An interesting decision with an international flavor from the Court of Appeals for the D.C. Circuit, Helmerich & Payne Int. Drilling Co. v. Bolivarian Republic of Venezuela, No. 13-7169 (May 1, 2015).
We suppose that if you are a U.S. oil exploration company operating in Hugo Chavez’ Venezuela, you get used to entertaining a certain amount of risk. But for more than 50 years prior, Helmerich “successfully operated an oil-drilling business in Venezuela through a series of subsidiaries.” Slip op. at 3. But in 2008, after PDVSA, the state-owned oil corporation fell behind in its rig lease payments to Helmerich’s subsidiary and the subsidiary “disassembled its drilling rigs and stacked the equipment in its yards,” the Venezuelan government decided to do something about it:
[O]n June 12, 2010, PDVSA employees, assisted by armed soldiers of the Venezuelan National Guard, blockaded H&P-V’s premises in western Venezuela, and then did the same to the company’s eastern properties on June 13 and 14. PDVSA acknowledged that it erected the blockade to “prevent H&P-V from removing its rigs and other assets from its premises, and to force H&P-V to negotiate new contract terms immediately.”
Slip op. at 5.
Soon thereafter, the oil rigs were declared to be “of public benefit and good,” and Hugo Chavez issued a Decree of Expropriation. It really is good to the the King in Venezuela (or the President, in this case). The expected statements followed, decrying the “American empire,” and accusing Helmerich’s subsidiary of being a lackey of the U.S. State Department, of promoting “big business transnational corporations,” and of “promot[ing] what they know best to do, which is war.” Slip op. at 5. The Venezuelan government began eminent domain proceedings in Venezuelan courts, but predictably, these went nowhere (“H&P-V has yet to receive service of process in the first proceeding, and the second has been stayed indefinitely.”).
“Believing that these proceedings [were] unlikely to result in adequate relief” (now there’s an understatement), Helmerich and the sub filed suit in D.C. federal court, alleging a taking in violation of international law, and raising associated claims such as breach of contract. The District Court denied Venezuela’s motion to dismiss.
The D.C. Circuit affirmed, concluding that Venezuela did not enjoy foreign sovereign immunity, rejecting its arguments that Helmerich’s Venezuelan subsidiary was a domestic Venezuelan corporation and therefore the taking was beyond the reach of of the U.S. courts. Yes, H&P-V was incorporated in Venezuela, operated there for many years, and its contracts were with the Venezuelan government and governed by Venezuelan law. But those earlier statements showed that Venezuela really treated H&P-V as an American company, despite the Venezuelan formalisms. This showed that the taking was not simply an internal Venezuelan matter, but could have been a “discriminatory taking” in violation of international law.
This was decided on a motion to dismiss, which the D.C. Circuit noted was a “forgiving standard,” and thus it was no error for the District Court to have denied Venezuela’s motion.