EXXON: London ruling may pose problems for PDVSA; ExxonMobil claims PDVSA acted "in bad faith"

Caracas Daily Journal (Jeremy Morgan): Even as people in Caracas celebrate a London judge's ruling in favor of Petróleos de Venezuela (PDVSA) in its dispute with ExxonMobil, reports reaching Caracas suggest the verdict might still work against the state oil corporation's interests. Much of what Judge Paul Walker stated in his ruling went PDVSA's way. But there was a sting in the tail that observers suggest could be cited by ExxonMobil in future legal proceedings.

Walker reportedly concluded that PDVSA had the right to appeal against another judge's injunction freezing $12 billion of its assets. He is said to have concluded that the "mere fact" that the defendant's ability to meet its debts was held in doubt didn't justify an injunction of that scale.

PDVSA counsel Gordon Pollock had argued in court there was no reason to think PDVSA wouldn't pay up if it lost the dispute over compensation for extra heavy crude oil rights in the Orinoco Basin. PDVSA, he reasoned, was known worldwide as a "transparent" organization. Walker agreed with PDVSA's counsel that the case did not involve the degree of urgency claimed by ExxonMobil. Neither did the judge find any reason to suppose there was a risk of fraud. And on the grounds that PDVSA didn't have substantial interests in the United Kingdom, he ruled that British jurisdiction didn't apply in this case.

But there was a devil in the detail of Walker's six-point judgement. Tucked away in the text was the view that PDVSA hadn't stuck to the rules in dealing with ExxonMobil over the planned "migration" to a "mixed company" in which PDVSA would have a 60 percent controlling interest in the Cerro Negro oilfield. ExxonMobil's attorneys had pointed to Article 15 of the original Cerro Negro contract. This stipulated that each side was obliged to inform the other at each stage of a dispute that might have an adverse effect on the other.