Venezuela's political turmoil impacts international investors

Sylvia Tonova and Xiao Hui Eng of Pinsent Masons said the evolving situation, marked by US intervention and increased scrutiny of economic ties, means that foreign investors may have grounds to pursue investment-related claims against Venezuela should new policies result in expropriation of assets or actions that are discriminatory, unfair or inequitable. These developments are especially pertinent in light of Venezuela’s substantial outstanding debts, ongoing joint ventures in the energy sector, and the changing landscape of international arbitration and investment treaties, they said.

In January 2026, Nicolás Maduro, then Venezuela president, was arrested by US military in an operation conducted in Venezuela. Maduro now faces drugs- and weapons-related charges before a US court, where he has protested his innocence. His former deputy, Delcy Eloína Rodríguez Gómez, is now acting president of Venezuela. US president Donald Trump has indicated that the US wants to play a leading role in how the country is run going forward, particularly the oil industry.

In recent weeks, several major publishers have examined the economic links Venezuela has with other countries, including China and the US.

Reports by the Guardian, Financial Times and Forbes all cite AidData research which highlights billions of dollars of loans China has extended to Venezuela over the past 20 years. The South China Morning Post said some arrangements in place enable the shipping of oil produced in Venezuela to China for the purposes of servicing Venezuela’s sovereign debt. The Guardian reported that Venezuela’s debts to China stood at $10 billion in 2024.

In Venezuela, foreign owners cannot directly own oil reserves. However, joint ventures established between local companies in Venezuela and major Chinese state-owned companies provide for oil production and distribution of supply.

Last August, Reuters reported on a deal struck between a Chinese company and the Venezuelan government relating to the development of two Venezuelan oilfields. According to that report, the deal provides for the Chinese company to operate the oilfields in return for Venezuela taking a share of what is produced. Two other Chinese companies were awarded Venezuelan oil contracts in 2024 in relation to the development of other oilfields in the country, according to Energy News.

US investors hold a substantial number of unpaid arbitral awards against Venezuela, which stem from a wave of nationalisation under the country’s former president Hugo Chávez in the mid‑2000s and subsequent regulatory interference during Maduro’s tenure.

A number of US companies pursued arbitration after being expropriated or forced into disadvantageous joint ventures with PDVSA, Venezuela’s state-run oil company. Many of these claims resulted in large ICSID and UNCITRAL awards, some exceeding several billion dollars.

ConocoPhillips, for instance, secured one of the largest awards in ICSID history – estimated at more than $8 billion – while ExxonMobil secured hundreds of millions of dollars in compensation in arbitration proceedings. Yet Venezuela has historically refused to pay most of these awards, leaving US investors reliant on enforcement actions in courts around the world.

The landscape, however, is shifting dramatically in the aftermath of Maduro’s removal. US investors now find themselves in a uniquely favourable position, not only because they are among the largest award-holders globally, but also because the US is expected to play a decisive role in shaping Venezuela’s political and economic reconstruction.

As the Financial Times has reported, Maduro’s removal from power “opens the door to a huge and complex debt workout,” with international settlement negotiations likely to encompass both sovereign bondholders and the backlog of arbitral award creditors. In parallel, Bloomberg and CNBC reporting indicates that the US government is actively encouraging US companies – especially in the energy and infrastructure sectors – to re-enter Venezuela, signalling a markedly different stance than toward Chinese or even European investors.

European investment in Venezuela has sharply contracted over the past decade. According to the European Commission, EU foreign direct investment (FDI) stocks in Venezuela have fallen dramatically, declining from €21.4 billion in 2013 to just €8.2 billion by 2023 as a result of chronic economic instability, foreign‑exchange controls, expropriations, and sweeping state intervention under the Chávez and Maduro governments.

Although the EU is Venezuela’s third‑largest trading partner, after the US and China, European companies have been either divesting, writing down assets, or halting operations due to the inability to repatriate income, deteriorating legal protections, and the collapse of domestic demand.

Despite this retreat, EU investors are among the most active claimants in investment treaty arbitrations against Venezuela, reflecting the extent to which European companies were affected by nationalisations and contract interference. Under bilateral investment treaties (BITs) with the Netherlands, Spain, Germany, France, Belgium/Luxembourg and Sweden, EU investors have brought dozens of cases at ICSID and under UNCITRAL rules since the early 2000s.

However, very few of the awards issued in favour of EU investors have ever been paid.

Venezuela has accumulated tens of billions of dollars in unpaid ICSID and UNCITRAL awards, making it one of the world’s most persistent non‑compliant states. This has forced award creditors to pursue attachment actions against PDVSA assets, oil cargoes, and overseas bank accounts. This dynamic has left EU investors in a position where treaty rights exist in theory, but practical recovery is extraordinarily difficult. The change of government may give some avenues for investors to obtain recovery on the awards won, according to Sylvia Tonova and Xiao Hui Eng of Pinsent Masons.

Sylvia Tonova said: “US investors are in a particularly distinctive position. They hold some of the largest unpaid arbitration awards against Venezuela, yet they are also the investors most actively encouraged to re‑engage with the country’s energy and infrastructure sectors.”

“European investment in Venezuela has all but evaporated, yet European companies remain among the country’s most active treaty claimants. With dozens of BIT cases still pending and only a handful of awards ever paid, EU investors now face a moment of renewed uncertainty – but also renewed leverage – as the political landscape shifts,” she added.

Xiao Hui Eng said: “In the context of Venezuela’s large outstanding debts to China and the signing of a bilateral investment treaty between China and Venezuela in May 2024, which entered into force on 14 January 2025, the recent change in circumstances point to possible investment arbitration disputes arising.”

Tonova added: “While Venezuela has denounced the ICSID Convention, which governs the world’s leading institution for investor-state dispute settlement, arbitration is possible under the UNCITRAL rules under the China-Venezuela BIT. The BIT has a relatively broad definition of investment, meaning the investment does not need to contribute to the economic development of Venezuela to be in-scope of the treaty. The definition of investment, however, excludes certain categories of investments, such as judgments or awards, public debt and portfolio investments. Further, the BIT includes the fair and equal treatment and full protection and security standards, but it limits them to the customary international law minimum standard of treatment.”

“Investors should also be aware of certain other limitations. In particular, the treaty excludes shell companies controlled by individuals or enterprises from third countries from its scope of protections and investors may not benefit from the treaty protection if they are controlled by individuals or enterprises from the host state.”