The COVID 19 pandemic has left many after-effects but the one referred to in the UK High Court ruling of 2 July 2020 is, because of its impact on the population of a country already hard hit by the sanctions imposed by the US, one of the most bloody.
In 2008 the Central Bank of Venezuela (BCV) opened a gold deposit account at the Bank of England (BoE) worth approximately one billion dollars. Since then this account was operated by the BCV without any limitation until 2018, when the Venezuelan authorities first claimed its return.
Thus, in January 2019, the BoE rejected the request for return on the grounds that they did not know who was entitled to the gold in their custody.
This refusal came a few days after opposition leader Juan Guaidó proclaimed himself “interim President” of the country on 23 January 2019. In that month he requested, in a letter sent to the then British Prime Minister, Theresa May, that the gold should not be given to the Government of Nicolás Maduro, arguing that it would be used for corrupt purposes.
For his part, on 4 February 2019, Foreign Minister Jeremy Hunt MP issued the following statement:
“The UK now recognises Juan Guaidó as Venezuela’s constitutional interim President, pending credible presidential elections”.
And on February 5, 2019, the Venezuelan National Assembly approved the Transitional Statute. This was described in the Preamble as a Statute that “governs a Transition to democracy to restore the full force of the Constitution of the Bolivarian Republic of Venezuela“.
Article 4 of the Statute states that “this Statute is a legal act in direct and immediate execution of Article 333 of the Constitution of the Bolivarian Republic of Venezuela” and Article 14 states that, in accordance with Article 233 of the Constitution, the President of the National Assembly (Mr. Guaidó) is “the legitimate interim President of the Bolivarian Republic of Venezuela“. Article 15, in turn, provided that the National Assembly could take the necessary decisions, inter alia, to safeguard State property abroad and its letter (a) gave the interim President the power to appoint ad hoc boards to take over the management of various public bodies, including “any other decentralized entity“, in order, inter alia, to protect their assets. In addition, Article 15(b) empowered the interim President to appoint a Special Attorney General to defend the interests of decentralized entities abroad.
On 5 February 2019, Mr. Guaidó, in his capacity as interim President, appointed Mr. Hernández as Special Prosecutor General (under articles 233, 236 and 333 of the Constitution and article 15 (b) of the Transitional Statute) and on 18 July 2019, in accordance with this, an ad hoc Board of the BCV. In turn, article 3 of Decree No. 8 of Mr. Guaidó, issued on 18 July 2019, provided that the said ad hoc Board would represent BCV abroad in relation to agreements concerning the management of international reserves, including gold, and article 7 provided that the acts which led to the appointment of the person currently holding the presidency of BCV (Mr. Ortega) were declared null and void.
Finally, on May 19, 2020, the National Assembly approved that the BCV’s assets abroad could only be managed by this ad hoc Board.
INTRODUCTION TO THE TRIAL IN THE HIGH COURT OF ENGLAND AND WALES
In light of the above background, this claim addresses two preliminary issues (recognition and justiciability issues) on two related matters: the BoE holds gold reserves of about $1 billion from the BCV and Deutsche Bank (“DB”) is required to pay the proceeds of a gold exchange agreement to the BCV in the amount of about $120 million, which is currently held by court-appointed trustees. In other words, what was at issue was the right of certain persons and bodies to give instructions to financial institutions on behalf of BCV with respect to foreign exchange reserves.
These two preliminary issues reflect the widely publicized controversy over who is the President of Venezuela; Mr. Maduro or Mr. Guaidó. Mr. Maduro claims to be the President of Venezuela on the grounds that he won the 2018 presidential election. Mr. Guaidó, for his part, claims to be the interim President of Venezuela because the 2018 presidential elections were irregular, because in reality there was no President and because, according to the Venezuelan Constitution, the President of the National Assembly, Mr. Guaidó, was the interim President of Venezuela, pending new presidential elections.
The BoE and the DB received conflicting instructions, so they decided to pay the reserves to whomever the courts determined to be entitled to give instructions on behalf of the BCV.
As a result, the BCV went to court in London in mid-May to claim that the BoE was not complying with its instruction to sell some of the gold and deliver the funds to the United Nations Development Program (UNDP) to buy medical supplies and equipment to fight the COVID-19.
ALLEGATIONS BY THE CENTRAL BANK OF VENEZUELA (BCV) / GOVERNMENT OF MADURO
The first preliminary question raised by Nicolas Maduro’s Board is that described as question of recognition.
The lawyer for the Nicolás Maduro Board argued that this recognition did not constitute an unequivocal recognition of another Government, because Her Majesty’s Government, by its actions and in particular by the maintenance (both before and after 4 February 2019) of full diplomatic relations with the Nicolás Maduro Government, in practice unequivocally recognized the Nicolás Maduro Government, in accordance with the “one voice” doctrine.
He also claimed that the recognition of “a Government of Guaidó” would contravene international law because he had not been elected through an electoral process.
As a second issue, Nicolás Maduro’s Board raised several objections to the legality, under Venezuelan law, of the aforementioned Transitional Statute and of the appointments made by Mr. Guaidó. They pointed out that this Statute and the appointments made on the basis of it were null and void, that they were not promulgated, nor published in such a way as to have legal effect and, therefore, were not effective against the BCV.
The Nicolás Maduro Board further argued that the rules of the “act of State” doctrine, issued by the United Kingdom Supreme Court, for the recognition of the effects of legislation or other acts of the Executive of a foreign State were not applicable and that, therefore, the court should question and reject the legal standards provided by the Guaidó Board as legal and valid.
Among the arguments put forward for the non-application of that doctrine was the Board’s claim that the Transitional Statute was null and void, that the executive actions of the interim President took effect outside the jurisdiction, as in the case of the aforementioned appointment of Mr. Hernández as Special Prosecutor General, since he was in Washington, D.C., and that the doctrine applied only to property within the jurisdiction of the State in question and only in relation to valid acts of State.
ALLEGATIONS OF THE PRESIDENT OF THE NATIONAL ASSEMBLY OF VENEZUELA JUAN GUAIDÓ
On the basis of this question of English law, Mr. Guaidó’s authority to make appointments to the BCV ad hoc Board was based on the recognition by His Majesty’s Government of Mr. Guaidó as interim constitutional President of Venezuela on 4 February 2019. Therefore, in accordance with the doctrine of “one voice“, the court had to accept, as conclusive, this unequivocal statement by Her Majesty’s Government recognizing a foreign sovereign state or the leader or Government of a foreign sovereign state.
In addition, Mr. Guaidó’s lawyer argued that the statement made on 4 February 2019 by Her Majesty’s Government was a “clear and unequivocal statement by Her Majesty’s Government that it recognizes Mr. Guaidó as interim constitutional President of Venezuela as of 4 February 2019“, specifically stating that “recognizes” is a word that Her Majesty’s Government would not use casually but deliberately.
The lawyer for Mr. Guaidó’s Board did not claim that there had been recognition by another Government. His argument referred not to the Government of Venezuela but to the President of Venezuela, although, of course, the President, as the Chief Executive, directs the action of the Government. The reason was not only the language used by Her Majesty’s Government but also that the appointments that are being challenged in relation to the BoE and the DB by Nicolas Maduro’s Board are appointments made by Mr. Guaidó as President of Venezuela.
He further accepted that the issue of “Government” in Venezuela is “difficult” because some parts of the State of Venezuela support Mr. Maduro and others support Mr. Guaidó.
- Justiciability Issue
The Guaidó Board considered that the objections raised by Nicolás Maduro’s Board were not actionable under the aforementioned “act of State” doctrine and argued, with respect to the rules of that doctrine, that the aforementioned Transitional Statute consisted of a legislative act of the State of Venezuela and that the appointments made were executive acts of the interim President of Venezuela that the court should recognize and not question.
The judge of the High Court of England and Wales, Nigel Teare, has ruled, in a judgment dated 2 July 2020, that it is the prerogative of Her Majesty’s Government to decide who is the lawful Head of State of Venezuela: Guaidó or Maduro (Breish at para. 60 by Popplewell LJ, quoting Lord Sumner in Duff v. Government of Kelantan  AC 797 at page 824, and Luther v. Sagor  3 KB 532 at page 556 by Scrutton LJ. and Mighell v. Sultan of Johore  1 QB 149 at page 158 by Lord Esher MR) and that on the basis of the political statement made by Lord Carrington, as Foreign Secretary in 1980, the meaning of His Majesty’s Government’s statement of 4 February 2019 must depend on the words of that statement understood in their factual context.
Thus, the judge has argued that the words “The United Kingdom now recognizes” indicate that, on the date of the statement (4 February 2019), the period of eight days from 26 January 2019 for Mr. Maduro to call new elections had elapsed and that, since no such elections had been called, the person recognized by the United Kingdom as President of Venezuela was Mr. Guaidó. The word “recognizes” therefore denotes “a formal statement of consequence“. Her Majesty’s Government therefore made a recognition of Mr. Guaidó’s legal status as President, rather than a mere expression of political support, this statement being clear and unequivocal in its meaning: there cannot be two Presidents of Venezuela, and it was therefore necessarily implicit in that statement that, on the basis of the doctrine of “one voice“, Her Majesty’s Government no longer recognized Mr. Maduro as President of Venezuela.
The “one voice” doctrine further requires the courts in the United Kingdom to accept a statement of recognition as conclusive because it is the Crown’s prerogative to make statements of recognition. Thus, having recognized Her Majesty’s Government as President of Venezuela, the courts and the Executive must speak with one voice, and the court cannot set aside Her Majesty’s Government’s statement or express any contrary opinion to that effect (Breish at paras. 1 and 34 by Popplewell LJ. Bouhadi v. Breish  EWHC 602 (Comm) at paragraph 43 by Blair J; Breish at paragraph 63 by Popplewell LJ).
On the other hand, it should be noted that, according to Justice Teare, the declaration of recognition made by Her Majesty’s Government did not refer to the Government of Venezuela but to the change in the person recognized by Her Majesty’s Government as President of Venezuela.
The judge further stated that the recognition did not refer to Mr. Guaidó as President in a normal sense, but as a “mere caretaker” pending new elections. The recognition was thus the recognition of an interim President pending elections, but even so there is no basis in international law that would prevent Mr. Guaidó from being recognized as President.
In the light of this, it has resolved that: “His Majesty’s Government recognizes Mr. Guaidó as the interim constitutional President of Venezuela and therefore does not recognize Mr. Maduro as the Constitutional President of Venezuela“.
Judge Teare also proceeds to analyze, through the three rules established by the doctrine of the “act of State” and, ultimately, whether or not the court should rule on the legality or validity of the acts and rules put forward by the Board of Maduro.
These three rules are set out in paragraphs 121-123 of Lord Neuberger’s judgment of the Supreme Court (Belhaj v Straw) of 17 January 2017:
“Rule 1: The courts of the United Kingdom shall recognize, and not question, the effect of the law of a foreign State or other laws in relation to any act occurring or having effect in the territory of that State.
- Second rule: The courts of the United Kingdom shall recognize and not question the effect of an act of the Executive of a foreign State in relation to any act which takes place or has effect within the territory of that State.
- Third rule: It has more than one component, but each component involves issues which are not for the United Kingdom courts to decide because they involve a challenge to the legality of the act of a foreign State which is of such a nature that a municipal court cannot or should not rule on it.”
Judge Teare concluded that the second rule of the “act of State” doctrine was applicable to Mr. Guaidó’s appointments as interim President of Venezuela and that there was therefore no need to examine whether the third rule was applicable.
Accordingly, Judge Teare concluded that both the rules and the competing appointments should be considered valid and effective, that they were foreign acts of State not subject to prosecution, and that the court lacked jurisdiction because of Mr. Guaidó’s immunity as the lawful interim President of Venezuela.
COMMENTARY ON THE JUDGEMENT
All unilateral sanctions are illegitimate insofar as they imply extraterritorial action by one state over another to force a certain behaviour, but the imposition of sanctions, or the failure to lift them, in the context of the COVID 19 pandemic, despite the international request made by the most heavily sanctioned countries by the United States, is an even more serious action, because of its effects on a population that has already suffered greatly in its most basic needs, denying even its right to food and health, as the UN itself has declared.
Its own Secretary General, Antonio Guterres, has echoed the above-mentioned request, highlighting these effects, as well as the negative impact on the international strategy to combat the coronavirus, although without any positive results.
In this context, the ruling now handed down further aggravates this situation, given that, as mentioned above, it is the Maduro Government that controls the political and administrative structure of Venezuela and that can channel adequate attention and aid of all kinds to the population.
Therefore, recognizing a self-proclaimed citizen as the “interim President” of the country, without respecting his electoral processes and legal institutions, and the impact of such a decision on the administration of the country’s assets, such as its gold reserves, means in practice not respecting the autonomy and sovereignty of third States, their governments, peoples and cultures, as well as contravening the international principle of non-intervention in the internal affairs of third States -the first precedent of which is found in the Resolution of October 1, 1936 of the Assembly of the League of Nations (Art. 15 .8) and then in the 1945 UN Charter (art.2) – with the undoubted intention of affecting their will and obtaining their subordination to foreign interests.
Points 1, 2 and 7 of Article 2 state that:
“In carrying out the purposes set forth in Article 1, the Organization and its Members shall act in accordance with the following principles:
- The Organization is based on the principle of the sovereign equality of all its Members.
- The Members of the Organization, in order to ensure to all of them the rights and benefits resulting from membership, shall fulfil in good faith the obligations assumed by them in accordance with the present Charter.
- Nothing in the present Charter shall authorize the United Nations to intervene in matters which are essentially within the domestic jurisdiction of any State or shall require the Members to submit such matters to settlement procedures under the present Charter, but this principle shall not prejudice the application of enforcement measures prescribed in Chapter VII.
On the other hand, it should be mentioned that the aforementioned ruling is a clear exercise in inconsistency, since while it states that the British Government recognizes Mr. Guaidó as “interim President“, it simultaneously emphasizes that the British Government recognizes the ambassador appointed by President Maduro as the official representative of Venezuela. If the United Kingdom really wanted to take a clear position in favour of Mr. Guaidó, it would be very easy for it to do so, since it would only have to withdraw the “placet” from that ambassador and all the other diplomatic personnel.
Nor can we forget that, while the lawsuit is going on, the gold reserves remain in the United Kingdom, with the economic advantages for that country that result from that permanence.
That is why, in light of the above, there are ample arguments in international law to appeal this ruling to the Court of Appeal and even in cassation to the United Kingdom Supreme Court, because it is so contrary to law and has such harmful effects on Venezuela and its population.
We cannot end without pointing out that, regardless of its final outcome, Venezuela should draw lessons from this lawsuit, since similar litigation could be reproduced throughout the world. This makes it advisable for the Venezuelan Government to prepare a worldwide strategy for the protection of its assets abroad from other possible legal actions by Mr. Guaidó.
The same would apply in the case of other countries that were suffering the effect of international sanctions.
Madrid, 20th July 2020
Department of Trade Commerce and International Sanctions
C/ Villanueva 29, 28001 MadridT: +34 91 436 00 90
Av. Diagonal 520, 08006 BarcelonaT: +34 93 488 28 02