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Jimenez v. Palacios

Court of Chancery of Delaware

August 2, 2019


          Date Submitted: July 23, 2019

          Daniel B. Rath, Rebecca Butcher, Jennifer L. Cree, LANDIS RATH & COBB LLP, Wilmington, Delaware; Quinn Smith, Katherine J. Sanoja, GST LLP, Miami, Florida; Gary J. Shaw, GST LLP, Washington, D.C.; Counsel for Plaintiffs and Counterclaim-Defendants Rodolfo Enrique Jiménez, Asdrúbal Chavez, Iris Medina, Marcos Rojas, José Alejandro Rojas, and Fernando de Quintal.

          Kenneth J. Nachbar, Susan W. Waesco, Alexandra M. Cumings, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware; Michael J. Gottlieb, Samuel Hall, WILLKIE FARR & GALLAGHER LLP, Washington, D.C.; Tariq Mundiya, Martin L. Seidel, Jonathan D. Waisnor, WILLKIE FARR & GALLAGHER LLP, New York, New York; Counsel for Defendants and Counterclaim-Plaintiffs Luisa Palacios, Edgar Rincón, Fernando Vera, Elio Tortolero, Andrés Padilla, Ángel Olmeta, Javier Troconis, Luis Urdaneta, and Rick Esser.

          A. Thompson Bayliss, J. Peter Shindel, Jr., Daniel J. McBride, ABRAMS & BAYLISS LLP, Wilmington, Delaware; José Ignacio Hernandez G., Special Attorney General of Venezuela, Washington, D.C.; Counsel for Amicus Curiae the Bolivarian Republic of Venezuela.


          MCCORMICK, V.C.

         In January 2019, after a controversial presidential election, the National Assembly of Venezuela declared the presidency of Nicolás Maduro illegitimate and appointed opposition leader Juan Guaidó as Interim President. In response, the President of the United States officially recognized the Guaidó government as sovereign. After Guaidó assumed office, his government appointed a new board of directors to govern Petróleos de Venezuela, S.A. ("PDVSA"), Venezuela's state-owned oil company. Guaidó's newly appointed directors then reconstituted the boards directors of the nominal defendants in this action-three Delaware entities directly or indirectly owned by PDVSA.

         The plaintiffs served as directors of the nominal defendants before Guaidó took office. They commenced this litigation pursuant to Section 225 of the Delaware General Corporation Law seeking a declaration that they comprise the rightful boards of the nominal defendants. The defendants, who are the directors appointed by Guaidó's PDVSA board, counterclaimed for a competing declaration.

         The parties have cross-moved for judgment on the pleadings. They agree that the President of Venezuela has the power to appoint the members of the board of PDVSA and, indirectly, determine the composition of the boards of the nominal defendants. They disagree on who holds the title of President of Venezuela, whether Guaidó's actions successfully reconstituted the PDVSA board, and whether the PDVSA board successfully reconstituted the boards of the nominal defendants.

         The outcome turns on two threshold issues that implicate doctrinal expressions of the concept of separation of powers-the political question and act of state doctrines. The political question doctrine requires courts to accept as binding the U.S. President's determination to recognize a foreign government. The act of state doctrine requires courts to assume the validity of an official act of a recognized foreign government performed within its own territory. Applying these doctrines, this decision accepts as binding the U.S. President's recognition of the Guaidó government and assumes the validity of the Guaidó government's appointments to the PDVSA board.

         The plaintiffs raise myriad arguments in an effort to complicate this straightforward analysis. They parse the U.S. President's official statement recognizing the Guaidó government, arguing that Guaidó's authority as "interim" President is limited. They pit the internal affairs doctrine against the more potent political question and act of state doctrines, arguing that the former should override the latter. They invoke exceptions to the act of state doctrine, arguing that the Guaidó government lacks jurisdictional indicia of statehood and exceeded its territorial limitations when appointing directors to the PDVSA board. Not one of these arguments persuades, and this decision resolves these issues in favor of the defendants.

         But this decision does not reach the ultimate question of who comprises the boards of the nominal defendants. The consents appointing the directors were provided to the plaintiffs as attachments to briefing and are not appropriately considered on a motion for judgment on the pleadings. This decision thus treats the defendants' motion as one for summary judgment and grants the plaintiffs an opportunity to submit an affidavit identifying disputed facts foreclosing summary judgment in the defendants' favor.


         As both sides correctly observe, the Court need not delve into the disputed facts concerning Venezuela's recent political turmoil in order to resolve the discrete legal issues presented by the cross motions. Yet, ignoring those events would cheat future readers of significant context. Thus, for context only, this factual background includes a summary of those events, which are not considered for the purpose of the legal analysis.[1] Otherwise, the facts are drawn from the parties' respective pleadings, documents integral to or incorporated by reference therein, [2] and judicially noticeable facts.[3]

         A. Recent Political Turmoil in Venezuela

         Following the 2013 death of Venezuelan President Hugo Chávez, his political heir Maduro became President of Venezuela. During Maduro's first term, Venezuela's economy spiraled downward, resulting in hyperinflation and a shortage of food and medical supplies. Some blamed Chávez and Maduro's economic policies, including strict price controls. Protests and civil insurrection ensued. Arrests followed.

         By late 2015, the opposition coalition had won control of Venezuela's legislative body, the National Assembly. Before the newly elected legislators took office, the National Assembly packed the Supreme Tribunal of Justice ("Supreme Tribunal") with judges reportedly loyal to Maduro. In early 2016, citing election irregularities, the Supreme Tribunal issued a ruling blocking three opposition lawmakers from taking office. The opposition coalition nevertheless swore in the three legislators, claiming the Supreme Tribunal's ruling was designed to strip the opposition of its supermajority in the National Assembly. In response, the Supreme Tribunal declared null and void decisions taken by the National Assembly while the three legislators held their seats. In March 2017, the Supreme Tribunal took over legislative powers from the National Assembly. The United States and other members of the international community condemned this action, prompting the Supreme Tribunal to reverse course in April 2017.

         On May 1, 2017, the Maduro regime took a new approach, calling for a National Constituent Assembly ("Constituent Assembly") under Article 347 of the Constitución de la República Bolivariana de Venezuela (the "Venezuelan Constitution"). Members of the international community denounced the move as an unconstitutional effort to concentrate political power, and the opposition coalition boycotted the July elections for the Constituent Assembly. The United States vowed "to take strong and swift actions" against the members of the Maduro regime, who the U.S. Department of State referred to as the "architects of authoritarianism."[4]Protests and violence ushered in election results, according to some accounts.

         In its first month of existence, the Constituent Assembly reportedly expressed support for Maduro, gave itself the power to legislate, and voted to put opposition leaders on trial for treason. The National Assembly refused to subordinate itself to the Constituent Assembly, resulting in two legislative bodies purporting to govern Venezuela.

         Maduro disqualified the opposition parties from participating in the 2018 Presidential election, which he then claimed to win.

         Amid a collapsing economy and growing humanitarian crisis, Maduro was sworn in for a second term as President of Venezuela on January 10, 2019. The National Assembly declared Maduro's presidency illegitimate on January 15, 2019. Invoking Article 233 of the Venezuelan Constitution, the National Assembly's president, Juan Guaidó, was named the Interim President of Venezuela on January 23, 2019.

         B. PDVSA and the CITGO Entities

         Although Venezuela's economy struggles, Venezuela's government lays claim to the largest proven oil reserves in the world. PDVSA is a Venezuelan company formed in 1975 by the President of Venezuela. Venezuela owns PDVSA, which indirectly owns CITGO Petroleum Corporation ("CITGO Petroleum"), a Delaware corporation headquartered in Houston and one of the largest operating petroleum refiners in the United States.

         PDVSA owns CITGO Petroleum through two other Delaware corporations, PDV Holding, Inc. and CITGO Holding, Inc. (with CITGO Petroleum and PDV Holding, the "CITGO Entities"). Venezuela is the sole stockholder of PDVSA, PDVSA is the sole stockholder of PDV Holding, [5] PDV Holding is the sole stockholder of CITGO Holding, and CITGO Holding is the sole stockholder of CITGO Petroleum.

         Historically, the President of Venezuela had the power to appoint the members of the board of directors of PDVSA by decree.[6] Maduro last exercised that authority in October 2018.[7]

         C. The United States Recognizes the Guaidó Government.

         The same day that Guaidó became the Interim President of Venezuela, the United States and a number of other countries recognized the Guaidó government. In a public statement on January 23, 2019, the U.S. President declared:

Today, I am officially recognizing the President of the Venezuelan National Assembly, Juan Guaido, as the Interim President of Venezuela. In its role as the only legitimate branch of government duly elected by the Venezuelan people, the National Assembly invoked the country's constitution to declare Nicolas Maduro illegitimate, and the office of the presidency therefore vacant. . . .
We encourage other Western Hemisphere governments to recognize National Assembly President Guaido as the Interim President of Venezuela, and we will work constructively with them in support of his efforts to restore constitutional legitimacy. We continue to hold the illegitimate Maduro regime directly responsible for any threats it may pose to the safety of the Venezuelan people.[8]

         On January 25, 2019, the U.S. Department of State accepted Interim President Guaidó's designation of Carlos Alfredo Vecchio as the Chargé d'Affaires of the government of Venezuela.[9]

         According to the plaintiffs, Maduro continued to wield actual control over PDVSA's Venezuelan operations.[10] According to the defendants, Maduro wielded this control through military force.[11] According to the U.S. Executive Branch, the Maduro regime made "continued attempts to undermine the Interim President of Venezuela and undermine the National Assembly, the only legitimate branch of government duly elected by the Venezuelan people, and to prevent the Interim President and the National Assembly from exercising legitimate authority in Venezuela[.]"[12] Citing these concerns, the U.S. President issued an Executive Order on January 25, 2019, that extended pre-existing sanctions to members of the Maduro regime.[13] Then, on January 28, 2019, the U.S. Department of Treasury's Office of Foreign Assets Control ("OFAC") added PDVSA to its Specially Designated Nationals and Blocked Persons List.[14] This designation prohibits U.S. persons "from engaging in transactions or dealings" with PDVSA in the absence of a license issued by OFAC.[15] Concurrent with the designation, to mitigate market disruptions stemming from these sanctions, OFAC issued licenses creating exceptions to the sanctions on PDVSA and the CITGO Entities.[16]

         On January 31, 2019, OFAC published a response to the frequently asked question, "[w]hen will sanctions be lifted on [PDVSA] or any entity in which PdVSA owns, directly or indirectly, a 50 percent or greater interest?"[17] The response states:

The path to sanctions relief for PdVSA and its subsidiaries is through the expeditious transfer of control of the company to Interim President Juan Guaidó or a subsequent, democratically elected government that is committed to taking concrete and meaningful actions to combat corruption, restore democracy, and respect human rights. A bona fide transfer of control will ensure that the assets of Venezuela are preserved for the country's people, rather than misused and diverted by former President Nicolas Maduro. Treasury will continue to use its economic tools to support Interim President Guaidó, the National Assembly, and the Venezuelan people's efforts to restore their democracy.[18]

         As of the date of this decision, OFAC has not changed its position.

         D. The Guaidó Government Appoints Directors to the Managing Board of PDVSA.

         On February 5, 2019, the National Assembly approved and adopted a Statute to Govern a Transition to Democracy to Reestablish the Validity of the Constitution of the Republic of Venezuela (the "Transition Statute").[19] The Transition Statute was adopted to facilitate a "democratic transition" in Venezuela in three phases: (1) "End the dictatorial regime" of Maduro, (2) "Set up a provisional Government for national unity, to ensure that the democratic system is restored and free elections are called[;]" and (3) "Restore a democratic State by holding free, clear and fair elections in the shortest time possible."[20]

         The Transition Statute identified Guaidó as "the legitimate President in Charge" of Venezuela.[21] It specifically empowered Guaidó to "appoint an ad hoc Managing Board" of PDVSA "to exercise PDVSA's rights as a shareholder of PDV Holding[.]"[22] The Transition Statute further directed the CITGO Entities to "have no relationship whatsoever" with Maduro and his regime.[23]

         On February 8, 2019, pursuant to the authority granted him under the Transition Statute, Guaidó appointed five individuals as the ad hoc Managing Board of PDVSA "for the purpose of carrying out all necessary actions to appoint a Board of Directors" for PDV Holding.[24] On February 13, 2019, the National Assembly approved this action by resolution.[25]

         On February 14, 2019, Venezuela's Constitutional Court, a subdivision of the Supreme Tribunal, issued a decision finding the Transition Statute unconstitutional and declaring the Transition Statute and the National Assembly resolution null and void.[26] The Constitutional Court found Guaidó's appointment of PDVSA's Managing Board unlawful and declared it a nullity.[27]

         E. The Managing Board of PDVSA Reconstitutes the Boards of the CITGO Entities.

         On February 15, 2019, the Guaidó-appointed Managing Board, acting for PDVSA as the sole stockholder of PDV Holding took action by a written consent pursuant to Section 228 of the Delaware General Corporation Law ("DGCL") to elect a new board of PDV Holding.[28]

         Also on February 15, 2019, each member of the new PDV Holding board executed a unanimous written consent pursuant to Section 141(f) of the DGCL electing a new officer of PDV Holding.[29] That officer then caused PDV Holding to act by written consent as the sole stockholder of CITGO Holding to elect a new board of CITGO Holding.[30] The CITGO Holding board repeated the steps for CITGO Petroleum.[31]

         The defendants allege (and the plaintiffs dispute) that the written stockholder consents electing the new boards of the CITGO Entities became effective on February 18, 2019, when each consent was delivered to the respective CITGO Entity.[32] The defendants also allege (and the plaintiffs dispute) that, at the end of this process, the new PDV Holding board comprised directors Luisa Palacios, Edgar Rincón, Fernando Vera, Elio Tortolero, and Andrés Padilla. The new CITGO Holding board comprised directors Palacios, Rincón, Ángel Olmeta, Javier Troconis, and Rick Esser. And the new CITGO Petroleum board comprised directors Palacios, Rincón, Luis Urdaneta, Olmeta, Padilla, and Esser.

         F. This Litigation

         On June 25, 2019, the plaintiffs initiated this action pursuant to Section 225 of the DGCL claiming that they comprise the boards of each of the CITGO Entities. By statute, Section 225 actions are summary proceedings, so the plaintiffs moved for expedited proceedings contemporaneous with filing their complaint, and the defendants agreed to expedition. On July 9, 2019, the defendants answered and counterclaimed. That same day, the plaintiffs answered the counterclaim. Both sides moved for judgment on the pleadings, submitting cross-opening briefs on July 11, 2019, and cross-answering briefs on July 16, 2019.[33] The Court heard oral argument on July 18, 2019.[34]

         Before oral argument, but after the parties' second round of briefing, the Court granted Venezuela leave to participate as amicus curiae in support of the defendants' motion.[35] Filing an amicus brief after the submission of the parties' principle briefing is typical, [36] and permitting Venezuela to participate as an amicus curiae is consistent with well-settled law.[37] The plaintiffs did not contend otherwise. During oral argument, however, counsel for the plaintiffs expressed concern that they were unable to respond to the arguments made by the amicus curiae.[38] To address this concern, and to allow the parties to address legal authorities identified by the Court during argument, [39] the Court ordered another round of briefing post-argument, which was submitted on July 23, 2019.[40]


         The parties cross-moved for judgment on the pleadings pursuant to Court of Chancery Rule 12(c). The Court will grant a Rule 12(c) motion "only when no material issue of fact exists and the movant is entitled to judgment as a matter of law."[41] In deciding cross motions for judgment on the pleadings, the Court will take the well-pleaded facts contained in the operative pleadings and "'view the facts pleaded and inferences to be drawn from such facts . . . in a light most favorable to the non-moving party.'"[42] The pleadings to which this Court may look are not limited to complaints or counterclaims, but also include answers and affirmative defenses.[43] On a Rule 12(c) motion, the Court may consider documents integral to the pleadings, [44] including documents incorporated by reference and exhibits attached to the pleadings, [45] and facts subject to judicial notice.[46]


         The parties agree that the President of Venezuela has the power to select the members of the board of PDVSA, which in turn has the power to determine the boards of the CITGO Entities. They disagree on three points. First, they dispute who wields sovereign authority of the President of Venezuela, an issue that turns on the political question doctrine. Second, they dispute whether Venezuela's sovereign authority properly reconstituted PDVSA's board, an issue that turns on the act of state doctrine. Third, they dispute the ultimate question of who constitutes the CITGO Entities' respective boards, which turns on facts not before the Court at the pleading stage.

         A. Under the Political Question Doctrine, the U.S. President's Recognition of the Guaidó Government Binds This Court.

         Under the political question doctrine, a decision to recognize a foreign sovereign presents a non-justiciable political question, because the recognition of a foreign sovereign is exclusively a function of the Executive Branch.[47] Applying this doctrine, the defendants contend that the Executive Branch's recognition of the Guaidó government is binding on this Court. And according to the defendants, invalidating Guaidó's actions to replace the PDVSA board would effectively undermine the Executive Branch's recognition of the Guaidó government. The defendants say that the plaintiffs' request for relief must therefore be denied. The plaintiffs respond that although the U.S. President issued a statement of recognition, that statement is limited on its face and does support the defendants' requested relief.[48]

         As Chief Executive, the President of the United States is the "sole organ of the federal government in the field of international relations[, ]"[49] and thus holds the exclusive power of recognition of a foreign government.[50] "Recognition is a 'formal acknowledgment' . . . 'that a particular regime is the effective government of a state.'"[51] "The very purpose of the recognition by our government is that our nationals may be conclusively advised with what government they may safely carry on business transactions and who its representatives are."[52] Recognition can be accomplished expressly through a statement of the Executive Branch or implicitly by receiving diplomatic representatives.[53]

         Given the exclusive nature of the Executive Branch's recognition authority, the Supreme Court of the United States has held that any decision by the Executive to recognize (or not recognize) a foreign government is a non-justiciable political question that federal and state courts must accept.[54] The seminal Supreme Court decision on recognition of a foreign government, Oetjen v. Central Leather Co., addressed the seizure of animal hides in Mexico by General Francisco Villa, a representative of the revolutionary government of Venustiano Carranza.[55] General Villa seized the hides to satisfy an assessment imposed by the revolutionary regime, and the hides were ultimately sold to the defendant.[56] The plaintiff brought suit claiming that the defendant lacked good title to the hides because General Villa had obtained them unlawfully.[57] During the pendency of the action in the lower courts, the United States recognized the Carranza government as both the de facto and de jure government of Mexico, [58] which proved dispositive on appeal. The Supreme Court held:

Who is the sovereign, de jure or de facto, of a territory is not a judicial, but is a political question, the determination of which by the legislative and executive departments of any government conclusively binds the judges, as well as all other officers, citizens and subjects of that government. This principle has always been upheld by this court, and has been affirmed under a great variety of circumstances.[59]

         Applying that principle, the Court held that the Carranza government "must be accepted as the legitimate government of Mexico" and gave that conclusion retroactive effect.[60] The Court further invoked the act of state doctrine, a companion to the political question doctrine discussed more fully in the next section of this decision, to presume valid General Villa's actions in seizing the hides on behalf of the recognized Carranza government.[61]

         Oetjen is well-settled law. Multiple decisions of the Supreme Court and lower courts have applied its holding.[62] Under Oetjen and its progeny, the applicable rule is clear: the Executive Branch's decision to recognize a foreign state "conclusively binds" all domestic courts, such that they must accept that decision.[63] This decision calls for a straightforward application of that rule.

         On January 23, 2019, the Executive Branch issued a statement "officially recognizing the President of the Venezuelan National Assembly, Juan Guaido, as the Interim President of Venezuela."[64] That statement also described the National Assembly as "the only legitimate branch of government duly elected by the Venezuelan people[.]"[65] The word "only" means "alone in a category" or to the exclusion of others.[66] Thus, no other elected branch of government in Venezuela- not Maduro nor the Constituent Assembly-is legitimate in the eyes of the Executive Branch. The determinations of the Executive Branch are unambiguous: Guaidó is recognized, the National Assembly is legitimate, and neither Maduro nor the Constituent Assembly are legitimate parts of the Venezuelan government.

         As their first line of defense, the plaintiffs quibble with the language of the January 23 statement. The plaintiffs describe the statement as having limited effect-neither elevating the Guaidó government to a superior position nor demoting the Maduro government to a subordinate role.[67] They note that the statement recognizes Guaidó as the "Interim President," not the President. To the plaintiffs, the word "interim" precludes Guaidó from "invok[ing] the powers that come with the title" of President.[68] They alternatively argue that the term "interim" renders the statement ambiguous, requiring further development of Venezuelan law on the meaning of "interim, "[69] and a review of the administrative construction of the Executive Branch's policy.[70] The plaintiffs next note that the January 23 statement declined to expressly "derecognize" the Maduro regime, which they argue is meaningful under foreign relations law.[71] To the plaintiffs, the Maduro regime is merely "non-recognized" in the eyes of the United States.[72]

         None of these attempted distinctions have consequences for the issues before the Court. "Recognition" is a term of art used by the Executive Branch to identify a regime that "is the effective government of a state."[73] Regardless of what title Guaidó holds, Guaidó and his regime are the effective government of Venezuela. As important, no other regime in Venezuela is currently "recognized," even using the plaintiffs' preferred nomenclature. At present, therefore, it cannot be disputed that Guaidó is the voice of Venezuela's sole effective government as recognized by the U.S. President. This Court is bound by that determination.

         B. Under the Act of State Doctrine, the Guaidó Government's Reconstitution of the PDVSA Board Is Valid.

         Recognition of Guaidó's government has significant consequences in this litigation because foreign sovereigns are entitled to the benefits of the act of state doctrine.[74] That doctrine confers presumptive validity on official acts of a foreign sovereign performed within its own territory. In this case, it means that Guaidó's creation of the Managing Board of PDVSA is valid.

         A product of federal common law, [75] the jurisprudential bases for the doctrine have evolved. The classic statement of the act of state doctrine is found in Underhill, which arose from a prior period of unrest in Venzuela.[76] In that case, the plaintiff was a U.S. citizen working in the Venezuelan city of Bolivar. When revolution erupted, he was physically detained in Bolivar by revolutionary forces. Upon returning to the United States, he brought claims sounding in tort against his captors. The revolutionary forces were ultimately successful and subsequently recognized by the United States. The Supreme Court of the United States held that "[e]very sovereign state is bound to respect the independence of every other sovereign state, and the courts of one country will not sit in judgment on the acts of the government of another, done within its own territory."[77] Applying this rule, the Court found in favor of the defendant, holding that the decision to detain the plaintiff was a presumptively valid act of a recognized sovereign.

         The Supreme Court of the United States reexamined and reformulated the act of state doctrine in Sabbatino.[78] Sabbatino involved a dispute over the proceeds from the sale of sugar cargo, which had belonged to an American-owned company, but which the Cuban government confiscated while the cargo was in Cuban waters.[79]The defendants argued that the act of confiscation violated international law and was thus not entitled to deference under the act of state doctrine. To address this argument, the Court revisited the jurisprudential bases of the doctrine.

         Underhill and intervening cases had articulated the act of state doctrine as an expression of comity and international law.[80] The Court in Sabbatino rejected that theory, [81] recasting the doctrine as arising from "constitutional underpinnings," or "the basic relationships between branches of government in a system of separation of powers. It concerns the competency of dissimilar institutions to make and implement particular kinds of decisions in the area of international relations."[82] As part of the family of theories derived from separation of powers principles, the act of state doctrine overrides otherwise binding law, including state and international law. The Sabbatino decision explained that the Judicial Branch

will not examine the validity of a taking of property within its own territory by a foreign sovereign government, extant and recognized by this country at the time of suit, in the absence of a treaty or other unambiguous agreement regarding controlling legal principles, even if the complaint alleges that the taking violates customary international law.[83]

         The Supreme Court of the United States had occasion to reexamine the act of state doctrine in W.S. Kirkpatrick, further clarifying its operation in two significant ways. The Court first distinguished the act of state doctrine from the political question and sovereign immunity doctrines, holding that "[t]he act of state doctrine is not some vague doctrine of abstention but a 'principle of decision binding on federal and state courts alike.'"[84] The Court next clarified the scope of official acts protected by the doctrine. Before W.S. Kirkpatrick, U.S. Supreme Court cases applying the act of state doctrine involved acts of expropriation by foreign governments, leaving open the question of whether the Court would apply the doctrine to other actions. In W.S. Kirkpatrick, the Supreme Court described the doctrine as applying to any "official act of a foreign sovereign performed within its own territory."[85]

         In sum, in its modern form, the act of state doctrine derives from the principle of separation of powers. It applies to a multitude of foreign acts performed by recognized sovereigns within territorial limits. Once applied, the doctrine requires the Court to assume the validity of the official act in question.

         In this case, the act of state doctrine resolves the question of who constitutes the PDVSA board. The Guaidó government's reconstitution of the PDVSA board was the official act of a recognized sovereign taken wholly within its own territory. Under the act of state doctrine, this Court must accept that action as valid without further inquiry.

         The plaintiffs make three arguments in response, none of which are convincing. The plaintiffs first dispute the applicability of the act of state doctrine, contending generally that Guaidó's actions in appointing the PDVSA board should be reviewed on their merits under Venezuela law in accordance with the internal affairs doctrine. The plaintiffs next contend that a party seeking the privileges of a "state" for invoking the act of state doctrine must have control over a recognized territory.[86] According to the plaintiffs, the Guaidó government in fact controls no territory or people, and thus should not be granted the presumptions of sovereignty.[87] The plaintiffs further dispute the territorial effect of the action in question, contending that it operated outside of Venezuela and that the Court may not apply the doctrine to actions by a state "designed largely to have an effect outside the territory of a foreign state."[88]

         1. The act of state doctrine overrides the internal ...

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