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 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). Continue reading Case of the Day: Crystallex International v. Petróleos de Venezuela→