Deutsche Bank v. Venezuelan Central Bank (BCV)

Case summary

At a glance

Parties: Deutsche Bank AG London Branch v. Central Bank of Venezuela (BCV) and court-appointed Receivers; and Banco Central de Venezuela v. the Governor and Company of the Bank of England, with the "Maduro Board" and the "Guaidó Board" (ad hoc Administrative Board) of the BCV as rival stakeholder claimants
Case no.: CL-2019-000303 and CL-2020-000304; [2020] EWHC 1721 (Comm); [2022] EWHC 2040 (Comm)
Court: High Court of Justice of England and Wales, Queen's Bench Division, Commercial Court (London)
Forum and rules: Arbitration claim under section 44 of the Arbitration Act 1996 (in support of London arbitration under an English-law gold swap contract); stakeholder proceedings under CPR Part 86
Treaty: None. Arbitration clause in the 2015–2017 gold swap contract between Deutsche Bank and the BCV
Court: Mr Justice Teare (2 July 2020); Mrs Justice Cockerill (29 July 2022)
Sector: Central banking; gold reserves
Outcome: 2020: the UK Government's recognition of Mr Guaidó as constitutional interim President is conclusive, and his appointments to the BCV are non-justiciable acts of state. 2022: the Venezuelan Supreme Tribunal of Justice (STJ) judgments annulling those appointments cannot be recognised, so the Guaidó Board succeeded.
Amount: Gold reserves held by the Bank of England worth about US$1 billion (2020 judgment) or about US$1.95 billion (2022 judgment); proceeds of the gold swap of about US$120 million held by receivers

The dispute

Two rival boards each claimed the right to instruct the Bank of England and Deutsche Bank on behalf of the Central Bank of Venezuela (BCV). One board was appointed by Mr Maduro. The other, an ad hoc board, was appointed by Mr Guaidó under the Transition Statute of 5 February 2019, and Mr Guaidó also appointed a Special Attorney General. The Bank of England holds BCV gold. Deutsche Bank owed the BCV the proceeds of a 2015–2017 gold swap contract, governed by English law and subject to London arbitration. After receiving conflicting instructions, Deutsche Bank obtained the appointment of receivers under section 44 of the Arbitration Act 1996, and the Bank of England filed a stakeholder application after the BCV, on the Maduro Board's instructions, sued it. The Guaidó Board relied on the UK Government's recognition of Mr Guaidó on 4 February 2019 and on the foreign act of state doctrine. The Maduro Board argued that the UK still recognised the Maduro government, that Mr Guaidó's acts were void under Venezuelan law, and that STJ judgments declaring them null should be recognised.

Key holdings

The UK Government recognises Mr Guaidó as constitutional interim President of Venezuela, and has done so since 4 February 2019. It therefore does not recognise Mr Maduro as President. The recognition is as Head of State, not as Head of Government, and it is conclusive under the "one voice" doctrine. 2020 Judgment ¶ 42
Once the UK Government has unequivocally recognised a person as President, the court cannot look at the Government's conduct, such as continued diplomatic relations with the Maduro government, to contradict that recognition. Recognition of Mr Guaidó as de jure President leaves no room for recognising Mr Maduro as de facto President. 2020 Judgment ¶¶ 44–49 and n. 1
Under the first rule of the foreign act of state doctrine, the court will not inquire into the validity of the Transition Statute. The statute's power of appointment took effect within Venezuela, even though the case concerns assets in London. Under the second rule, the court will not question Mr Guaidó's appointments of the ad hoc board and the Special Attorney General, even if they are unlawful under Venezuelan law. This includes the question whether the BCV is a "decentralised entity". The court lacks jurisdiction because of subject matter immunity. 2020 Judgment ¶¶ 72–73, 88–89, 93
Following the Supreme Court's decision ([2021] UKSC 57), only STJ judgments that explicitly declare the Executive Acts to be nullities ("quashing decisions") can limit the act of state rule. Only five of the ten judgments relied on (Judgments 4, 5, 6, 8 and 9) qualify. Arguments that other judgments quashed the acts "implicitly" were rejected. 2022 Judgment ¶¶ 144–150
The STJ judgments cannot be recognised. Venezuelan law has no concept of in rem judgments, and the erga omnes effect of these judgments does not make them equivalent to in rem judgments. The expansion of the recognition rules proposed by the Maduro Board was not incremental and is not justified by the authorities. 2022 Judgment ¶¶ 169–189
Even if the judgments were recognisable, two defences would bar recognition. First, recognition would conflict with the one voice doctrine, because the judgments take as their starting point that Mr Guaidó is not President. Second, the proceedings were serious, flagrant breaches of natural justice and of Article 6 ECHR: none of the Guaidó interests was notified or heard. The public policy defence would have failed. The evidence of the STJ's systemic lack of independence gave grounds for concern but did not meet the threshold of cogent evidence. 2022 Judgment ¶¶ 217–218, 239, 243–244, 262–263

Procedural history

4 February 2019The UK Foreign Secretary states that the UK recognises Juan Guaidó as constitutional interim President of Venezuela.
13 May 2019Deutsche Bank issues an arbitration claim form under section 44 of the Arbitration Act 1996, and receivers are appointed to hold the gold swap proceeds. The 2022 judgment dates the claim form 14 May 2019.
19 March 2020The FCO replies to a letter of 14 February 2020 from Knowles J, confirming that the UK Government's position of 4 February 2019 is unchanged. On 30 March 2020 Knowles J orders the trial of preliminary issues, and on 29 April 2020 Flaux LJ refuses the Maduro Board permission to appeal.
14 May 2020The BCV, on the Maduro Board's instructions, sues the Bank of England. The Bank of England files a stakeholder application.
2 July 2020Teare J decides the Recognition Issue and the Justiciability Issue for the Guaidó Board.
The Supreme Court decides [2021] UKSC 57. The 2022 judgment reports that it upheld the one voice point and the act of state rules, subject to an exception for executive acts that the foreign courts have declared nullities.
29 July 2022Cockerill J refuses to recognise the STJ judgments, and the Guaidó Board succeeds. Whether the declarations sought should follow was left for further argument. The published documents do not show what happened next.