In a long-standing dispute between Venezuelan state-owned Oil Company Petroleos de Venezuela SA (“Petroleos”) and ConocoPhillips, a New York district court judge upheld ConocoPhillips’ acquisition of a 50% stake in a Texas refinery. The two parties were former joint partners in an oil refining operation but disagreements between them led to the triggering of a contract provision that automatically dissolved the joint venture. Following the dissolution, the parties proceeded to arbitration.
The arbitration action concerned a range of disputes, one of which involved the parties’ Transfer Agreement, pursuant to which mandatory transfers of joint venture interests acted as a remedy for ConocoPhillips in the event of Petroleos’s breach. This was referred to as the “Call Option,” which Petroleos contended at arbitration acted as a penalty because it resulted in a purchase price of zero dollars for its share of the joint venture. The arbitration panel concluded that the Call Option was valid and enforceable under New York law and did not constitute an impermissible contractual penalty. Petroleos petitioned to vacate the portion of the award regarding the Call Option, but the district court denied the petition, and granted ConocoPhillips petition to confirm.
PDV Sweeny, Inc. v. ConocoPhillips Co., No. 14-cv-5183 (U.S.D.C. S.D.N.Y. Sept. 1, 2015).