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Venezuela Rebuffed by U.S. High Court on Bandagro Bond Suit

The U.S. Supreme Court refused to block an Ohio investor group from suing Venezuela over potentially $900 million in bank notes that the South American country says are forgeries.

The justices today turned away an appeal from Hugo Chavez’s Venezuelan government, which sought to invoke a U.S. law that immunizes foreign sovereigns from some lawsuits in American courts. The Supreme Court acted after the Obama administration urged rejection of the appeal.

The suit by DRFP LLC, which does business under the name Skye Ventures, may be the first of several claims over the disputed bearer bonds, according to Venezuela’s appeal.

The notes were allegedly issued in 1981 by the Banco de Desarrollo Agropecuario, then a state-owned Venezuelan bank also known as Bandagro.

The two Skye Ventures notes have a face value of $50 million apiece. The investor group said in 2010 that, with interest, the bonds were worth as much as $900 million.

Skye Ventures says it acquired its two notes only after the Venezuelan attorney general issued a 2003 opinion declaring them valid. The investor group then demanded payment in Columbus. When Venezuela refused, Skye sued.

A federal appeals court in Cincinnati ruled in 2010 that Venezuela isn’t shielded by the U.S. Foreign Sovereign Immunities Act. The court left open the possibility that Venezuela could win dismissal of the case using a different line of argument.

The case is Republica Bolivariana de Venezuela v. DRFP, 10-1144.

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