PDVSA Bondholders Win Second Circuit Affirmance of Validity of Notes Issued by Venezuela’s State-Owned Oil Company

Paul, Weiss secured a significant appellate victory for an ad hoc group of holders of defaulted bonds issued by the Venezuelan state-owned oil company Petróleos de Venezuela, S.A., (PDVSA), when the Second Circuit unanimously affirmed a September 2025 summary judgment finding that the notes, worth roughly $3 billion, are valid and enforceable.

In 2016, PDVSA issued approximately $3.4 billion of notes maturing in 2020 in exchange for existing notes of PDVSA that were coming due in 2017. Following a political shake-up in Venezuela in 2019, the United States declared Venezuela’s legislature, the National Assembly, to be the only legitimate Venezuelan government. Shortly thereafter, the National Assembly passed a resolution stating that PDVSA’s 2016 exchange transaction was an invalid “national public interest contract” that should have been approved by the National Assembly under the Venezuelan constitution.

PDVSA, under a new board appointed by the National Assembly, defaulted on the notes in October 2019. Two days later, PDVSA commenced an action in the Southern District of New York against the trustee and collateral agent for the notes, asserting that both the notes and the pledge were invalid because, among other reasons, they were “contracts of national interest” that required approval by the National Assembly under the Venezuelan constitution, and because the act-of-state doctrine required the U.S. courts to defer to the National Assembly’s declarations that the notes were invalid.

In 2020, U.S. District Judge Katherine Failla of the Southern District of New York determined that New York law governed the validity of the notes, that the notes and pledge were valid under New York law, and that the act of state doctrine did not bar resolution of the issues. PDVSA appealed to the Second Circuit, which certified the choice of law question to the New York Court of Appeals and ultimately remanded to the Southern District of New York in 2024 with instructions for the court to determine the validity of the notes under Venezuelan law. Judge Failla then granted our summary judgment motion in 2025 and denied PDVSA’s competing motion, finding that both the notes and the pledge were valid. PDVSA again appealed to the Second Circuit.

The Second Circuit panel on October 27 affirmed the district court’s grant of summary judgment in favor of the bondholders, agreeing with the district court that, under the Venezuelan constitution, the National Assembly’s approval was not required to validate PDVSA’s exchange offer. It further concluded that the act-of-state doctrine, which bars courts from invalidating certain official acts of foreign sovereigns, does not apply.

The Paul, Weiss team is led by partners Andrew Rosenberg, Jeffrey Recher and Paul Paterson, and includes capital solutions and restructuring partner Jacob Adlerstein and counsel Karen Zeituni; and litigation of counsel Walter Rieman, and counsel Conrad Scott, Joshua Thompson and Sabrina Hendershot.