Case of the Day: Ministry of Oil of Iraq v. 1,032,212 Barrels of Crude Oil

The case of the day is Ministry of Oil of the Republic of Iraq v. 1,032,212 Barrels of Crude Oil Aboard the United Kalavrvta (S.D. Tex. 2014). The Iraqi government’s view is that under Iraqi law, it owns all of Iraq’s plentiful oil. The independence-minded leaders of the Kurdistan region, however, have other ideas. According to Iraq, the Kurdish government had been illegally pumping crude and had illegally transported some of it to Turkey via a pipeline. Despite Iraq’s opposition, Turkey loaded the oil onto the United Kalavrvta, which then set sail for Galveston. Iraq claims that Kurdistan is guilty of conversion. It brought an action in admiralty against the oil, in rem, and against the Kurdish government, in personam. The judge, on the strength of Iraq’s allegation that the ship was or soon would be in Galveston, ordered the arrest of the cargo. However, the ship was still sixty miles out to sea, outside of the United States’s territorial waters. Kurdistan moved to vacate the seizure order.

The main question in the case was whether the court had admiralty jurisdiction. That question, in turn, depended on whether Iraq could show that the tort—the conversion of the oil—took place in navigable waters. The judge reasoned that the conversion occurred when the Kurdish government illegally extracted the oil in the first place, not when it shipped the oil to Turkey and not when the oil was loaded aboard the ship or at any later time. Thus the conversion of the oil, while it might violate Iraqi law, did not fall within the jurisdiction of a US admiralty court. The court did, however, grant leave to amend the complaint, and Iraq may try to plead a claim in personam against the Kurdish government and assert that the US court has jurisdiction under the FSIA. In the meanwhile, though, the order to arrest the oil has been vacated. It’s not quite clear what Kurdistan intends to do now. According to Reuters, the tanker is still in the Gulf of Mexico but had turned off its transponder for a time and is now underway.

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