An attachment that involves a "sovereign" always present challenges, some bigger than others.

KRY in the U.S. is trying to crack the sovereign protections imposed by the FSIA, which only allow the attachment of a) commercial assets only, b) if the assets are owned by an instrumentality, proof of extensive control through veil piercing and/or c) would work fraud or injustice if the separate status protection is allowed to stand.  Bancec, the seminal FSIA case, was decided based on c). KRY's case is being pursued based on a) and b).

In the EU, some jurisdictions are more amenable to sovereign assets attachments depending on the type of assets and the presumed source and use of the funds. Proving the commercial nature of the assets is also the cornerstone of a successful writ of attachment. The presumption ab initio is that the assets involved are for public use and the plaintiffs' challenge is to prove otherwise. So, an attachment case against assets in the U.K., France, the U.S. and China declared to be owned by a Central Bank (such as the $1.5 billion in gold bullion at the Bank of England) faces an uphill battle because a prior U.K. decision established that a central bank is a priori an independent institution and cannot be considered an instrumentality without clear and convincing proof to the contrary (versus a preponderance of the evidence). Canada, Germany and Switzerland have a less restrictive immunity protection for assets owned by Central Banks.

The task becomes considerably easier when the source of the assets is from a commercial activity (e.g. PDVSA) or the use is to pay for government purchases considered to be of a commercial natured (e.g. military purchases). Funds destined to pay for food and medicines and the like are deemed to be for a public purpose and, therefore, not attachable.

The $1.4 billion frozen at Euroclear were destined to pay principal and interest on debt issued by both Venezuela (sovereign debt) and PDVSA (commercial debt). Maduro has argued that $450 million of the $1.2 billion was for food and meds purchases. However, Euroclear is a “settlement and related securities services for cross-border transactions involving domestic and international bonds, equities, derivatives and investment funds”. Therefore, Euroclear is an investment, equity and bond settlement system, not a trade settlement system.

The $1.2 billion frozen at Novo Bank (NB) are PDVSA funds (e.g. commercial assets). A significant portion of the $3.2 billion of frozen funds in the 20 U.S. bank accounts are PDVSA funds deposited at NB for investment purposes. Novo Banco is a Portuguese bank that is 75 percent-owned by the U.S. private equity firm Lone Star Funds, is subject to the OFAC sanctions and a sueable third-party in the award collections effort by KRY. Portugal’s arbitration law is based on the UNCITRAL model law and the country is a signatory of the New York Convention and recognizes and enforces foreign arbitral Awards.

A portion of the $3.2 billion amount is from seizures related to Venezuelan government and PDVSA corruption. Funds related to corruption are considered the be the property of the sovereign or the instrumentality (e.g. PDVSA) held in trust by the wrongdoers or the banks that hold the funds. Thus, any third-party holding these funds are subject to suit and writ of attachment, if source or use of the funds is commercial in nature (as defined above).

Obtaining an attachment order (as the means to pressure the debtor to pay up) is likewise easier in some jurisdiction versus others. In Belgium (where the $1.4 billion frozen at Euroclear are), for example, the YUKOS shareholders were able to freeze all the assets in the country as soon as the 2007 $50 billion award against Russia for the expropriation of the company was issued. Executing the attachment has proven more difficult because of the suits and appeals than ensued. Just recently, the Dutch Supreme Court ruled in favor of the YUKOS shareholders, but Russia announced that it would appeal that decision to the International Court of Justice. Nonetheless, the frozen funds will remain frozen until a final, unapellable decision is issued.