The case of the day is Helmerich & Payne International Drilling v. Bolivarian Republic of Venezuela (D.C. Cir. 2015). Helmerich & Payne, an Oklahoma oil company, operated in Venezuela through subsidiaries incorporated under Venezuelan law. Beginning in 2007, its subsidiary made contracts with the Venezuelan state oil company, PDVSA, for the use of the subsidiary’s drilling rigs. But PDVSA quickly fell behind on payments under the contract. PDVSA did, however, promise that payments would be forthcoming, and H&P’s subsidiary completed the work under the contract. The subsidiary then prepared its equipment to be removed from the country, but the Venezuelan government then sent its national guard to prevent removal of the equipment and to force the negotiation of new contractual terms. Venezuela issued press releases stating that the drilling rigs had been nationalized. The government later issued a decree of expropriation and some Hugo Chavez-flavored anti-American press releases. Venezuela brought two eminent domain actions in its courts, supposedly to compensate H&P’s subsidiary. But the subsidiary never received service of process in the first case, and the second case was stayed indefinitely. H&P sued Venezuela and PDVSA. The defendants argued the claim was barred by the FSIA and under the act-of-state doctrine.

The first key issue, and the only one I’m going to consider in this post, was whether the expropriation exception to the FSIA, § 1605(a)(3), applies. The exception applies “in any case … in which rights in property taken in violation of international law are in issue.” The H&P subsidiary had Venezuelan nationality because it was organized in Venezuela. Venezuela claimed that that was the end of the story, since in general a foreign state’s expropriation of the property of its own national does not violate international law. But the Venezuelan subsidiary argued that the usual rule didn’t apply, since Venezuela had discriminated against it on the basis of its sole shareholder’s nationality. The Second Circuit’s decision Banco Nacional de Cuba v. Sabbatino is the main precedent for this argument, though the Supreme Court had vacated that decision on other grounds. The Restatement (Third) of Foreign Relations Law (§ 712 cmt. f) also suggests that a discriminatory expropriation violates international law. The court refused to dismiss for want of jurisdiction, basically leaving the decision on the merits of Venezuela’s argument to another day. A motion to dismiss on immunity grounds, the court observed, was proper only when it was abundantly clear that the complaint necessarily would fail (this isn’t the language the court used, so don’t quote it, but it’s the gist of it).

Julian Ku has commented on this aspect of the decision at Opinio Juris. He bemoaned the lack of citation to non-US authorities on this question of international law, which I think is completely right.

I think Julian found the decision a little surprising:

What I find fascinating is the Court’s rejection of Venezuela’s argument that as a “domestic takings”, its expropriation of a Venezuelan company cannot violate international law, even if (as in this case) the sole shareholder of that Venezuelan company was a U.S. national and that there is plenty of evidence of anti-U.S. animus motivating the expropriation.

It seems to me that maybe the decision isn’t as surprising as it seems, since the court was careful to distinguish between the standard applicable to a motion to dismiss for want of jurisdiction and the standard applicable to a decision on the merits. Granted, this gets a little complicated in the FSIA context, but the court seems committed to a forgiving standard of review when faced with a motion to dismiss a FSIA case:

What plaintiffs must allege to survive a jurisdictional challenge, then, “is obviously far less demanding than what would be required for the plaintiff’s case to survive a summary judgment motion” or a trial on the merits. Agudas Chasidei Chabad of U.S. v. Russian Federation, 528 F.3d 934, 940 (D.C. Cir. 2008). In an FSIA case, we will grant a motion to dismiss on the grounds that the plaintiff has failed to plead a “taking in violation of international law” or has no “rights in property … in issue” only if the claims are “wholly insubstantial or frivolous.” Id. at 943. A claim fails to meet this exceptionally low bar if prior judicial decisions “inescapably render the claim[] frivolous” and “completely devoid of merit.” Hagans v. Lavine, 415 U.S. 528, 538, 543 (1974). “[P]revious decisions that merely render claims of doubtful or questionable merit do not render them insubstantial” for jurisdictional purposes. Id. at 538.