Venezuela, a Constitutional War Zone

Venezuela doesn’t have any serious legal problems, other than the fact that it doesn’t have an executive branch, doesn’t have a legislative branch, and doesn’t have a judicial branch.

It is becoming increasingly difficult to keep up with Venezuela’s constitutional crisis, and where each power currently stands. On Wednesday, the Constitutional Chamber of the Supreme Tribunal handed down Decisions No. 155 and 156, which establish that:

  • National Assembly members committed treason (yes, treason) by backing a motion to call for the application of the Inter-American Democratic Charter;
  • Representatives that signed this agreement are not protected by parliamentary immunity. Immunity, the Tribunal ruled, applies only to acts undertaken as part of their constitutional duties. Given that —according to the Supreme Tribunal— this resolution is treasonous, voting for it is not a protected act. Indeed, they should be tried for it.
  • The Court delegates unlimited power to the President, in the context of a state of emergency. This unlimited grant of power allows the President to reform any law he deems necessary to sustain constitutional order;
  • The Judicial branch will now be empowered to approve mixed enterprise agreements (a type of Joint Venture often used in Faja del Orinoco oil developments), stripping the Legislative branch of its constitutionally granted power (under art. 187);
  • The Legislative branch has ceased the exercise of its functions because they are in contempt of court (desacato) and while they remain in contempt, the Judicial branch will assume the duties given by the Constitution to the Legislative branch. The Judicial Branch may dictate laws and approve treaties and agreements, powers until now reserved to the National Assembly; and
  • The President may modify the Organic Hydrocarbons Law under the powers granted to him by the State of Emergency.

This is a lot to process. Constitutionally speaking, Venezuela has become a constitutional arroz con mango. Yesterday’s decisions effectively rewrite whole swathes of the constitutional order, making it uncertain where each branch starts and ends.

It’s useful to try to imagine how this looks to an outside stakeholder. Say I represent a foreign oil company interested in investing in Venezuela through a mixed company. It used to be that any mixed company contract needed to be approved by the National Assembly and later signed off by the President (art. 33 of the Organic Hydrocarbons Law).

Last night, that all changed. The Tribunal now says that the President can now modify the Hydrocarbons Law and the Tribunal itself can approve the contract. But I can see that’s not what the constitution says, and not what the law says. So, is my investment safe? Can I be sure a future government will honor it?

I have just three minor problems in establishing the enforceability of any contract I reach. Let’s look at them one by one:

The Executive Branch doesn’t exist.

On January 9th 2017, the National Assembly declared that the President had abandoned his post, meaning that constitutionally speaking, he is no longer the President. According to the National Assembly, he was no longer fulfilling his duties as President and was due to undergo a trial to establish his “political responsibility.”

We emphasize in the word “political” because this action should not be mistaken with a Brazilian style impeachment trial, which was a criminal prosecution. Since the 1999 Constitution, unlike its 1961 predecessor, has no provision for impeachment, the president couldn’t be found guilty. He could, the Assembly argued, be said to have “abandoned” his post. This would leave the presidency vacant.

So since a legitimate, elected branch of government, acting within its legal boundaries, declared the presidency vacant, constitutionally speaking Venezuela should have held elections 30 days after this announcement.

Think how this looks from a foreign investor’s point of view. Any agreement signed by Maduro after January 9, may be unenforceable against a new government. Although this does not seem to be an issue at the moment, there is a real possibility that this argument will eventually be put before a bench.

Any agreement signed by Maduro since January 9th carries significant legal risk, and as the government gets more and more creative in attributing more and more powers to itself, the risk only grows.

The Legislative Branch doesn’t exist

Last year, the Supreme Tribunal declared that the National Assembly is in contempt of court (desacato.) It declared that the Assembly has, in fact, been in contempt of court ever since the day they assumed office because they incorporated the Representatives from Amazonas (which according to the Court, were elected through fraud), leaving them no longer empowered to legislate. Even though these three representatives voluntarily decided to resign to avoid continued conflicts with the Court, the Court has sustained that the desacato remains until they are formally unincorporated by an offcial agreement approved by the National Assembly, which until this date hasn’t been done.

The problem with the desacato argument is that according to the Supreme Court, every decision made by the National Assembly is unenforceable until they resolve the contempt measure.

Any attempt at serious legal analysis is absolutely futile here.

Of course, everyone in Venezuela grasps that the desacato argument is a political gambit masquerading as a legal argument: there is no plausible constitutional argument to legitimately support the Tribunal’s interpretation. This raises the dilemma of whether an unconstitutional decision is enforceable.

It was the Tribunal’s determination to overplay the contempt card that created our current constitutional arroz con mango.

For the purposes of our hypothetical foreign oil company, it is unclear who we should resort to in order to get approval for our mixed company contract. This dichotomy raises the issue of enforceability in case a new government takes power. The argument could be made that if the Legislative branch approves the mixed company contract, then the agreement would be unenforceable given that the Judicial branch has decided to assume this power. However, as mentioned before, that decision is also unconstitutional, so it is not likely hold in front of any arbitral tribunal or foreign court either.

The Judicial Branch Doesn’t Exist.

On July 14th 2016 the National Assembly decided, acting under its legitimate functions granted by the Constitution, to declare void the appointment of thirteen Supreme Court Justices and twenty-one Substitute Magistrates. These appointments by the lame-duck chavista Assembly in the dying days of 2015 were illegal: they didn’t meet the correct timelines or procedures, and many of the magistrates appointed didn’t meet the constitution’s minimal requirements to sit on the bench.

The Supreme Court’s acts acts find their basis not on legal precedent or law but on a political agenda.

In fact, a legitimately elected body of Representatives, acting under the powers granted to them by the Constitution, decided to void the appointment of several Justices, which should mean that any decision taken by those Justices is void. On the other hand, the Constitutional Chamber of the Supreme Court has basically emasculated the National Assembly, leaving it constitutionally powerless.

So we’re left with a game of Constitutional “what came first, the chicken or the egg?” The Supreme Court Justices declared that the National Assembly was in desacato before the National Assembly declared the appointment of the Justices void, hence all of its acts were void starting on January 11, 2016. However, the decision made by the Constitutional Chamber had no Constitutional basis whatsoever, nor is the Constitutional Chamber empowered to decide in that manner.

TSJ gave a president the power to change the law, even though the constitution doesn’t give them the power to give him that power.

In fact, we’re so far removed from normal constitutional practice here the dilemma can’t be resolved on a purely legal basis. On paper, we can say that there is a legitimate National Assembly and an illegitimate Supreme Court at the moment. However, in practice we see it’s the other way around. Mamarracho though the Tribunal may be, it has power and the Assembly doesn’t.

Until the legitimately authorized branch of government —the National Assembly— appoints new Justices, any decision made by the Justices whose appointment was annulled by the National Assembly, has no legitimate basis and is void from the start.

In reality, the Supreme Court has been used by the government to legitimize its agenda. That is why it is complicated to definitively argue where the Supreme Court stands, legally: their acts find their basis not on legal precedent or law but on a political agenda.

Any attempt at serious legal analysis is absolutely futile here.

For the purposes of our foreign oil company, last night a Judicial branch that doesn’t exist in quite the normal sense just awarded itself the duty of approving contracts in explicit contravention of what the law says. It also gave a phantasmagoric president the power to change that law, even though the constitution doesn’t give them the power to give him that power.

According to yesterday’s rulings, our hypothetical oil investor would have to resort to that tribunal to get a new contract approved. But let’s be serious: any lawyer who feels comfortable advising a client to go down that path is certifiably crazy.

The bottom line is that, if I were representing a big oil company interested in investing in Venezuela, I wouldn’t think any agreement I could strike in this context would be secure into the future.

In light of the constitutional war Venezuela has undergone through the past year, we’re deep into a kind of constitutional twilight zone where every new contract is suspect. There is no way out of this morass without a far reaching political settlement between the parts. Today, nothing looks less likely.