Venezuelan Oil Takings Case Has Its Day in Court

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By Melissa Heelan Stanzione

Nov. 2 — A tussle between Venezuela and a U.S.-owned oil company highlighted the sticky issue of how difficult it should be to hale a foreign nation into U.S. court, during oral argument Nov. 2 at the U.S. Supreme Court ( Bolivarian Republic of Venezuela v. Helmerich & Payne Int'l Drilling Co., U.S., No. 15-423 , 11/2/16 ).

The Bolivarian Republic of Venezuela expropriated the property of a company drilling for oil in Venezuela. Later, the company and its U.S.-based parent company, Helmerich & Payne International Drilling Company, sued the country.

At issue was the jurisdictional pleading standard under an exception to the Foreign Sovereign Immunities Act, which generally provides that foreign countries are immune from suit in U.S. courts.

The expropriation exception says that a foreign state isn’t immune when “rights in property taken in violation of international law are in issue.”

The esoteric arguments both sides raised boiled down to the question of which best served the interests of international comity.

How Low Should Court Go?

The high court may decide whether the exception’s jurisdictional pleading standard provides a low bar, as the D.C. Circuit held below, or sets a higher standard, requiring allegations to actually describe a taking in violation of international law.

Only a claim that is “wholly insubstantial or frivolous” will be dismissed for lack of jurisdiction, the U.S. Court of Appeals for the D.C. Circuit said below, quoting Bell v. Hood , 327 U.S. 628 (1946) .

This standard is the one that best serves comity interests, Catherine M.A. Carroll argued for the drilling company. Carrol is the partner in charge of Wilmer Cutler Pickering Hale and Dorr LLP's Washington office.

Applying Venezuela’s proposed standard would result in a “mini trial” being conducted on the issue of jurisdiction, which is an affront to a foreign state’s dignity, Carroll said.

Digging Into Jurisdiction

Counsel for Venezuela argued for delving deeper.

“The problem is that when you’re talking about jurisdiction at an FSIA case, you can’t just decide that the plaintiff might have stated a jurisdictional predicate,” Catherine E. Stetson argued for the country. Stetson is a partner in Hogan Lovells US LLP's Washington office..

“You have to decide whether that right actually exists,” she said.

Justice Ruth Bader Ginsburg—who “taught jurisdiction,” as Justice Stephen G. Breyer reminded the court—questioned Venezuela’s desire to raise the threshold.

After all, in order “to get your toe in the door,” the general rule is that you don’t have to show the court “that you have stated a claim at that point,” Ginsburg said.

“You just have to meet the threshold jurisdictional standard,” she said.

Front Loading

Ginsburg pointed out that Venezuela’s standard “front loads” the issues.

“Putting together everything you said, what I come out with is in order to have jurisdiction, you have to prevail on the merits, which is a facts dispute. They get front-loaded, too. So everything is decided under the jurisdictional head,” Ginsburg said.

But to preserve a foreign state’s dignity, you can’t “dilute the FSIA’s jurisdictional standard,” Stetson said.

This requires asking whether the statute’s jurisdictional standards have been met, not whether they “may be satisfied,” she said.

The federal government also argued for a higher standard.

“The question of whether property was taken in violation of international law” is something that “has to be decided at the jurisdictional stage in law, where there’s a challenge like there is here,” Elaine J. Goldenberg argued. Goldenberg represented the Department of Justice, which filed a friend of the court brief supporting Venezuela.

Swinging Back and Forth

Breyer didn’t think the lower courts would be amenable to a decision supporting this view.

“I came in on your side, but I swing back and forth,” Breyer said.

Now “I’m getting pushed the other way,” he said.

Asserting jurisdiction over a foreign state using a nonfrivolous standard is an affront to its dignity, Goldenberg said.

“How often is that a serious concern?” Chief Justice John G. Roberts Jr. asked Goldenberg.

There have been real reciprocity concerns as a result of a foreign state being haled into our courts, Goldenberg said.

Bank Markazi is a good example, Ginsburg said, referring to Bank Markazi v. Peterson, 84 U.S.L.W. 4222, 2016 BL 125330 (U.S. April 20, 2016).

The court’s decision in that case ensured that nearly $2 billion in funds held in a U.S. bank will remain available to satisfy terrorism judgments against Iran.

“When the court issued its decision in that case, Iran filed a suit against the United States in the World Court,” Ginsburg said.

Stetson reminded the court during her rebuttal of the significance of the case.

“Here, subject matter jurisdiction isn’t just about jurisdiction over a class of cases or a type of case. It’s jurisdiction over this sovereign standing in front of the court,” she said.

To contact the reporter on this story: Melissa Heelan Stanzione in Washington at mstanzione@bna.com

To contact the editor responsible for this story: Jessie Kokrda Kamens at jkamens@bna.com

For More Information

Text of the transcript at http://src.bna.com/jPg.

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