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On October 27, 2026, the US Court of Appeals for the Second Circuit affirmed that the PDVSA 2020 bonds and the pledge of 50.1% of the shares of CITGO Holding are valid under Venezuelan law.

The decision is Petróleos de Venezuela, S.A. v. MUFG Union Bank, N.A., No. 25-2652, slip op. at 51, 60 (2d Cir. Oct. 27, 2026). This is a case that divided Venezuelan public opinion and legal circles. Much of the public debate tracked the nation’s political divide, with defenders of the bonds more commonly associated with the Maduro side and their opponents more commonly associated with the political opposition. Those who challenged the bonds argued that they were invalid because they were not approved by the National Assembly under article 150 of the 1999 Venezuelan Constitution. They were asking the courts to treat the 2020 bonds and the CITGO pledge as void from the start, so the bondholders could not enforce the notes or foreclose on the pledged CITGO shares. But the 2020 bonds did not create a debt out of nothing. They refinanced preexisting PDVSA debt. Paying what is owed should not be controversial; and the law is, or should be, what it is, no matter what political side one supports.

This case was started by a lawsuit brought in the US by PDVSA entities under the ad hoc board appointed by the interim government of Juan Guaidó, and highly promoted by Venezuelan political opponents of Maduro. The problem they faced is that PDVSA had never subjected its past debt transactions to legislative approval, whether under article 126 of the 1961 Venezuelan Constitution or article 150 of the 1999 Venezuelan Constitution. That is a fact, not a matter of opinion.

The 2015 National Assembly rejected the CITGO pledge in September 2016, but did not state that the indenture itself was a national public interest contract under article 150.

There was also no previous case holding that the contracts or indentures governing PDVSA bond issuances were national public interest contracts. The binding decisions of the Constitutional Chamber of the Venezuelan Supreme Court of Justice (TSJ), as the US Court of Appeals read them, pointed in the other direction: national public interest contracts are contracts entered into by the Republic, or competent organs of the National Executive, and do not include contracts entered into by state owned companies in the Decentralized Public Administration, such as PDVSA. There were other TSJ decisions involving the Central Bank and mixed companies (in this case, allowing contracts without the National Assembly’s approval), but none decided that a PDVSA bond issuance or the CITGO pledge was a national public interest contract. 

But the lawyers hired by the interim government of Juan Guaidó argued that these bonds were different because they were secured by 50.1% of the shares of CITGO Holding, an asset of obvious importance to Venezuela. That was the novel step in the argument. There were older cases and legal writings discussing article 150 and public interest contracts, but no preexisting judicial authority had held that a PDVSA debt transaction, or a pledge of CITGO, became a national public interest contract requiring National Assembly approval. The older authorities that PDVSA invoked did not decide that proposition. What was new was not article 150 itself. It was the attempt to apply article 150 to this transaction.

The National Assembly elected in 2015 categorically rejected the CITGO pledge in a September 27, 2016 acuerdo. But that did not state that the indenture itself was a national public interest contract under article 150. That specific conclusion came in October 2019, after the transaction had closed and the controversy had fully developed, when the National Assembly stated that the 2020 Bond indenture violated article 150 because it was a national public interest contract executed with foreign companies without parliamentary authorization. The PDVSA plaintiffs, acting through the ad hoc board recognized in the United States, then submitted expert legal opinions advancing that same position.

There was no preexisting judicial holding applying article 150 to a PDVSA bond issuance or to the CITGO pledge. PDVSA’s historical practice ran the other way, and the courts ultimately rejected that application of article 150 of the Venezuelan Constitution.

The case has been litigated since 2019. The district court in New York initially ruled for the creditors under New York law. After the New York Court of Appeals held in 2024 that Venezuelan law governs the validity of the securities, the Second Circuit vacated that judgment and remanded. On remand, the district court considered additional expert legal submissions and again held that the bonds and collateral were valid, this time under Venezuelan law. The Second Circuit affirmed yesterday.

PDVSA had another argument: even if article 150 did not itself invalidate the bonds, it argued that US courts had to give effect to the National Assembly resolutions under the act of state doctrine, a rule that generally prevents US courts from questioning official sovereign acts carried out by a foreign government within its own territory. The court rejected that argument as well. Even assuming that the resolutions were sovereign acts intended to invalidate the transaction, the relevant transaction and property were outside Venezuela. The bonds, the depository arrangements and the collateral were centered abroad, particularly in New York. The court therefore held that the act of state doctrine did not require a US court to give the resolutions the extraterritorial effect PDVSA sought.

That record also matters when lawyers involved in the case later comment publicly on it. A novel litigation theory should not be described as if it had been settled Venezuelan law all along. It was not. There was no preexisting judicial holding applying article 150 to a PDVSA bond issuance or to the CITGO pledge. PDVSA’s historical practice ran the other way, and the courts ultimately rejected that application of article 150 of the Venezuelan Constitution. That history is relevant to credibility when lawyers or experts later present advocacy developed in litigation as a neutral account of what Venezuelan law clearly required from the beginning. Lawyers who participated in the case or publicly advocated its legal theory should disclose that context when commenting on it. Readers can then decide what weight to give their views.

Creditors may continue trying to collect the CITGO collateral. Whether and when they can actually reach it is a different question.

What does all of this mean in practical terms? It does not mean that the bondholders own CITGO today or can seize it tomorrow. It means that PDVSA lost its central defense to the 2020 bonds and the CITGO pledge. PDVSA cannot avoid those obligations by arguing that the Venezuelan Constitution required prior approval from the National Assembly. The bonds and the collateral are legally valid. The creditors may therefore continue trying to collect. Whether and when they can actually reach the CITGO collateral is a different question involving enforcement proceedings, US sanctions administered by OFAC and the separate Delaware proceedings involving other creditors of Venezuela.

The PDVSA entities may now ask the US Court of Appeals to rehear the case or seek rehearing by the full court, sitting en banc. They may also petition the Supreme Court of the United States for a writ of certiorari. That would be a request for discretionary review, not another appeal as of right. If the judgment stands, the case will return to the district court and the creditors can continue pursuing their contract and enforcement claims. OFAC may still control whether and when a transfer or sale involving the CITGO collateral can occur, and the separate Delaware creditor proceedings remain important.

The political argument over the PDVSA 2020 bonds may continue, but the legal argument is now much narrower. After seven years of litigation, the district court and the court of appeals, applying Venezuelan law, have concluded that the bonds and the collateral are valid. Politics may still affect when creditors get paid. It no longer supplies a persuasive legal basis for saying that the debt or the pledge never validly existed.

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