Chinese investors should proactively consider how their commercial relationships with Venezuelan parties will be affected by the recent turmoil.

The United States’ military operation in the capital of Venezuela on January 2, 2026, resulted in the capture and removal from power of President Nicolás Maduro. In a statement the following day, President Donald Trump said the United States would temporarily run the country until such time that a “safe, proper and judicious transition” can occur. He further stated that American oil companies would claim and extract Venezuelan oil supplies. Venezuelan Vice President Delcy Rodríguez was sworn in as acting president on January 5. After initial statements opposed to the intervention, Rodríguez has since called for a “balanced and respectful” relationship with the U.S. government.

Chinese investors have invested a significant amount in Venezuela in recent years. According to Reuters, “Beijing poured money into Venezuela's oil refineries and infrastructure, providing an economic lifeline as the U.S. and its allies tightened sanctions from 2017. China purchased around $1.6 billion worth of goods in 2024, according to Chinese customs data, the latest full-year figures available. Oil made up about half the total.” Bloomberg reports that “Venezuelan shipments made up only 4% of China’s oil imports last year … the South American nation provides a unique type of sludgy, high-sulphur crude that’s used to produce bitumen, which is vital for construction and road building.”

Given the sizeable Chinese investment in Venezuela and the position of the Trump administration toward trade with China, it is prudent for Chinese investors to consider timely the impact of the latest political turmoil in Venezuela on their investment. We set out some facts and background below to guide your considerations.

Contractual Risk Management Under National Law

Chinese investors should proactively consider how their commercial relationships with Venezuelan parties will be affected by the recent turmoil.

One situation that will likely arise is that the Venezuelan parties may rely on the recent turmoil to declare force majeure events that prevent, delay or disrupt performance of contractual obligations. To protect their positions, Chinese parties should ensure that any declaration of force majeure event by Venezuelan parties clearly sets out the basis for such declaration and complies with the contractual requirements for force majeure. For example, a party will generally only be able to claim force majeure if it can establish it has taken steps to mitigate the consequences of the force majeure event, including by providing alternative performance where possible.

Another immediate issue that Chinese parties should consider is whether the potential loss and damage to their investment is covered by any applicable insurance policy. Insurance policies may provide coverage for war risk on damage resulting from acts of war, including invasion, insurrection and rebellion. While these war risk insurance policies are most commonly used in shipping and aviation industries, general insurance policies for other industries may provide similar coverage.

Finally, Chinese parties should ensure that they comply with any relevant time limits to lodge complaints on breaches of contract. Some contracts include specific time limits for bringing claims or exercising rights. A right or the possibility of bringing a claim may be lost if steps are not taken within the stipulated time period. Thus, it is critical for parties to ensure compliance with applicable time limits.

Accrual of Rights Under International Law

Given President Trump’s threat of American oil companies taking over the Venezuelan oil industry, subsequent actions by the Venezuelan authorities that detrimentally affect the rights of Chinese investors—in the oil industry or otherwise—could potentially give rise to investment treaty claims against Venezuela. Investment treaty arbitration is arbitration between a foreign investor (in this case a Chinese investor) and a host state (in this case Venezuela) in relation to the host state’s breach(es) of obligation(s) under international law to protect the investor or the investor’s investment.

China and Venezuela signed the Agreement on the Reciprocal Promotion and Protection of Investments (China-Venezuela BIT), which “appl[ies] to the investors and covered investments, made either before or after the entry into force of this Agreement.” It provides various protection to investment and investors of the contracting states.

The China-Venezuela BIT affords potentially significant protections to Chinese investors in Venezuela that are similar to protections provided under other bilateral investment treaties, including provisions:

1. 1. On fair and equitable treatment and full protection and security (Article 4);
   2. Against expropriation by the host state (Article 7);
   3. On national treatment and most-favoured nation treatment (Article 5);
   4. On compensation for losses from war, armed conflict, uprising, civil turmoil and national state of emergency (Article 8); and
   5. On free repatriation and transfer of funds related to an investment (Article 9).

One procedural issue of note is that the China-Venezuela BIT has a short limitation period of “three years … since the date when the investor first learned, or should have learned, of the alleged breach.” (Article 12(3)(c)) Given that there is a six-month mandatory negotiation period prior to arbitration (Article 12(2)), any party intending to bring a claim under the China-Venezuela BIT only has a short period of time to assess and consider the prospect of such claims before initiating proceedings.

Another practical aspect that parties should consider is the likelihood of recovery of monetary damages against the host state. While Venezuela has one of the worst track records of honouring international investment awards and settlement agreements, there are ways to enforce awards against Venezuela. In particular, an award against Venezuela or Venezuelan state entities can potentially be enforced against assets owned by the Venezuelan state in the 172 signatory states to the New York Convention, including the United States, the United Kingdom and China. There is a track record of awards against Venezuelan state entities being enforced in the United States where Venezuela holds substantial assets. For example, Crystallex International Corporation has persuaded the Delaware District Court to enforce an investment award against property nominally held by Petróleos de Venezuela S.A., the Venezuelan national oil company.

Chinese parties with investments in Venezuela should pay close attention to the development of the situation and obtain timely legal advice to ensure that any prospective investment treaty claim does not become time barred.

Fora for Resolving Disputes

Any dispute against the contractual counterparty should be resolved in the forum chosen in the contract. Absent such choice of forum in the contract, the determination of the proper forum will require detailed analysis on the contractual framework and factual background of the transaction.

With respect to investment treaty arbitration, the China-Venezuela BIT provides three fora for such disputes: (1) the Venezuelan courts, (2) ad hoc UNCITRAL arbitration or (3) any other arbitration institution that the parties may agree. The parties’ choice of forum is binding and cannot be retracted. If a party submits an investment treaty dispute to the Venezuelan court, it waives the right to submit the same dispute to international arbitration (and vice versa) (Article 12(3)(b)).

An additional forum that should also be considered is mediation through the International Organization for Mediation. When China’s President Xi Jingping launched the Global Governance Initiative in September 2025, he explained that the initiative calls on all countries to commit to sovereign equality, international rule of law, multilateralism, a people-centered approach and real actions, and seeks to build a more just and equitable system of global governance. The resolution of disputes through mediation aligns with the thrust of these objectives. Mediation, as a mechanism to resolve disputes between private parties or investors and host state, will preserve the commercial and collaborative relationship between the parties without the usual breakdown through adversarial processes. A party may pursue mediation of a dispute in parallel to initiating a binding dispute resolution process, like litigation and arbitration.

Overall Practical Takeaways

Chinese parties with investments in Venezuela should:

• Timely assess the risks of nonperformance by the Venezuelan parties and the prospect of potential contractual claims.
• Take legal advice and ensure they comply with time limits for the exercise of contractual rights and the bringing of claims.
• Follow the development of the situation closely to ensure that any international investment claims are not unintentionally waived or become time barred.
• Give early consideration on the appropriate forum to resolve the dispute, whether it is the national court, international arbitration or mediation.

About Duane Morris

Members of Duane Morris’s International Disputes Group have extensive experience advising parties involved in international disputes under different governing laws, including advising on rights and remedies in respect of expropriation and other governmental actions in Venezuela. We are a team of experienced and tenacious trial advocates with extensive experience of representing Chinese clients in cross-border disputes with amounts totalling billions of dollars.

For More Information

If you have any questions about this Alert, please contact Duncan Speller, Owen Newman, Mark Handley, Justin Li, any of the attorneys in our International Disputes Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.