Case to Watch: Helmerich & Payne International v. Venezuela

This week, the Supreme Court will hear arguments in Helmerich & Payne International v. Venezuela. I wrote about the case back in May 2015. Here was my description of the facts:

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 issue I considered in my prior post was whether the expropriation exception to the FSIA, § 1605(a)(3), applied, since the H&P subsidiary had Venezuelan nationality. But the issue on review in the Supreme Court, as reported by Trey Childress at Conflict of Laws, is the pleading standard in FSIA expropriation cases on a motion to dismiss for lack of subject matter jurisdiction: does the plaintiff need to allege “rights that actually are legally recognized ‘rights in property,’ and a taking that actually is a ‘violation of international law,’ or whether it is enough to plead a substantial claim, even if it might actually fail on the merits?

This is a deep question with implications that are potentially far-reaching. I see policies on both sides. On the one hand, as a general rule you don’t want to collapse the question of jurisdiction with the merits and say that the court only has jurisdiction to hear cases that are meritorious. On the other hand, in the FSIA context there are special policies that weigh against requiring a foreign state to defend a case in the US courts beyond the initial stages unless an FSIA exception applies. The statute says that a foreign state is immune from jurisdiction unless rights in property taken in violation of international law are in issue. Most jurisdictional statutes are not worded in this way. On the other hand, there seems to be a reasonable argument that you can’t tell from the pleadings whether rights in property have been expropriated, since that’s precisely the question to be litigated! So it’s a pickle.

One response to “Case to Watch: Helmerich & Payne International v. Venezuela”

  1. Alessandro Spinillo

    The case is interesting indeed. I wonder why Helmerich did not move to ICSID arbitration instead.

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