American Bar Association
Media Alerts
Media Alerts - Helmerich & Payne International Drilling Co. v. Bolivarian Rep. of Venezuela -- D.C. Circuit
Decrease font size
Increase font size
May 1, 2015
  Helmerich & Payne International Drilling Co. v. Bolivarian Rep. of Venezuela -- D.C. Circuit
Headline: Split D.C. Circuit panel permits suit against Venezuela for 2010 seizure of deep-water oil rigs.

Area of Law: Foreign Sovereign Immunities Act

Issue: Whether an American-based company and its Venezuela-based subsidiary can pursue claims against Venezuela for expropriation and breach of contract under the expropriation and commercial activities exceptions of the Foreign Sovereign Immunities Act.

Brief Summary: Helmerich & Payne (H&P), an Oklahoma-based company with a Venezuela-based subsidiary (H&P-V), operated deep-water drilling rigs off of Venezuela, contracting its business with state-owned Petroleos de Venezuela (PDVSA). By 2009, PDVSA had defaulted on ten contracts and was $100 million in arrears. H&P-V announced its intention not to renew the contracts and disassembled its rigs, stacking its equipment in preparation for leaving Venezuela. On June 2010, PDVSA and armed soldiers seized the disassembled rigs, and the government announced it had "[taken] control over the company" by "forcible possession." H&P and H&P-V brought suit in the U.S. District Court for the District of Columbia against PDVSA and Venezuela for taking the rigs in violation of international law and against PDVSA for breach of contract. PDVSA and Venezuela claimed that the Foreign Sovereign Immunities Act (FSIA) and the act-of-state doctrine barred both claims.

The district court determined that, while H&P-V was a "national" of Venezuela and could not itself pursue a claim for a violation of international law, H&P had standing to assert a taking in violation of international law on behalf of its property interest in its subsidiary under FSIA's expropriation exception. Moreover, the court found that H&P had alleged sufficient "direct effects" within the United States to qualify for the FSIA's "commercial activity" exception. This appeal followed.

The U.S. Court of Appeals for the District of Columbia Circuit affirmed in part and reversed in part. The court started from the premise that it would permit a suit to proceed under the expropriation exception unless plaintiff's claims were "wholly insubstantial or frivolous." The court noted that all parties agreed that a corporation has the nationality of the state under which it is organized and that a foreign state's expropriation of its own property (a so-called "domestic taking") does not violate international law. However, guided by a 1962 Second Circuit precedent, the court found an exception to the domestic takings rule where the state expropriated property of a company because its shareholders were predominantly foreign. The court found that the Venezuelan government's anti-American statements supported the "discriminatory takings" exception, and, at this stage of the proceedings, such a claim was neither "wholly insubstantial" nor "frivolous." The court thus permitted H&P-V's claim to proceed in its own right.

Turning to the claim that H&P, a shareholder, lacked sufficient interest in H&P-V to assert claims, the court determined that under the FSIA, H&P's ownership interest in H&P-V's property sufficed to confer standing. In so doing, the court declined to import the "shareholder standing rule" into the FSIA.

Because the district court had not ruled on Venezuela's act-of-state claim below, the court declined to do so, reasoning that the claim might be mooted by subsequent adjudication of the expropriation issue.

Finally, the court determined that PDVSA's breach of contract lacked sufficient "direct effect" in the United States to fall under the FSIA's commercial activity exception. The court concluded that PDVSA's breach did not require H&P-V to breach any existing contracts with U.S. subcontractors and that the contract did not require PDVSA to make payments to Oklahoma banks. The court also rejected the argument that PDVSA's breach stopped a flow of resources between Venezuela and the United States, as the court concluded that any such interruption was the result of H&P-V's decision not to renew the fixed-period contract.

Judge Sentelle dissented as to the applicability of the expropriation exception. He concluded that the domestic takings rule precluded H&P-V's claim and that H&P, as a shareholder, lacked standing under ordinary corporate law principles to assert a claim on H&P-V's behalf.

For the full text of the opinion, please see http://www.cadc.uscourts.gov/i...e/13-7169-1550133.pdf

Panel: Judges Garland, Tatel, and Sentelle

Argument Date: 01/16/2015

Date of Issued Opinion: 05/01/2015

Docket Number: No. 13-7169

Decided: Affirmed in part, reversed in part.

Opinion Author: Judge Tatel

Case Alert Author: Elizabeth Earle Beske/Ripple Weistling

Counsel: Mary H. Wimberly, Joseph D. Pizzurro, Robert B. Garcia, George E. Spencer, William L. Monts III, and Bruce D. Oakley for Appellants.

David W. Ogden, David W. Bowker, Catherine M. Carroll, Elisebeth C. Cook, and Francesco Valentini for Appellees

    Posted By: Ripple Weistling @ 05/01/2015 01:38 PM     DC Circuit  

FuseTalk Enterprise Edition - © 1999-2018 FuseTalk Inc. All rights reserved.

Discussion Board Usage Agreement

Back to Top