Time was, in our experience, when losing parties in arbitration paid the amount of the award without demur or fuss. But, today, there seems to be greater resistance on the part of award debtors to pay amounts awarded against them. One of the means of resistance is the deliberate impoverishment of an arbitration debtor through fraudulent transfers of assets to persons not parties to the arbitration. In response, claimants have, either in the course of arbitration proceedings, or in the enforcement stage, sought to have their awards enforced against parties that were not parties to the original commercial transaction. Two recent cases concern efforts made by arbitration claimants to enforce their awards against nonparties.
The ‘Crystallex’ Case
Crystallex International v. Petróleos de Venezuela, et al. (D. C. Delaware, Civil Action No. 15-1082-LPS) decided Sept. 30, 2016, is one such case. In that case, Crystallex brought an investor-state arbitration under the rules of the International Center for State Investment Disputes against Petróleos de Venezuela (PDVSA), the state-owned oil company of Venezuela. Crystallex asserted, in Delaware federal court, that PDVSA and its alleged alter ego, the state of Venezuela, had violated the Delaware Uniform Transfer Act (DUFTA) through fraudulent transfers. The complaint alleged that these two defendants, anticipating an award against PDVSA in the ICSID arbitration, caused CITGO Holding, a wholly owned subsidiary of PDVSA, to issue $2.8 billion in debt securities, the proceeds of which were paid by CITGO to its direct parent, PDV Holding, as a dividend. PDV then transferred the funds to PDVSA as a dividend. Crystallex alleged that the purpose of these transactions was to move the $2.8 billion to Venezuela, where it would allegedly be safe from execution by investors.
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