To the political and economic impact that the crisis in Venezuela is having, we must add a third risk vector: the legal one. The legal questions posed by the current scenario to companies and investors present in the country are innumerable. And the worst is that the lack of precedents and the uncertainty about the outcome of the confrontation between Juan Guaidó, interim president appointed by the National Assembly, and the Chavista leader Nicolás Maduro prevent jurists from offering action guidelines that guarantee business safety.
Venezuela has long been a high risk ecosystem for money. Fear, however, has increased in recent years. According to data from the Secretary of State for Trade, investment in the country from Spain has gone from 664 million euros in 2014, to 226 million in 2017. From January to September last year, the amount fell to 116 million. The number of Spanish companies with presence there, as quantified by the Venezuelan Spanish Chamber of Industry and Commerce, is 94. From the legal point of view, the Venezuelan crisis poses two major sources of risk for foreign companies and investors: expansion of international sanctions against the Maduro regime and the consolidation of two executives, with the ability to act and make decisions, which would require having to decide who is obeyed or with whom it is contracted.
The current regime of sanctions of the European Union (EU) against Venezuela is not too severe. It prohibits the sale to the country of arms, of equipment that can be used for internal repression and technology that allows the interception of communications. In addition, it freezes the assets and prevents funds from being made available to 18 of the regime's figures (they are known as designated persons); all of them senior officials, officials and representatives of the Government of Maduro.
However, as announced by the High Representative for the EU, Federica Mogherini, at the end of January, the EU foreign ministers do not rule out tougher sanctions. A decision that, in any case, would not be simple because countries like Italy or Greece break the unanimity that is required to approve this type of measures.
The road, in any case, The United States has already opened it. Three weeks ago, the Trump Administration included in its list of designated persons (and, therefore, with which it is prohibited to contract) the state company Petróleos de Venezuela (PDVSA). The extraterritorial effect of the US sanctions (which even force citizens and companies from other countries) and the possibility of the EU also expanding its restrictions, makes it imperative for companies to consider what to do if, from one day to the next, decrees the prohibition of the activity to which they are dedicated in Venezuelan soil. Or how to act if a designated person or organization is declared with whom they have contracts in force.
"The company will have to terminate the contract if it does not want to be exposed to a sanction," explains Valeria Enrich, partner of Baker McKenzie. A decision that, in any case, entails the danger of being denounced for breach of contract. The inclusion of clauses that allow one of the parties to free themselves from their obligations in case of international sanctions (although they are not always written in such a clear way), however, is already a common practice, and more so in high risk jurisdictions such as Venezuelan "It is not a panacea, but it is the minimum necessary protection", adds the partner of the firm Paul Amberg. According to reports, the counterpart usually resists its inclusion, but usually ends up agreeing because "no one hires" without this safeguard. Of course, the foreseeable thing is that, if executed, the aggrieved claim demanding a large compensation. The machinery to respond to these litigation must be prepared.
José María Viñals, partner of Lupicinio, suggests another option to avoid the impact of new sanctions: the construction of the well-known Chinese walls. That is, legal, societal, economic and even material barriers that allow creating a division between the parent and the subsidiary that prevents one of the group's branches from operating in Venezuela without the group suffering American or European reprisals. A "very expensive way that is not available to any company".
If the coexistence of the double presidency of Guaidó and Maduro continues, and, above all, if the first one manages to take control of institutions or part of the territory (thus being able to adopt effective decisions), there would be a legally high bicephalia problematic The dictates of what executive would be mandatory? What commitments would be valid? "There is no legal framework or precedent to solve it," says Marta Casado, a professor of International Law at the University of Deusto, who, however, emphasizes that a state should not be confused with its government. Thus, the agreement signed by Maduro links Venezuela, and will continue to do so even if the political change at the head of the country crystallizes.
"If two governments coexist, the companies will have to decide what to do, but if they are coherent with the international position of Spain, they should grant legitimacy to the Guaidó Administration," Viñals reflects, adding a last derivative to the already infamous Venezuelan scenario. If the Maduro regime fails to comply with a commitment, filing it before an international arbitration court could be understood as an act of recognition or legitimation. "The situation is ultracomplex," ditches the lawyer.