Chickpen, S.A. v. Bolivarian Republic of Venezuela

Background

Chickpen, S.A. brought a breach-of-contract action against the Bolivarian Republic of Venezuela to recover amounts allegedly owed under two sets of dollar-denominated debt securities: global bonds issued in 1998 and global notes issued in 2001. The agreements stated that Venezuela waived sovereign immunity for relevant claims, consented to suit in the Southern District of New York, and agreed that New York law would govern.

The opinion states that Venezuela failed to make required principal and interest payments on both the Bonds and the Notes. Chickpen sought the unpaid principal, unpaid interest, additional interest through judgment, statutory prejudgment interest, post-judgment interest, attorneys’ fees, and costs. Chickpen filed the action on January 22, 2021. Venezuela was served under 28 U.S.C. § 1608(a)(4), did not appear, and did not answer. The Clerk of Court entered a certificate of default on July 30, 2021.

Jurisdiction and service

The Foreign Sovereign Immunities Act generally protects foreign states from suit but allows a foreign state to waive immunity expressly or implicitly. The court held that Venezuela expressly waived immunity in the fiscal agency agreements, so the court had jurisdiction over Chickpen’s claims.

The court also held that service was proper under § 1608(a)(4). The opinion explains that the other statutory service methods were unavailable because Venezuela’s consular offices had been closed without a replacement agent, the political situation made service under international conventions impossible, and Venezuela had objected to service by mail. The Clerk therefore sent the papers to the U.S. Department of State, which delivered them to the Venezuelan embassy in Washington, D.C.

Liability

Because Venezuela failed to respond, it was in default. For a default judgment against a foreign state, however, the plaintiff must establish its claim with evidence satisfactory to the court; the court cannot simply accept unsupported allegations in the complaint.

The court found that Chickpen, as the beneficial owner authorized to sue by Cede & Co., had contractual standing. Based on Chickpen’s affidavits and supporting documents, the court found that Venezuela failed to make payments required by the Bonds and Notes. That failure constituted a breach of contract, and Chickpen was entitled to a default judgment on its breach-of-contract claims.

Damages and disposition

For the Bonds, Chickpen sought $1,285,000 in unpaid principal and $708,106.43 in unpaid interest through August 31, 2021, along with additional amounts that could accrue before judgment. For the Notes, Chickpen sought $11,599,000 in unpaid principal and $3,450,702.50 in unpaid interest through August 31, 2021, along with additional amounts that could accrue before judgment. The court also stated that Chickpen could recover qualifying interest accruing between the complaint and judgment, statutory prejudgment interest on missed interest payments, post-judgment interest, and reasonable attorneys’ fees and costs where authorized by the Bonds.

The court found that some amounts in Chickpen’s proposed default judgment were unexplained. It ordered Chickpen, by June 9, 2022, either to explain the amounts in specified paragraphs or to submit a new proposed default judgment reflecting amounts due when submitted. Chickpen could also file billing records and other documentation supporting fees and costs. The court’s order states that Chickpen’s motion for default judgment was GRANTED.