PDVSA: Exxon-Requested Asset Freeze Unjustified, Should be Lifted

State oil company Petroleos de Venezuela SA, or PDVSA, argued to a U.K. court Thursday that an injunction obtained by Exxon Mobil Corp. to freeze up to $12 billion of the Venezuelan company's assets was unjustified and should be repealed.

Lawyers representing PDVSA told the judge that the London court's decision last month to order a freezing injunction had been beyond its jurisdiction and unwarranted given the nature of the dispute between PDVSA and ExxonMobil, which is seeking compensation for an oil project nationalized last year by the Venezuelan government.

PDVSA's lead lawyer, Gordon Pollock, said the case had "no relevant connection to the English court" because neither PDVSA nor ExxonMobil are English companies with considerable assets here. The court's move to get involved with the case was "inappropriate" and was an example of "exorbitant jurisdiction," he said.

Pollock later told reporters that PDVSA had no assets in the U.K.

ExxonMobil decided to take PDVSA to international arbitration last year after Venezuelan President Hugo Chavez nationalized the Cerro Negro heavy oil joint venture, which was operated by ExxonMobil.

The value of the Irving, Texas-based oil company's 41.6% share of the project has been estimated at between $2 billion and $3 billion; PDVSA has been unwilling to offer more than $750 million.

ExxonMobil argues the freeze on PDVSA's assets is necessary to ensure it will get paid for the loss of the project and future revenues if an international court rules in its favor. A ruling isn't expected for at least a few years.

Pollock argued Thursday that such injunctions are ordinarily issued in cases of fraud and that PDVSA was being unfairly targeted.

"It is absurd for the claimants to say...that we are the kind of people who are dissipating or hiding assets," in order to avoid paying possible compensation, Pollock told the court.

Pollock also argued that PDVSA shouldn't be held directly responsible for moves by the Venezuelan government, saying the current legal dispute was "not the result of a breach" in contract by PDVSA, but had arisen as a consequence of "actions taken by a third party, the government of Venezuela."

ExxonMobil was present at the hearing Thursday but didn't comment.

The hearing is set to continue through next week with a preliminary decision expected from the judge Tuesday.

Copyright (c) 2008 Dow Jones & Company, Inc.


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