Recent legislative developments in Venezuela and evolving sanctions policies are reshaping the risk and opportunity landscape for companies operating in or planning to operate in Venezuela. While enforcement risks and regulatory uncertainty remain significant, recent US sanctions relief — particularly in the form of new OFAC general licenses — continues to reopen pathways for cross-border engagement, investment planning and commercial activity.
Explore key takeaways from our recent Venezuela Brief discussion series webinar focusing on the current disputes, enforcement and compliance environment in Venezuela, including:
- The current sanctions landscape in the EU, UK and US
- The outlook for disputes
- Governing law, arbitration and enforcement of arbitral awards involving Venezuelan counterparties
- Practical compliance and due diligence priorities for foreign investors
- Financial flows and international compliance standards
The current sanctions landscape in the EU, UK and US
EU sanctions: Targeted and non-economic
The EU sanctions regime remains narrow, focused on political and human rights concerns rather than broad economic considerations. Current EU sanctions against Venezuela:
- Consist primarily of targeted individual sanctions, with 69 individuals currently subject to asset freezes and EU travel bans (mainly senior political and government officials)
- Include a weapons embargo and restrictions on exporting equipment that may be used for internal repression, such as crowd-control or surveillance technology.
- Explicitly exclude humanitarian and civilian trade, including food, medicine and other non-repressive goods. Notably, there is no EU ban on Venezuelan oil and gas, general trade embargo or financial sector sanctions broadly restricting commercial activity.
Current EU sanctions are in force until January 10, 2027, with the possibility of changes tied to developments in democracy and human rights.
UK sanctions: Closely aligned with the EU
UK sanctions largely mirror the EU framework and have not materially changed in recent years. The current UK regime:
- Focuses on designated persons linked to human rights abuses and internal repression, rather than state-owned entities or sectors.
- Includes trade restrictions such as an arms embargo, controls on internal repression goods and limits on services to Venezuela’s armed forces.
- Operates under a strict liability framework, meaning enforcement action can arise even without intent. UK authorities are applying an increasingly broad view of jurisdiction, meaning that even limited UK touchpoints may be sufficient to trigger enforcement.
Beyond sanctions, companies should also be aware of the extraterritorial reach of the UK Bribery Act and UK anti-money laundering legislation.
US sanctions: Conditional reopening through general licenses
The US sanctions framework remains the most complex — and most consequential — for companies engaging with Venezuela. Core blocking sanctions against the Venezuelan government, including PDVSA and Venezuela's Central Bank, remain in place prohibiting dealings, unless otherwise authorized by OFAC. Since January 2026, OFAC has issued a series of narrowly tailored and conditional general licenses, initially focused on energy and later expanding to other sectors such as minerals.
- These licenses typically:
- Limit participation to established US or allied companies
- Restrict activities to defined projects
- Require US governing law and US dispute resolution mechanisms
- Impose strict payment, reporting and record keeping requirements
General License 57 (GL 57), issued on April 14, 2026, marks another significant development in US sanctions relief. This general license:
- Authorizes financial services involving key blocked Venezuelan state banks, including account services, payments, wire transfers and correspondent banking.
- Reopens channels for cross-border financial transactions, likely catalyzing increased commercial activity between Venezuela and the US.
It is also expected to drive a corresponding rise in commercial disputes and compliance challenges, explored below.
The disputes outlook
As sanctions restrictions ease and commercial activity resumes, companies should anticipate several categories of disputes:
1. Traditional commercial disputes, particularly related to:
- Construction, refurbishment and infrastructure projects
- Oil and gas services and supply agreements
- Offtake, pricing, quality and delivery obligations
2. Sanctions-related contract disputes, arising when:
- Contractual performance becomes prohibited due to changes in sanctions or licensing
- Counterparties are no longer permitted to transact with state-owned entities
3. Investor-state disputes, especially where:
- Legal or regulatory changes alter the established investment framework
- Expectations given to foreign investors are not maintained over time
Governing law, arbitration and enforcement of arbitral awards involving Venezuelan counterparties
Understanding governing law and contract validity risks
Venezuela recognizes party autonomy in selecting governing law, subject to mandatory public policy rules. Even where contracts are governed by US law (as required under certain OFAC licenses), issues of contractual validity — including corporate authority and required approvals — are assessed under Venezuelan law. Failure to obtain proper Venezuelan approvals may render contracts void or unenforceable, regardless of governing law.
Arbitration post ICSID withdrawal
Although Venezuela withdrew from ICSID in 2012, it remains a party to more than 20 bilateral investment treaties, many of which provide alternative arbitration mechanisms. Options include:
- ICSID Additional Facility
- UNCITRAL ad hoc arbitration
For US investors, corporate structuring through treaty-protected jurisdictions may allow access to treaty protections alongside contractual protections under US law.
Arbitral award enforcement challenges
Enforcement against the Venezuelan state or state-owned entities is complicated by sovereign immunity and limits on execution against state assets. Commercial assets may be executable, but identifying and attaching assets remains a practical challenge. The New York Convention remains a critical tool, allowing arbitral awards to be enforced globally wherever assets are located.
Practical compliance and due diligence priorities for foreign investors
Venezuela remains a high-risk jurisdiction from a compliance standpoint. To manage this, investors should treat compliance as an operational necessity, prioritizing:
- Sanctions and trade controls analysis, including:
- Licensing requirements
- Counterparty screening
- Mitigating exposure to US primary and secondary sanctions
- Anti-corruption and AML controls are essential:
- High corruption risk due to extensive interaction with state-owned enterprises
- Overlapping enforcement exposure under the FCPA, UK Bribery Act and other anti-corruption regimes
- Third party risk management, including:
- Enhanced due diligence for agents, distributors and joint venture partners
- Ongoing monitoring, not just onboarding diligence
- Documented government interaction protocols, including:
- Clear approval processes
- Prohibitions on cash payments and undocumented or excessive commissions
- Governance and accountability, including:
- Active involvement of senior management
- Independent and empowered compliance functions
- Credible investigation and remediation frameworks
Amid Venezuela's evolving and uncertain environment, compliance strategies must be practical, localized and embedded in daily operations as well as supported by continuous monitoring and real time escalation mechanisms.
Financial flows and international compliance standards
Venezuela no longer maintains a formal exchange control regime, and foreign currency transactions are permitted, including USD- and EUR denominated contracts. Following GL 57, Venezuelan banks are increasingly able to receive and transmit international funds through correspondent banking networks.
International compliance expectations — particularly Financial Action Task Force (FATF) recommendations — are frequently incorporated into contractual frameworks. Venezuelan banks are actively working to improve compliance and address FATF gray list concerns, with potential progress anticipated over time.
What’s next?
While recent developments signal a cautious reopening of Venezuela’s commercial landscape, the environment remains highly uncertain. Companies considering entry or expansion should proceed deliberately, integrating sanctions analysis, dispute planning and robust compliance frameworks from the outset.
Baker McKenzie’s US, UK, European and Venezuela based teams continue to assist clients across sectors as they assess opportunities, structure investments and manage disputes in this evolving environment. Please reach out to your Baker McKenzie contact with any questions.