On 7 November 2016, the US Court of Appeals for the Second Circuit in New York affirmed a lower district court’s decision to deny the petition of Venezuela's state-owned oil company, PDVSA, to vacate an award arising from an International Chamber of Commerce (ICC) arbitration.

In the arbitral proceedings, PDVSA challenged a provision in the parties’ agreements that gave ConocoPhillips a call option to acquire PDVSA's stake in the parties’ joint venture, in the event of PDVSA's breach. The tribunal rejected PDVSA’s argument that exercise of the call option resulted in an unenforceable penalty under New York law. PDVSA sought to vacate the award on public policy grounds, but the Court of Appeals held that PDVSA was required to show that enforcement of the award would violate “basic notions of morality and justice” and PDVSA failed to meet that test. The decision demonstrates that while challenges on public policy grounds are available, they are rarely successful.

Case: PDV Sweeny, Inc. v. ConocoPhillips Co., (2d Cir. Nov. 7, 2016) (United States Court of Appeals for the Second Circuit).