Venezuela: Its Gold Held In Britain's Vaults
Source: https://uk.reuters.com/article/us-venezuela-gold/venezuela-gold-holdings-in-bank-of-england-soar-on-deutsche-deal-sources-idUKKCN1PF1Z8
By: Om Nagle
DISCLAIMER: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of the KCL Latin American Society or El Cortao.
Even before the COVID-19 pandemic, thousands of people in Venezuela were already suffering the ravaging effects of armed violence caused by years of political and economic instability. Official statistics indicate that, to date, Venezuela has had just over 110,000 confirmed cases of COVID-19 and about 880 total deaths. However, these government provided statistics are more a reflection of the country’s testing capabilities than of the true number of cases. The Nicolás Maduro led regime has largely limited testing to a few government-operated institutions which have medical supplies imported from partner nations like Iran and China. It is therefore unsurprising that Venezuela ranks as having the worst testing capacity in Latin America, only being able to perform about 264 tests a week with significant errors and delays in obtaining the results. The pandemic has therefore only served to make matters worse for Venezuelans who already have scarce access to food, water, and healthcare.
Venezuela’s current problems have certainly not been caused solely by COVID-19. Rather, the pandemic has exacerbated an unprecedented humanitarian and economic crisis caused by years of corruption, mismanagement and failed government policies. Recurrent droughts and severe international sanctions have worsened pre-existing food security and fuel shortage problems, adding pressure on the crippling private sector and overburdened humanitarian NGOs. The Maduro government, in light of these stricter sanctions and a desperate need for funds to battle the pandemic, looked abroad to liquidate its assets stored with the Bank of England. Their attempt to secure the 31 tonnes of gold-bullion have been met with significant challenges. The Maduro-led government has claimed that proceeds from the gold will be used to contribute funds to the United Nations Development Fund to help combat the COVID-19 pandemic. But his opponent, Juan Guaidó, believes there is very little merit to these claims and that the funds obtained would be used to further corruption. The litigation between the two highly contested Presidents of Venezuela has resulted in the money being held inside British Vaults far away from where it is truly needed: in Venezuela – to alleviate the suffering of the Venezuelan people.
This article will aim to impartially highlight and analyse the controversial questions raised by the UK Courts in the case of “Maduro Board” of the Central Bank of Venezuela V. “Guaidó Board” of the Central Bank of Venezuela [2020]
Since April of 2013, Nicolás Maduro has held the office of the President of Venezuela. December 2015 saw the dispute over the election of the deputies to the National Assembly for the state of Amazonas. The Supreme Tribunal of Justice of Venezuela (STJ), the country’s utmost constitutional court, granted provisional relief suspending the implementation of the election of the four deputies. However, the victorious opposition decided to swear-in the deputies anyway. As a result, the STJ issued a judgement on the 1st of August 2016, declaring all decisions taken by the National Assembly “null and void for so long as it was constituted in breach of the judgments and orders of the STJ”. In May 2017, a rival legislature was established on Maduro’s initiative called the National Constituent Assembly (NCA).
The presidential election of 2018 witnessed Maduro claiming victory again. A month later, he appointed Mr. C. José Ortega as the president of the NCA and of the Central Bank of Venezuela (BCV). In retaliation, the National Assembly declared the appointment unconstitutional. The STJ, following its 2016 judgement, declared the National Assembly’s resolution unconstitutional.
January 2019 saw Maduro being sworn-in for a second term as the President of Venezuela. However, the National Assembly and its President, Juan Guaidó, announced, relying upon Article 233 of the Venezuelan Constitution, that Maduro had usurped the office of the President and that Guaidó was the Interim President of Venezuela. Several countries, such as the United States, Colombia, Members of the EU and the UK gave the Maduro-led government 8 days to call elections. After failing to call elections, the Foreign Secretary to the UK reaffirmed the recognition of Juan Guaidó as an interim President “in charge of the transition back to democracy”. Furthermore, the Minister of State for Europe and the Americas justified the UK government’s recognition of Guaidó, based on the National Assembly’s consistency with following the rules set out in the Venezuelan Constitution. Additionally, he highlighted the exceptional nature of the refugee crisis whereby 3.6 million Venezuelans had fled the country in pursuit of a life away from a regime which was “holding onto power though electoral malpractice and harsh repression of dissent” and had been referred to the International Criminal Court by six countries for its human rights abuses.
Meanwhile, the National Assembly passed the Transition Statute with the aim of “restoring the full force and effect of the Venezuelan Constitution”. It was signed bearing the seal of Guaidó as the President of Venezuela. Using the legal backing provided by the Transition Statute, Guaidó appointed a Special Attorney General, Mr. Jose I. Hernandez, and an ad hoc board of the BCV to defend the “interests of decentralized entities abroad”. The STJ passed judgements holding the Transition Statute, appointment of the special attorney general, andthe creation of the ad hoc board of the BCV as unconstitutional, null and void.
The Bank of England holds gold reserves valued at about US $1.95 billion for the Banco Central De Venezuela (BCV). Consequently, a gold-swap contract with Deutsche Bank obligates them to pay the BCV a sum of about US $120 million. Currently, the sums are held by court appointed receivers. When the Maduro Board requested access to the gold, the Bank of England rejected their request owing to non-recognition of the Maduro-led government by the United Kingdom. This led to the current litigation at hand, wherein the courts have to decide upon two preliminary issues: firstly, which of the two boards is entitled to give instructions on behalf of the BCV concerning the assets held with the Bank of England and, secondly, who holds the office of the president of Venezuela.
Initially, the Guaidó Board was successful in securing positive consideration through a judgement in its favour. Wherein the court held that, owing to the UK Foreign Ministry’s statements about the recognition of Juan Guaidó as the interim president of Venezuela, the Maduro Board of the BCV wouldn’t be entitled to give instructions in relation to the assets. This was appealed by the lawyers representing the Maduro-led government who argued that, although the UK recognised Guaidó as the interim-president, they in practice continued diplomatic relations with the Maduro-led government through the Ambassador of Venezuela to the UK in London and the UK’s Ambassador to Venezuela in Caracas. While considering this aspect of the appeal, the UK High Court passed its judgement that diplomatic relations were irrelevant considering the UK recognised Juan Guaidó as the President, and it is the President of Venezuela that appoints the board of the BCV. They reaffirmed that “there is no room for recognition of Mr Guaidó as de jure President and of Mr Maduro as de factoPresident”, the “one-voice” principle would dictate that the UK Government no longer recognises Maduro as President of Venezuela in any capacity.
In reference to the second preliminary issue, the court took into consideration the arguments presented by the Maduro Board as well as the Guaidó Board but reaffirmed that, at this stage, it was not in the UK High Court’s jurisdiction or capacity to pass judgement on the issue of the office of the president of Venezuela. The court in its concluding statements directed the litigating parties to dispute the matter in the Commercial Court. The Special Attorney appointed by Guaidó formally informed the International Centre for Settlement of Investment Disputes (ICSID) to set aside any arbitration requests from the Maduro Board, as the Guaidó board is the sole controller of the BCV, thus limiting any chances of this dispute being resolved without judicial proceedings in the UK. Unfortunately, as the litigation between the two offices of presidents in Venezuela gets expensive, complicated and drawn-out, the people of Venezuela have to ultimately bear the cost.
Om Nagle is a second-year law student at SOAS, University of London. He is interested in the intersection of law, international affairs and public policy.
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