Tag Archives: FSIA

Case of the Day: Hardy Exploration v. Government of India

The case of the day is Hardy Exploration & Production (India), Inc. v. Government of India (D.D.C. 2016). Hardy was a participant, initially with other private firms and later on its own, then in the end with an Indian state-owned company, GAIL (India) Ltd., in a contract with the government of India for the development and production of hydrocarbons in an area off India’s southeastern coast. After Hardy and GAIL found hydrocarbons in 2006, a dispute arose as to whether the find was natural gas (as the government thought) or oil (as Hardy and GAIL thought). If the find was oil, then Hardy, for reasons unimportant here, would have forfeited its interest under the contract. Hardy demanded arbitration in Kuala Lumpur, as per the parties’ arbitration agreement. The tribunal found that Hardy’s position was correct, ordered a restoration of the status quo ante, and awarded damages of 5 billion rupees (about $74 million). India sought to vacate the award in the Indian courts (not the Malaysian courts), but its petition was dismissed. Hardy filed a petition to enforce the award in India, and then sought confirmation in Washington. India’s defense was that service of process (by FedEx) was defective under the FSIA. Hardy countered that the contract contained a special arrangement for service of process, and that service was therefore proper under 28 U.S.C. § 1608(a)(1).
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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.

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Case of the Day: Crystallex International v. Petróleos de Venezuela

The CITGO Sign in Kenmore Square
A Boston landmark. Credit: Lunarsurface

The case of the day is Crystallex International Corp. v. Petróleos de Venezuela (D. Del. 2016). Crystallex was a Canadian corporation that had brought an ICSID arbitration against Venezuela, relating primarily to Venezuela’s denial of a permit to allow Crystallex to mine gold deposits in the Las Cristinas area and to the decision of a state-owned economic development company, Corporación Venezolana de Guayana, to rescind a mining contract with Crystallex. The arbitration resulted in an award of more than $1.2 billion in damages to Crystallex.

In today’s case, Crystallex alleged that Venezuela, in anticipation of the award, had “orchestrated a scheme to monetize its American assets and pull the proceeds out of the United States, in order to evade potential arbitration creditors.” In particular, it alleged that Venezuela and its state oil company, Petróleos de Venezuela, cause CITGO, a subsidiary of Petróleos de Venezuela, to issue $2.8 in debt and then to pay the proceeds of the issuance to Petróleos de Venezuela in the form of a dividend. The main claim was for fraudulent transfer under the Uniform Fraudulent Transfer Act. CITGO moved to dismiss for failure to state a claim. (Note that I’m simplifying things a bit—there actually were two levels of subsidiaries, with the indirect subsidiary paying a dividend to the direct subsidiary and the direct subsidiary then paying a dividend to Petróleos de Venezuela. I’m using the name CITGO to refer to both, even though ultimately CITGO was dismissed from the case and the other subsidiary, PDV Holding, Inc., was not. This is mainly so I can use the picture of the CITGO sign, a Boston landmark).
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