Case of the Day: Helmerich & Payne v. Venezuela
Posted on August 20, 2018
The case of the day is Helmerich & Payne International Drilling Co. v. Bolivarian Republic of Venezuela (D.C. Cir. 2018). I’ve written about the case several times before, most recently in a post on the Supreme Court’s 2017 decision. Guest poster Ira Ryk-Lakhman also wrote a more extensive overview of the Supreme Court’s decision. Here is my brief description of the facts from the prior posts:
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.
In the Supreme Court, the question was the pleading standard that applies when a plaintiff pleads a case within the expropriation exception to FSIA immunity. The holding: “[T]he expropriation exception grants jurisdiction only where there is a valid claim that ‘property’ has been ‘taken in violation of international law.’ § 1605(a)(3). A nonfrivolous argument to that effect is insufficient.”
In its first decision in the case, the DC Circuit had held that both the American company and its Venezuelan subsidiaries had adequately pleaded expropriation claims against the Venezuelan state. But on remand, in light of the Supreme Court’s decision, things were a little more complicated. The court again affirmed the denial of the motion to dismiss the claim of the American parent company. With respect to the Venezuelan subsidiary, the court noted that the claim was “a matter of domestic, not international law under the domestic-takings rule.” But the subsidiary claimed an exception in cases where the foreign state expropriates the property of a local subsidiary with the discriminatory intent to harm the foreign owners. The court, though, found that there was no such exception to the ordinary rule in customary international law. Interestingly, according to the court, all of the sources cited to support the supposed exception “derive from a single country—the United States—that expressly argues in its amicus brief that no such exception exists.” Banco Nacional de Cuba v. Sabbatino, 307 F.2d 845 (2d Cir. 1962), rev’d on other grounds, 84 S. Ct. 923 (1964), could be read to the contrary, but the court held that Sabbatino was wrongly decided “to the extent it suggests that corporate nationality under international law depends on the nationality of the corporate owners rather than the place of incorporation.”
I am interested in looking at this case in the light I suggested in my post on EIG Energy Fund v. Petroleo Brasileiro: if we are great respecters of corporate personality in cases where plaintiffs injured by the acts or omissions of a foreign subsidiary find themselves unable to recover from the corporate parent, are we are great respecters of corporate personality in the context of deciding when businesses do or do not have claims, say, under investment treaties or claims for expropriation? EIG Energy, just as a matter of appearances, suggests the answer is “maybe not,” but today’s case suggests, again just as a matter of appearances, that the answer is “maybe so.” I say appearances because there may well be sound reasons to treat the various cases differently; but in light of the public attention on the issue as reflected in the recent publication of a draft treaty on transnational business and human rights, I think appearances matter here.