were deposited in New York

with the Law Debenture Trust Company of New York. Finally, all the Governing

Documents state that they shall be construed in accordance with the laws of the

State of New York, and that all matters arising out of them will be governed by

New York law.

III.   Political Backdrop and Venezuelan Constitution

       The Exchange Offer occurred in the context of intense political conflict and

turmoil in Venezuela. In December 2015, political parties that opposed Maduro

won an overwhelming majority of the seats in the Venezuelan National Assembly.

This opposition coalition began to assert its prerogatives under the Venezuelan

Constitution, including with respect to PDVSA.

       Several provisions of the Venezuelan Constitution are relevant to this

dispute. Article 303 mandates that the State “shall retain all shares of [PDVSA].”

J. App’x at 87. Article 150 vests the National Assembly with power to approve

contracts of “national public interest.” The operative text of the provision reads:

       The execution of national public interest contracts shall require the
       approval of the National Assembly in those cases in which such
       requirement is determined by law.
       No municipal, state[,] or national public interest contract shall be
       executed with foreign States or official entities, or with companies not
                                          9
      domiciled in Venezuela, or shall be transferred to any of them without
      the approval of the National Assembly.

J. App’x at 86. Additionally, Article 187, Paragraph 9 vests the National Assembly

with the power to authorize the executive branch to execute contracts of national

interest. The operative text of that provision reads:

      It is the role of the National Assembly to: . . . Authorize the National
      Executive to enter into contracts of national interest, in the cases
      established by law. Authorize contracts of municipal, state[,] and
      national public interest, with States or official foreign entities or with
      companies not domiciled in Venezuela.

Id. The terms “contracts of national public interest” and “contracts of national

interest” are not defined. Id.

      In early May 2016, Maduro declared a “State of Exception and Economic

Emergency” that claimed a number of powers for himself, including the right to

unilaterally execute public interest contracts. J. App’x at 2612.

      In response, in May 2016, the National Assembly passed a “Resolution on

the Respect of the Inherent Non-transferable Powers of the National Assembly on

Contracts of Public Interest Signed by and Between the National Executive and

Foreign States or Official Entities or with Companies Not Domiciled in Venezuela”

(the “May 2016 Resolution”). J. App’x at 3514–16. The May 2016 Resolution

explicitly invoked the National Assembly’s powers under Articles 150 and 187,

and (1) rejected the provision of Maduro’s emergency decree that purported “to
                                         10
authorize the National Executive to sign contracts of public interest, without the

approval of the National Assembly[;]” (2) “warn[ed] that any activity carried out

by an organ that usurps the constitutional functions of another public authority is

null and void[;]” (3) “remind[ed] that . . . contracts of national . . . public interest .

. . without the approval of the National Assembly . . . shall be null and void in their

entirety”; and (4) instructed that the resolution be circulated to foreign embassies

to inform them about the nullity of public interest contracts executed without

legislative approval. J. App’x at 3515–16.

      Immediately after PDVSA announced the Exchange Offer on September 17,

2016, the National Assembly responded with a second resolution on September

27, 2016: the “Resolution[] on the Current Financial Situation of Petróleos de

Venezuela S.A.”      J. App’x at 110–12.        The resolution invoked the National

Assembly’s powers under Article 187, and resolved: (1) to summon the PDVSA

President to appear before the National Assembly to explain the bond swap; (2)

“[t]o reject categorically that, within the swap transaction, 50.1% of the shares

comprising the capital stock of Citgo Holding Inc. are offered as a guarantee with

priority, or that a guarantee is constituted over any other property of the Nation[;]”

(3) “[t]o urge the Public Ministry to open an investigation to determine if the

current transaction protects the National Property, in accordance with articles 187,

                                           11
section 9, 302 and 303 of the Constitution of the Bolivarian Republic of

Venezuela[;]” and (4) to urge PDVSA to present the Country with a refinancing

plan. J. App’x at 111. As stated above, PDVSA and its subsidiaries executed the

Exchange Offer, notwithstanding the National Assembly’s two resolutions.

      The conflict between the National Assembly and the Maduro regime

continued to escalate from the fallout of the 2018 presidential election in which

Maduro claimed victory for himself.        The U.S. government described these

elections as “not free, fair or credible.” J. App’x at 4803. On January 15, 2019, the

National Assembly issued a legislative order naming National Assembly

President Juan Guaidó as the Interim President of Venezuela. The United States

recognized Guaidó as the Interim President of Venezuela and the National

Assembly as the “only legitimate branch of government duly elected by the

Venezuelan people.” J. App’x at 4803.

      In February 2019, the National Assembly enacted the “Statute to Govern a

Transition to Democracy to Reestablish the Validity of the Constitution of the

Republic of Venezuela.” J. App’x at 4750. Pursuant to this transition statute,

Interim President Guaidó appointed a new, ad hoc board of directors for PDVSA.

This new PDVSA board appointed new boards for PDVSA Petróleo and PDV

Holding.

                                         12
       In October 2019—just over three years after the Exchange Offer—the

National Assembly passed a third resolution, titled “Resolution that Reiterates the

Invalidity of PDVSA’s 2020 Bonds” (the “October 2019 Resolution”). J. App’x at

118–20. After recounting the political struggle between the National Assembly

and the Maduro regime over PDVSA and the Exchange Offer, the October 2019

Resolution purported to (1) “ratify that the 2020 Bond indenture violated Article

150 of the Constitution[;]” (2) “ratify that the 2020 Bond indenture violated Articles

311 and 312 of the Constitution[;]” (3) “reiterate all the questions that this National

Assembly has been formulating since 2016 regarding the irresponsible

indebtedness of PDVSA[;]” and (4) “summon the Government of [President

Guaidó] to adopt all actions aimed at defending PDVSA’s assets in the United

States . . . .” J. App’x at 118–20.

       Control of the PDV Entities became divided. The Maduro-appointed Board

remained in control of all operations and assets in Venezuela. At the same time,

after the United States government’s recognition of Guaidó as the legitimate

President of Venezuela, the Guaidó-appointed Ad Hoc Board was recognized in

the United States as the governing body of the PDV Entities.

       The 2020 Notes required principal payments each October, and interest

payments each April and October. PDVSA (in Venezuela) made the scheduled

                                          13
payments between 2017 and April 2019, and the Ad Hoc Board took the position

that the payments were made subject to a reservation of rights as to the validity of

the 2020 Notes. PDVSA did not make its scheduled October 2019 principal and

interest payments. At this point, the Ad Hoc Board caused this suit to be brought

in the United States in the name of the PDV Entities. The Ad Hoc Board directs

the PDV Entities in the conduct of this litigation.

IV.   District Court Proceedings

      The PDV Entities sued on October 29, 2019.           The complaint sought

declarations that the 2020 Notes, Indenture, and Pledge Agreement are invalid,

illegal, null and void ab initio, and thus unenforceable. The PDV Entities also

requested an injunction preventing the Creditors from enforcing any claimed

remedy under the Notes. The Creditors counterclaimed on December 18, 2019,

asking for a declaratory judgment that the Governing Documents are enforceable

and asserting claims for breach of contract, breach of warranty, unjust enrichment,

and quantum meruit.

      The case proceeded quickly through discovery and the parties filed cross-

motions for summary judgment in June 2020. In their motion, the PDV Entities

asserted the 2020 Notes, Indenture, and Pledge were invalid for two reasons. First,

they argued that the National Assembly’s withholding of Article 150 authorization

                                         14
for the Exchange Offer, and its affirmative passage of resolutions rejecting the

Exchange Offer, constituted sovereign acts that rendered the entire Exchange Offer

void under Venezuelan law. Under the act-of-state doctrine, they argued, the

district court was required to accept and give effect to those sovereign acts.

Second, they argued New York choice-of-law principles directed the court to

apply Venezuelan law on the issue of the validity of the 2020 Notes, and that the

notes were void under Venezuelan law because the Exchange Offer is a contract

of national public interest requiring Article 150 approval.

      After the PDV Entities invoked the act-of-state doctrine, the district court

invited the United States to submit its views about the applicability of the doctrine

and U.S. policy. The United States filed a statement of interest, responding that it

took no position on whether the act-of-state doctrine applied because, in its view,

there were “unresolved questions of fact and of Venezuelan law antecedent to the

possible applicability of the doctrine.” J. App’x at 5234. It also took the position

that resolving the case in accord with U.S. law and policy “appear[ed] to turn on

questions of fact and of Venezuelan law.” J. App’x at 5233. It further noted “the

United States’ foreign policy concerning Venezuela is being effectuated in part

through [the Office of Foreign Asset Control]’s implementation of the U.S.

                                         15
sanctions regime, without regard to the act of state or comity doctrines.” J. App’x

at 5234.

      Following extensive oral argument, the district court issued its decision on

October 16, 2020, ruling for the Creditors on both issues. The district court first

rejected the PDV Entities’ act-of-state argument. While concluding the National

Assembly resolutions constituted official acts of a foreign sovereign, the court held

that under this Court’s decision in Allied Bank International v. Banco Credito Agricola

de Cartago, 757 F.2d 516 (2d Cir. 1985), the October 2019 Resolution could not

retroactively extinguish the notes. The district court then examined the language

of the May 2016 and September 2016 resolutions and concluded that by their plain

text, they did not operate to void the Exchange Offer. In particular, the district

court reasoned that on its face the May 2016 Resolution addressed the authority of

the National Executive but did not apply to the PDV entities. It concluded that the

September 2016 Resolution did not identify the Exchange Offer as a contract of

national public interest and did not assert that the Exchange Offer, if executed

without National Assembly approval, would violate Article 150 or otherwise be

invalid or void. The court rejected the argument that the National Assembly’s

withholding of Article 150 approval qualified as the act of a foreign sovereign

because it concluded that the Assembly’s decision to withhold its approval

                                          16
constituted a decision not to act rather than an official action, and therefore lacked

the formality necessary to qualify as an official act under the doctrine.

       Turning to choice of law, the district court held New York law governed the

dispute in its entirety. The court rejected the PDV Entities’ statutory argument

that section 8-110(a)(1) of the New York Uniform Commercial Code required the

court to apply Venezuelan law in assessing the validity of the Exchange Offer.

After rejecting several choice-of-law theories regarding the authority of foreign

entities and the enforceability of contracts that are illegal under foreign law, the

district court concluded that New York law applied via a traditional center-of-

gravity analysis. The court assumed for the purposes of its analysis that the New

York choice-of-law clauses in the agreements were ineffective, explaining that

either approach would result in application of New York law.

       Finding no infirmity in the Governing Documents under New York law, the

district court granted the Creditors’ motion for summary judgment and denied the

PDV Entities’ cross-motion. 5 By judgment entered December 1, 2020, the court

5Because the district court applied New York law in assessing the validity of the Governing
Documents, it did not resolve the contested question of whether the Exchange Offer constituted

                                             17
declared the Governing Documents enforceable. It further declared the PDV

Entities in default and the Creditors entitled to exercise their remedies for default,

including sale of the collateral.         The district court also entered a monetary

judgment on the Creditors’ breach-of-contract counterclaims.

       The PDV Entities filed this appeal and moved to stay execution of the

judgment during the pendency of the appeal. The district court granted the

motion.

                                       DISCUSSION

       The issues raised in this appeal largely track those raised in the district court.

The PDV Entities argue the district court contravened the act-of-state doctrine by

failing to give effect to the National Assembly resolutions by declaring the

Governing Documents enforceable.              Next, they challenge the district court’s

conclusion that the validity of the Governing Documents should be determined

solely under New York law. They argue that New York Uniform Commercial

Code section 8-110—or, in the alternative, several non-statutory choice-of-law

a national public interest contract for purposes of Article 150. Also, because it awarded summary
judgment to the Creditors on their breach of contract counterclaims, the district court denied
summary judgment on their claims for unjust enrichment and quantum meruit, and excluded the
PDV Entities’ expert report relating to those equitable claims. The Creditors had not moved for
summary judgment on their counterclaims for breach of warranty. This appeal addresses only
the contract and declaratory judgment claims on which the district court based its judgment.

                                               18
principles—direct the application of Venezuelan law on the issue of the validity of

the 2020 Notes, particularly with respect to PDVSA’s authority to execute the

Exchange Offer without legislative approval.

V.    Standard of Review

      We review without deference the district court’s rulings on motions for

summary judgment. NML Cap. v. Republic of Argentina, 621 F.3d 230, 236 (2d Cir.

2010). Summary judgment is proper when there are no genuine disputes of

material fact and the movant is entitled to judgment as a matter of law. See Fed.

R. Civ. P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986).

VI.   Act-of-State Doctrine

      Because the act-of-state doctrine applies only when resolution of a claim or

defense under applicable law requires adjudication of the validity of a foreign

sovereign act, we conclude that resolution of the New York choice-of-law issues is

a necessary antecedent to the potential application of the act-of-state doctrine in

this case.

      The act-of-state doctrine is a rule of decision requiring that, in the process of

deciding cases, courts accept as valid the acts of foreign sovereigns taken within

their own jurisdictions. See W.S. Kirkpatrick & Co. v. Env't Tectonics Corp., Int'l, 493

U.S. 400, 409 (1990). While the rationale underlying the doctrine has varied
                                          19
throughout history, the Supreme Court’s more recent cases tie the doctrine to

separation of powers principles and a concern that the Judicial Branch’s “passing

on the validity of foreign acts of state may hinder the conduct of foreign affairs.”

Id. at 404 (internal quotation marks omitted).

      We recently described the contours of the doctrine in Celestin v. Caribbean

Air Mail, Inc., 30 F.4th 133 (2d Cir. 2022). In Celestin, we concluded that the act-of-

state doctrine did not preclude an antitrust claim for collusion to fix the prices of

remittances and telephone calls between the U.S. and Haiti—allegedly facilitated

by a Haitian Presidential Order and Central Bank Circulars—because the claims

did not require adjudication of the validity of any Haitian sovereign acts. Id. at 145.

After expounding on the doctrine and our recent cases dealing with it, id. at 138–

40, we summarized the doctrine as follows:

      [W]hen applicable, the act of state doctrine serves as a rule of decision
      on the merits. First, the court should assume that a foreign state's
      official acts executed within that state’s territory are valid in that they
      have the legal effects—like transfers of title, assumptions or
      repudiations of contractual obligations, and grants of public
      authority—that they purport to have. Second, under that premise, the
      court should evaluate the merits of the legal claim or defense before
      it according to the posture of the case.

Id. at 140. We explained that by “legal claim or defense before it” we meant that a

court should evaluate “the claim or defense under the law of the relevant

                                          20
jurisdiction. For example, a U.S. federal or state cause of action may not turn on a

foreign act’s validity, even if an analogous cause of action under foreign law

would be precluded by the act.” Id. at 140 n.4.

       This final proviso disciplines our approach in this appeal. As noted above,

the act-of-state doctrine does not alter our obligation to evaluate the parties’ claims

and defenses in this action under governing law. The PDV Entities contend that

the absence of National Assembly approval, the 2016 resolutions, 6 or some

combination thereof, were sovereign acts that had the legal effect under

Venezuelan law of rendering the Governing Documents void from the beginning.

But if the PDV Entities’ contractual obligations (or lack thereof) do not turn on the

status of the Exchange Offer under Venezuelan law, the act-of-state doctrine is not

implicated. That is, if Venezuelan law is irrelevant to the PDV Entities’ obligations

under the Governing Documents because New York law applies in this

proceeding, then the act-of-state doctrine would not apply.

6Our decision in Allied Bank forecloses any argument that the October 2019 Resolution could
operate on its own to retroactively void the 2020 Notes, Indenture, and Pledge Agreement. We
do not read the PDV Entities’ brief as arguing otherwise, as their argument is focused on
distinguishing Allied Bank as involving “retroactive repudiation of debt that was indisputably
valid when issued.” Appellants’ Br. at 40. Because we are starting with the choice-of-law issue,
we express no opinion on whether the October 2019 Resolution could have some interpretative
or authoritative weight with respect to the meaning and impact of the 2016 resolutions.

                                              21
       This conclusion is consistent with guidance from the Restatement (Fourth)

of Foreign Relations, which we cited favorably in Celestin. See 30 F.4th at 138. This

Restatement commentary explains: “when applicable,” the act-of-state doctrine

“bars a court from questioning the validity of the foreign act on the ground that it

did not comply with that sovereign's own legal requirements, international law,

or U.S. law or policy.” Restatement (Fourth) of Foreign Relations Law § 441 cmt.

(a).   Though the doctrine requires courts to accept the validity of a foreign

sovereign act, it does not preclude courts from imposing extraterritorial legal

consequences arising from that act in accordance with applicable law. Id. § 441

cmt. (d). For that reason, we do not understand the act-of-state doctrine to require

a departure from ordinary choice-of-law analysis in determining the legal

consequences in the United States of a foreign sovereign act. 7

       So, although the PDV Entities advance the act-of-state doctrine as the lead

argument on appeal, we view the choice-of-law analysis as a necessary antecedent

7 The Celestin court described the act-of-state doctrine as a “special choice-of-law rule.” 30 F.4th
at 138. Consistent with the discussion above, we understand that description to refer to choice of
law with respect to the validity of foreign sovereign acts—in this case the 2016 National Assembly
resolutions and the absence of approval of the Exchange Offer—and not with respect to the
extraterritorial consequences of the foreign sovereign acts under the substantive law applied in a
particular case—in this case the impact, if any, on the enforceability of the Governing Documents.

                                                22
to the act-of-state analysis in this case. Accordingly, we reserve judgment on the

act-of-state argument pending resolution of the choice-of-law issues.

VII. Choice of Law

      At the heart of this dispute are complex and important questions involving

New York choice-of-law principles. The PDV Entities contend that PDVSA lacked

legal authority to execute the Exchange Offer without express approval from the

National Assembly. They assert the Exchange Offer was a “contract of national

public interest” because it secured billions of dollars of PDVSA debt by posting as

collateral the country’s “crown jewel,” CITGO. Appellants’ Br. at 3. In the view

of the PDV Entities, the 2020 Notes, Pledge Agreement, and Indenture (including

their choice-of-law clauses) were all void from the jump because PDVSA

possessed no ability, authority, or capacity to execute the Exchange Offer absent

National Assembly approval. Whether the PDV Entities can rely on the asserted

requirements of Venezuelan law to challenge the validity of the bonds turns on

New York choice-of-law rules. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487,

496 (1941) (holding that federal courts sitting in diversity jurisdiction apply the

choice-of-law rules of the state in which it sits).

      The core facts are not disputed. The parties executed Governing Documents

that contain New York choice-of-law clauses. Much of the activity surrounding

                                           23
the Exchange Offer occurred in New York, and the notes themselves are located in

New York. But PDVSA is a Venezuelan corporation, created and empowered by

Venezuelan law. And it is not just any corporation, but a corporation anchored to

state ownership by constitutional mandate.                 Moreover, the Venezuelan

Constitution requires the National Assembly to approve contracts of national

public interest.

       In light of these facts, the parties make several competing arguments

regarding whether New York or Venezuelan law governs the validity of the 2020

Notes. The PDV Entities rely heavily on the statutory choice-of-law directive for

investment securities in New York Uniform Commercial Code section 8-110(a)(1),

which says that the “local law of the issuer’s jurisdiction . . . governs . . . the validity

of a security[.]” They also fall back on common law choice-of-law principles as

articulated primarily by federal district courts within this Circuit, including the

principle that a foreign entity’s authority is determined under foreign law, and

that under New York law a security issued by a foreign entity can be unenforceable

on the ground that it was issued in violation of the law of the issuer’s jurisdiction.

The Creditors contest these arguments and point instead to the Governing

Documents’ New York choice-of-law clauses and a traditional center-of-gravity

                                            24
analysis, which they say require application of New York law to all issues,

including whether the contracts are valid.

      We consider the competing arguments concerning the applicability of

section 8-110(a)(1), and of New York common law choice-of-law principles in turn.

      A.     Uniform Commercial Code Section 8-110(a)(1)

      The PDV Entities advance a textual argument that section 8-110(a)(1) of the

New York Uniform Commercial Code requires application of Venezuelan law to

the question of whether the Exchange Agreement is invalid because it was not

approved by the National Assembly, and the Creditors draw on New York

caselaw and other considerations to support a narrower view of section 8-

110(a)(1).

      Article Eight of New York’s Uniform Commercial Code, which deals with

investment securities, contains a choice-of-law directive that, if applicable, would

require application of Venezuelan law to determine the validity of the bonds:

“[t]he local law of the issuer’s jurisdiction, as specified in subsection (d), governs:

(1) the validity of a security[.]” N.Y. U.C.C. § 8-110(a)(1). Subsection (d) states that

an “[i]ssuer’s jurisdiction” is the jurisdiction under which the issuer is organized.

                                          25
Id. § 8-110(d). PDVSA is the issuer of the 2020 Notes 8 and is organized under the

laws of Venezuela; Venezuelan law is the “local law of the issuer’s jurisdiction.”

Accordingly, the statute appears to call for the application of Venezuelan law to

determine the “validity” of the 2020 Notes.

       The term “validity” is not defined in section 8-110, but the Official Comment

to that section ties the meaning of “validity” to the provisions in section 8-202.

Specifically, the Official Comment to section 8-110 explains that subsection 8-

110(a) “ensures that a single body of law will govern the questions addressed in

Part 2 of Article 8, concerning the circumstances in which an issuer can and cannot

assert invalidity as a defense against purchasers.” Id. § 8-110 cmt. 2. The Official

Comment also states: “whether an issuer can assert the defense of invalidity may

implicate significant policies of the issuer’s jurisdiction of incorporation. See, e.g.,

Section 8-202 and Comments thereto.” Id. The Official Comment, therefore,

suggests that the meaning of “validity” is connected to various defenses of

invalidity, which are detailed in Part 2—more specifically, section 8-202. See also 7

Hawkland, et al., UCC Series § 8-110:2 (2020) (“[S]ection 8-202 is the principal

8Both parties appear to agree that the 2020 Notes fall within the definition of security under
Article 8.

                                             26
Article 8 substantive rule to look to for guidance in applying the choice of law rule

in subsection 8-110(a).”).

       Section 8-202 expressly indicates that “validity” is determined with

reference to, among other things, the issuer jurisdiction’s constitution. Section 8-

202(b)(1) states:

       [I]f an issuer asserts that a security is not valid . . . [a] security other
       than one issued by a government or governmental subdivision,
       agency, or instrumentality, even though issued with a defect going to
       its validity, is valid in the hands of a purchaser for value and without
       notice of the particular defect unless the defect involves a violation of a
       constitutional provision. In that case, the security is valid in the hands
       of a purchaser for value and without notice of the defect, other than
       one who takes by original issue.

(emphases added). Because section 8-110 and its Official Comment tie the concept

of “validity” to defenses of invalidity under section 8-202, and because section 8-

202 explicitly mentions constitutional violations as a type of defect that could bear

on a security’s invalidity, 9 the plain language of Article 8 and associated

9 Section 8-202 and its Official Comment detail rules for when and against whom issuers may
assert defenses of invalidity. As explained by the Official Comment, subsection (b) puts the onus
on the issuer to make sure the security is free of defects, and generally gives purchasers for value
without notice the right to enforce a defective security against the issuer. See N.Y. U.C.C. § 8-202
cmt. 3. But the Comment also details three circumstances where purchasers do not gain those
rights, which include violations of constitutional provisions and some situations involving a
governmental issuer. Id. We express no view about whether PDVSA falls into these exceptions,
and only refer to section 8-202 insofar as it sheds light on the meaning of “validity” in section 8-
110.

                                                27
commentary support applying Venezuelan law to determine the validity of the

2020 Notes in light of Articles 150 and 187(9) of the Venezuelan Constitution.

       The Creditors advocate a much narrower view of the scope of section 8-

110(a) and the meaning of “validity,” making arguments that point the other way.

Citing the Bill Jacket for Section 8-110 and a Uniform Commercial Code Treatise,

the Creditors argue that “validity” goes only to whether the security was issued

in accordance with the issuer’s corporate charter, by-laws, and the corporate law

of the issuer’s jurisdiction. The Creditors deny that section 8-202(b)(1) illuminates

the meaning of validity, and they suggest section 8-202(b)(1)’s reference to

“violation[s] of . . . constitutional provision[s]” is cabined to those constitutional

provisions directly dealing with the issuance of securities. 10

       Whatever its weaknesses as a textual matter, at least two factors may

support the Creditors’ position that section 8-110 calls for application of

Venezuelan law in determining the validity of the 2020 Notes: (1) two recent New

10The treatise on which the Creditors rely suggests section 8-202 contemplates a scenario quite
analogous to our case: where a governmental issuer sold municipal bonds to the public, only to
later discover some “constitutional or statutory provision concerning authorization for issuance
of municipal bonds had not been satisfied.” 7 Hawkland, et al., UCC Series § 8-110:2. Here, we
have a government-owned issuer arguing a key constitutional provision concerning
authorization for public interest contracts has not been satisfied.

                                              28
York Court of Appeals cases giving broad effect to choice-of-law clauses in New

York; and (2) the absence of any caselaw on section 8-110.

       First, a thread of New York caselaw could support the Creditors’ argument

that in light of the contractual provisions calling for application of New York law,

section 8-110 has no bearing on this case. In IRB-Brasil Resseguros, S.A. v. Inepar

Investments, S.A., 20 N.Y.3d 310 (2012), the New York Court of Appeals considered

an action to recover on defaulted notes guaranteed by a Brazilian company. The

guarantee was subject to New York choice-of-law provisions pursuant to General

Obligations Law section 5-1401, 11 and the action to enforce it was brought by a

purchaser of the notes. The Brazilian company argued that the guarantee was

unenforceable because it was never approved by the company’s board of directors,

as required under Brazilian law.              New York conflict-of-law principles, the

company argued, required application of Brazilian substantive law to evaluate the

enforceability of the agreement. The New York Court of Appeals disagreed.

11 General Obligations Law section 5-1401(1) allows parties to choose New York law to govern
contracts arising out of transactions covering not less than $250,000 even if they lack New York
contacts. By its own terms section 5-1401 does not apply “to the extent provided to the contrary
in subsection (c) of section 1-301 of the uniform commercial code.” Section 1-301(c) provides that
if section 8-110 (among others) specifies the applicable law, the parties’ contrary agreement as to
the applicable law is effective “only to the extent permitted” by section 8-110. Accordingly, it
appears that where the authority for a New York choice-of-law election relies on section 5-1401(1),
that choice-of-law election cannot override section 8-110. We do not understand the choice-of-
law election in this case to rest on the authority conferred by section 5-1401(1).

                                                29
Relying heavily on the purposes underlying General Obligations Law section 5-

1401, the court concluded that “[t]o find here that courts must engage in a conflict-

of-laws analysis despite the parties’ plainly expressed desire to apply New York

law would frustrate the Legislature’s purpose of encouraging a predictable

contractual choice of New York commercial law and, crucially, of eliminating

uncertainty regarding the governing law.” 20 N.Y.3d at 316. 12

       In 2015, the Court of Appeals extended this holding to a case in which the

applicable choice-of-law principles were embodied in a statute rather than

12The court did not give specific guidance as to whether and how to deploy New York law to
assess the actual authority of the officers who signed the guarantee in question. The First
Department had applied New York law in evaluating whether the agreement, “allegedly
executed by a person lacking actual authority under foreign law, is enforceable by a third party.”
IRB-Brazil Resseguros, S.A. v. Inepar Invs., S.A., 83 A.D.3d 573 (1st Dep’t 2011). In applying New
York law, however, the First Department relied on ratification in enforcing the guarantee, so it
did not wrestle with the conundrum of how to evaluate a person’s actual authority to undertake
an action without considering the laws under which that person acted. This is the conundrum
identified by the district court in this case. See Petroleos de Venezuela S.A. v. MUFG Union Bank,
N.A., 495 F. Supp. 3d 257, 283 n.12 (S.D.N.Y. 2020) (“[T]here is a logical flaw inherent in following
a contractual choice-of-law provision before determining whether the parties have actually
formed the contract in which the choice-of-law clause appears.” (internal quotation marks
omitted)).
In addition, we note that in IRB-Brasil no party had argued to the Court of Appeals that the choice
of law provision was inapplicable to a dispute over contract formation; the dispute was whether
the clause required application of New York choice of law rules, or the automatic application of
New York substantive law. Cf. Schnabel v. Trilegiant Corp., 697 F.3d 110, 119 (2d Cir.
2012)(observing, in dicta that “[a]pplying the choice-of-law clause to resolve the contract
formation issue would presume the applicability of a provision before its adoption by the parties
has been established”)(citing Trans–Tec Asia v. M/V Harmony Container, 518 F.3d 1120, 1124 (9th
Cir. 2008) for the proposition that “we cannot rely on the choice of law provision until we have
decided, as a matter of law, that such a provision was a valid contractual term and was
legitimately incorporated into the parties’ contract”).

                                                 30
common law, and in which the New York choice-of-law election did not rest on

the authority of General Obligations Law section 5-1401.             See Ministers &

Missionaries Benefit Board. v. Snow, 26 N.Y.3d 466 (2015). In Ministers, the Court of

Appeals held that New York choice-of-law provisions in retirement and death

benefit plans for certain ministers and missionaries controlled over a New York

statutory directive, EPTL 3-5.1(b)(2), that would have applied the substantive law

of the decedent’s domicile at death in determining the effect of the decedent’s

divorce on the designation of his wife as beneficiary. Id. at 476. The court reasoned

that “[i]f New York’s common-law conflict-of-laws principles should not apply

when the parties have chosen New York law to govern their dispute . . . and EPTL

3-5.1(b)(2) simply represents a common-law conflicts principle that has been

codified into statute, that provision should not be considered in resolving th[e]

dispute.” Id. at 474. A contrary view, the court reasoned, would undermine the

contracting parties’ expressed intent to avoid a conflict-of-laws analysis. Id. at 475.

The Court of Appeals’ conclusion in Ministers rested on its determination that

EPTL 3-5.1(b)(2) was essentially a “conflict-of-laws directive” rather than a

“statement of substantive law.” Id. at 474.

      We cannot confidently predict what the Court of Appeals would do in the

present case. As set forth above, section 8-110 is not a freestanding choice-of-law

                                          31
rule. It is closely related to and gives effect to the substantive law governing

commercial contracts set forth in section 8-202, and is accordingly an integral part

of a comprehensive statutory scheme of substantive law under New York’s

Uniform Commercial Code. Concluding that the parties’ contractual choice-of-

law election in this case overrides section 8-110, assuming for the sake of

discussion that it otherwise applies, would potentially impact the parties’ abilities

to assert their substantive rights under the New York Uniform Commercial Code

more broadly. Moreover, we find it potentially significant that the New York

Uniform Commercial Code provision that recognizes the enforceability of choice-

of-law elections when a transaction bears a reasonable relation to the selected

jurisdiction expressly excepts circumstances where section 8-110 specifies the

applicable law and provides that a choice-of-law election that runs counter to the

requirements of section 8-110 is effective only to the extent permitted by that

section.   See N.Y. U.C.C. § 1-301.       For these reasons, although the IRB-

Brasil/Ministers line of cases gives the Creditors a potential counterargument,

whether the parties’ contractual choice-of-law election overrides any effect of

section 8-110 is very much an open question.

      A second factor causes us to approach the PDV Entities’ section 8-110

argument with caution: the absence of any cases applying the statute. As far as

                                         32
we can tell, the New York Court of Appeals has never interpreted section 8-110,

much less applied it in a way that would provide guidance as to its scope.

Considering the volume of securities activity in New York, if section 8-110 was as

broad as the above analysis suggests, one would expect to find a trove of New

York decisions applying the statute.

      For these reasons, existing precedent does not allow us to predict with

confidence the proper resolution of the PDV Entities’ section 8-110 argument.

      B.    Potential Common Law Exceptions to Enforcing Choice-of-Law

            Clauses

      The general rule under New York law, as set forth above, is that “courts will

generally enforce choice-of-law clauses and that contracts should be interpreted

so as to effectuate the parties’ intent.” Ministers, 26 N.Y.3d at 470. This general

rule applies even to issues of contract validity and the parties’ ability to execute

the agreement containing the choice-of-law clause. See IRB-Brasil, 20 N.Y.3d at 313,

316 (applying New York substantive law to evaluate the argument that the

purported contract was void under foreign law because the board of directors

never authorized it in accordance with foreign law).

      We have discerned at least one possible exception to this general rule that

may potentially apply in this case. The New York Court of Appeals has recognized
                                        33
a public policy exception. See Welsbach Elec. Corp. v. MasTec N. Am., Inc., 7 N.Y.3d

624, 629 (2006) (citing Restatement (Second) of Conflict of Laws § 187(2)). The

Restatement describes this exception as follows:

      The law of the state chosen by the parties to govern their contractual
      rights and duties will be applied, even if the particular issue is one
      which the parties could not have resolved by an explicit provision in
      their agreement directed to that issue, unless . . . application of the
      law of the chosen state would be contrary to a fundamental policy of
      a state which has a materially greater interest than the chosen state in
      the determination of the particular issue and which, under the rule of
      § 188, would be the state of the applicable law in the absence of an
      effective choice of law by the parties.

Restatement (Second) of Conflicts of Laws § 187(2)(b). Accordingly, in Welsbach,

the New York Court of Appeals considered whether to honor the parties’ Florida

choice-of-law election with respect to a contractual “pay-if-paid” provision. Such

provisions are unenforceable under New York law but permitted in Florida. The

court’s analysis hinged on whether New York’s public policy disallowing such

agreements was so fundamental, and Florida’s policy allowing them so “truly

obnoxious[,]” as to warrant invocation of the exception. 7 N.Y.3d at 629–30. The

court answered both questions in the negative and did not apply the exception.

Id. at 632. By contrast, in Brown & Brown, Inc. v. Johnson, the New York Court of

Appeals relied on the public policy exception in declining to honor the parties’

                                        34
contractual choice of Florida law with respect to a restrictive covenant in an

employment agreement. 25 N.Y.3d 364, 368–70 (2015).

      New York intermediate appellate courts have applied these same principles

in considering whether to enforce contractual elections of New York law. See, e.g.,

Marine Midland Bank, N.A. v. United Missouri Bank, N.A., 223 A.D.2d 119, 124 (1st

Dep’t 1996) (concluding that Kansas public policy considerations were not

sufficiently fundamental to override parties’ choice to apply New York law). The

public-policy exception to the general enforceability of choice-of-law clauses may

undergird the intermediate court’s recent decision in North American Elite

Insurance v. Space Needle, LLC, 200 A.D.3d 425 (1st Dep’t 2021) (concluding that

insurer licensed in Washington State that was seeking to enforce contractual New

York choice-of-law provision in insurance contract issued in Washington State did

not demonstrate a likelihood of success on the merits where provision choosing

New York law violated Washington State prohibition against such clauses). See

also Restatement (Second) of Conflict of Laws § 202 (providing that the effect of

illegality upon a contract is “determined by the law selected by application of the

rules of §§ 187–188”).

      The Court of Appeals of New York has not decided whether, in light of

Ministers and IRB-Brasil, New York recognizes this exception to the principle that
                                        35
choice-of-law clauses are enforceable and require application only of the

“substantive law” of the chosen jurisdiction.    In the present case, there is a

colorable argument that, to use the language of the Restatement (Second) of

Conflict of Laws, Venezuela has the “materially greater interest” over the

“particular issue” of PDVSA’s authority or capacity to execute the Exchange Offer

without National Assembly approval, and that enforcing the Governing

Documents would violate a “fundamental policy” of Venezuela. For this reason,

the public policy exception to the general enforceability of choice-of-law clauses

may come into play in this case.

      By identifying the above exception, we do not intend to rule out the

possibility that other common law doctrines may be relevant. For example, in

Indosuez International Finance v. National Reserve Bank, the New York Court of

Appeals used a most-significant-relationship analysis to decide what law to apply

in evaluating whether a set of agreements executed by the deputy chair of a

Russian bank’s board were unenforceable because the deputy lacked authority

under Russian law to sign them. 98 N.Y.2d 238 (2002). The agreements included

choice-of-law provisions selecting either New York or English law. After the bank

failed to pay amounts due under the agreements, it argued that the agreements

were not executed by the bank’s accountant general, so they were null and void

                                       36
under Russian law. Rather than simply applying the law the parties had elected

in the agreement (New York or English) to evaluate the validity of the notes, the

court conducted a most-significant-relationship analysis pursuant to sections 188

and 292(1) of the Restatement (Second) of Conflict of Laws and concluded that

New York had the paramount interest. Id. at 245. The court accordingly applied

New York law to determine the enforceability of the agreements. Id. at 245–46.

Whether IRB-Brasil now precludes the approach taken in Indosuez is not entirely

clear. The former case did not expressly overrule the latter.

      Likewise, federal courts applying New York law have concluded that with

respect to transactions with a foreign state or state instrumentality, questions

regarding the actual authority of an agent of the state’s government should be

resolved with reference to the law of the foreign jurisdiction. See, e.g., Anglo-Iberia

Underwriting Mgmt. Co. v. PT Jamsostek, No. 97 Civ. 5116, 1998 WL 289711, at *3

(S.D.N.Y. June 4, 1998) (applying Indonesian law to assess an Indonesian

government-owned entity’s authority to conduct certain commercial activity),

vacated in part on other grounds by Anglo-Iberia Underwriting Mgmt. Co. v. Lodderhose,

235 F. App'x 776 (2d Cir. 2007); Storr v. Nat'l Defence Sec. Council of Republic of

Indonesia–Jakarta, No. 95 Civ. 9663, 1997 WL 633405, at *2 (S.D.N.Y. Oct. 14, 1997)

(same). In at least one case, the court followed this approach even in the presence

                                          37
of a contractual choice-of-law election. See Themis Cap., LLC v. Democratic Republic

of Congo, 881 F. Supp. 2d 508 (S.D.N.Y. 2012) (applying the law of the Democratic

Republic of Congo to determine whether the signatories had actual authority to

bind the DRC contractually).       In Themis, the court explained, “[w]here a

commercial transaction is with a foreign state and that state is found to have the

most significant relationship to the transaction, New York law must look to the

law of the foreign state to determine the actual authority of an agent of the state's

government.”     Id. at 521 (internal quotation and alterations omitted) (citing

Restatement (Second) of Conflict of Laws section 292(1) for the proposition that

“choice of law questions related to actual authority are subject to ‘most significant

relationship’ test”).

      Insofar as PDVSA is wholly owned by a foreign sovereign and the parties

dispute its legal ability to execute the Exchange Offer, these decisions may have

some bearing. However, whether these federal district court decisions applying

foreign law to determine the actual authority of a foreign state’s representatives or

state instrumentalities to enter into disputed agreements are well grounded in

New York law has never been determined by any New York court. Moreover,

even assuming these cases are properly reasoned under New York law, it is not

clear that cases dealing with actual authority in the principal-agent context are

                                         38
applicable by analogy to cases, like the one before us, involving an entity’s

authority or capacity under applicable local law to enter, on its own behalf, into a

particular agreement.

VIII. Certification

      Rather than predict how the New York Court of Appeals would resolve

these issues and risk doing violence to New York law, we recognize that the Court

of Appeals is far better equipped to provide answers. The Court of Appeals

authorizes certification from us on determinative questions of New York law

where there is no controlling Court of Appeals precedent. N.Y. Comp. Codes R.

& Regs. tit. 22, § 500.27. Likewise, under our Local Rule 27.2, we may certify

questions of New York law to the New York Court of Appeals.

      We have discretion about when to certify. Among the factors that guide our

decision are: (1) whether the New York Court of Appeals has addressed the issue;

(2) whether the questions are “of importance to the state and may require value

judgments and public policy choices;” and (3) whether the certified questions are

“determinative of a claim before us.” Barenboim v. Starbucks Corp., 698 F.3d 104,

109 (2d Cir. 2012).     Furthermore, because certification commonly imposes

considerable burdens of expense and delay on the parties, we must consider

whether the benefits of certification outweigh the disadvantages.        See 10012

                                        39
Holdings, Inc. v. Sentinel Ins. Co., Ltd., 21 F.4th 216, 224 (2d Cir. 2021)

(“[C]ertification is not costless: Because the certification process always incurs the

risk of some delay, we must consider the age and urgency of the litigation, the

impact that costs and delays associated with certification will have on the litigants,

and the costs that delay imposes on other cases that depend on resolution of the

legal issues.” (internal citations and quotation marks removed)).

      As set forth in depth above, this case raises a number of difficult legal

questions that have not been addressed by the New York Court of Appeals.

      These choice-of-law issues strike us as of utmost importance to the State of

New York given its standing as the world’s preeminent commercial and financial

center. The Court of Appeals has noted New York’s interest in promoting and

preserving this status, and in maintaining predictability for parties.              The

unresolved questions certified below require balancing of potentially divergent

policy interests with an eye to the consistency of New York contract law overall.

      Furthermore, answers to our certified questions “could resolve this case.”

Ministers & Missionaries Benefit Bd. v. Snow, 780 F.3d 150, 155 (2d Cir. 2015), certified

question accepted, 25 N.Y.3d 935 (2015); see also Morris v. Schroder Cap. Mgmt. Int'l,

445 F.3d 525, 531 (2d Cir. 2006) (resolution of certified questions “determine[d] the

outcome of [the] appeal”), certified question accepted, 6 N.Y.3d 880 (2006).
                                           40
      If the court concludes New York choice-of-law principles require the

application of New York law on the issue of the validity of the 2020 Notes, and

that Article 150 and the resolutions have no effect on the validity of the contract

under New York law, then we would affirm the district court's decision to apply

New York law and uphold the validity of the bonds. On the other hand, if the

court concludes Venezuelan law applies to the particular issue of PDVSA’s legal

authority to execute the Exchange Offer, then we would likely remand for an

assessment of Venezuelan law on that question and, if necessary, for consideration

of the Creditors’ equitable and warranty claims.

      In view of the very high value of 50.1% of the stock of Citgo, the collateral

at issue in this litigation, we do not think that the additional burdens of another

round of litigation would outweigh the public and private benefit of a definitive

answer from the Court of Appeals regarding these thorny questions of New York

law. The expense added by certification is modest relative to the amount in

controversy. Cf. Valls, 919 F.3d at 742-43 (“In cases involving modest amounts at

stake, the expense added by certification can exceed the amount in contention,

and, depending on the circumstances, the attendant delays may also be

unjustifiably burdensome.”). And the added litigation time is warranted in light

of the considerable stakes.

                                        41
                                  CONCLUSION

      For the reasons discussed above, we defer decision in this appeal, and

CERTIFY the following questions to the New York Court of Appeals:

   1. Given PDVSA’s argument that the Governing Documents are invalid and

      unenforceable for lack of approval by the National Assembly, does New

      York Uniform Commercial Code section 8-110(a)(1) require that the validity

      of the Governing Documents be determined under the Law of Venezuela,

      “the local law of the issuer’s jurisdiction”?

   2. Does any principle of New York common law require that a New York court

      apply Venezuelan substantive law rather than New York substantive law in

      determining the validity of the Governing Documents?

   3. Are the Governing Documents valid under New York law, notwithstanding

      the PDV Entities’ arguments regarding Venezuelan law?

      “Consistent with our usual practice, we do not intend to limit the scope of

the Court of Appeals’ analysis through the formulation of our question[s], and we

invite the Court of Appeals to expand upon or alter these questions as it should

                                         42
deem appropriate.” Nguyen v. Holder, 743 F.3d 311, 317 (2d Cir. 2014) (internal

quotation marks omitted). This panel retains its jurisdiction.

      It is therefore ORDERED that the Clerk of this Court transmit to the Clerk

of the Court of Appeals of the State of New York a Certificate, as set forth below,

together with a complete set of briefs and appendices, and the record filed in this

Court by the parties.

                                  CERTIFICATE

      The foregoing is hereby certified to the Court of Appeals of the State of New

York pursuant to Second Circuit Local Rule 27.2 and New York Codes, Rules, and

Regulations Title 22, section 500.27(a), as ordered by the United States Court of

Appeals for the Second Circuit.

                                        43