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Venezuela v. Helmerich and Payne International

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Supreme Court of the United States
Venezuela v. Helmerich and Payne International
Reference: 15-423
Issue: Sovereign immunity
Term: 2016
Important Dates
Argued: November 2, 2016
Decided: May 1, 2017
Outcome
D.C. Circuit vacated and remanded
Vote
8-0 to vacate and remand
Majority
Chief Justice John G. Roberts • Anthony Kennedy • Clarence Thomas • Ruth Bader Ginsburg • Stephen Breyer • Samuel Alito • Sonia Sotomayor • Elena Kagan


Bolivarian Republic of Venezuela v. Helmerich and Payne International Drilling Co. is a case argued during the October 2016 term of the U.S. Supreme Court. Argument in the case was held on November 2, 2016. The case came on a writ of certiorari to the United States Court of Appeals for the District of Columbia Circuit. On May 1, 2017, in a unanimous opinion by Justice Stephen Breyer, the court vacated and remanded the judgment of the D.C. Circuit.

In this case, the court held that the D.C. Circuit's standard to review cases falling within the Foreign Sovereign Immunities Act's (FSIA) expropriation exemption was too lenient. The expropriation exemption applies to "any case .. in which rights in property taken in violation of international law are in issue and that property ... is owned or operated by an agency or instrumentality of the foreign state ... engaged in a commercial activity in the United States.'" The D.C. Circuit had held that any nonfrivolous claim raised under the expropriation exemption conferred jurisdiction under the FSIA. The Supreme Court, however, held that this standard was too lenient and ruled that the exemption only grants jurisdiction in cases where a court finds the factual record supports a claim that property was taken in violation of international law.[1]

HIGHLIGHTS
  • The case: Venezuela expropriated drilling equipment from a Venezuelan subsidiary of a U.S.-based corporation in an alleged violation of international law. Venezuela sought to dismiss a lawsuit challenging their expropriation under the Foreign Sovereign Immunities Act (FSIA), but federal courts in Washington, D.C. denied Venezuela's motion to dismiss the lawsuit.
  • The issue: What is the correct standard for dismissing an expropriation exception lawsuit under the FSIA?
  • The outcome: On May 1, 2017, the court vacated and remanded the judgment of the D.C. Circuit.


    • In brief: The Foreign Sovereign Immunities Act (FSIA), a federal law, generally prohibits lawsuits against foreign governments in U.S. courts, with some exceptions. One such exception is the expropriation exception, which denies sovereign immunity "in any case ... in which rights in property taken in violation of international law are in issue." In order to dismiss expropriation exception lawsuits brought within the jurisdiction of the United States Court of Appeals for the District of Columbia Circuit, the lawsuit must be wholly insubstantial or frivolous, otherwise the lawsuit may proceed to a judgment on the merits. Venezuela and its state-owned petroleum corporation, PDVSA, challenge the propriety of this standard, arguing that the standard is not uniform across all federal circuit courts. The United States also filed a brief noting the variability of standards for dismissing FSIA expropriation exception cases across the federal judiciary. Oral argument before the U.S. Supreme Court was held on November 2, 2016.

    You can review the D.C. Circuit's opinion here.[2]

    Click on the tabs below to learn more about this Supreme Court case.

    Case


    Background

    A U.S.-based company, Helmerich and Payne International Drilling Co. (H&P-IDC), through a series of subsidiary companies, successfully operated an oil-drilling business in the Bolivarian Republic of Venezuela (Venezuela) for more than 50 years. One such subsidiary, Helmerich and Payne de Venezuela (H&P-V), provided drilling services to the Venezuelan government. In the 1970s, the Venezuelan government brought all exploration, production, and exportation of its oil industry under state control via two state-owned corporations: Petroleos de Venezuela S.A. and PDVSA Petroleo; collectively, these companies are known as PDVSA. From 1975 to 2010, PDVSA contracted with H&P-V for use of H&P-V's specialized deep water oil-drilling equipment. The equipment was originally purchased by the parent U.S. company, then transferred to H&P-V. Beginning in 2007, PDVSA fell behind in its payment obligations under ten different contracts with H&P-V. Despite assurances of forthcoming payment, PDVSA fell behind in overdue payments in excess of $100 million U.S. dollars. In January 2009, H&P-V announced it would not renew any contracts with PDVSA unless existing payments owed under contract to H&P-V improved. In June 2010, while the drilling equipment lay disassembled in a H&P-V property in Venezuela, PDVSA employees and the Venezuelan National Guard blockaded H&P-V's equipment 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." Later than month, then-President Hugo Chavez ordered the expropriation of H&P-V's equipment. In an effort to compensate H&P-V for the appropriated equipment, PDVSA filed two eminent domain actions in Venezuelan courts; both cases have not moved forward in years. In response, H&P-V and its U.S.-based parent company, H&P-IDC, filed suit in the United States District Court for the District of Columbia against both Venezuela and PDVSA claiming an illegal seizure of property in violation of international law. Venezuela and PDVSA countered that they could not be sued in U.S. courts under the Foreign Sovereign Immunities Act (FSIA) and sought a motion to dismiss on all counts. H&P argued that two separate exceptions under the FSIA - the expropriation exception and the commercial activity exception - gave the district court jurisdiction.[2]

    The district court received briefing on four separate issues,[2]

    “

    1.Whether, for purposes of determining if a "taking in violation of international law" has occurred under the FSIA’s expropriation exception, H&P-V is a national of Venezuela under international law;
    2. Whether H&P-IDC has standing to assert a taking in violation of international law on the basis of Venezuela’s expropriation of H&P-V’s property;
    3. Whether plaintiffs’ expropriation claims are barred by the act-of-state doctrine, including whether this defense may be adjudicated prior to resolution of Venezuela’s challenges to the court’s subject matter jurisdiction; and
    4. Whether, for purposes of determining the applicability of the FSIA’s commercial activity exception, plaintiffs have sufficiently alleged a "direct effect" in the United States within the meaning of that provision [3]

    		”

    The district court found for Venezuela on the first count, but ruled in favor of H&P on counts 2-4. Both parties appealed to the United States Court of Appeals for the District of Columbia Circuit. A three-judge panel comprised of Chief Judge Merrick Garland, Judge David Tatel, and Judge David Sentelle heard the appeal. Judge Tatel wrote the opinion for the court, in which Judge Sentelle concurred in part and dissented in part. The panel opinion addressed the issues presented to the district court above through assessment of claims made under two exceptions recognized under the FSIA: expropriation and commercial activity.[2]

    The expropriation exception

    The FSIA, under 28 U.S.C. § 1605(a)(3), denies sovereign immunity "in any case ... in which rights in property taken in violation of international law are in issue." Venezuela sought a motion to dismiss under the FSIA, arguing that H&P-V, as a company incorporated under Venezuelan law as a Venezuelan national, cannot assert violations of international law. Venezuela also argued that the parent company, H&P-IDC, lacked "rights in property" of its Venezuelan-based subsidiary and, because of this, H&P-IDC lacked standing to bring a claim against Venezuela and PDVSA.

    Under the D.C. Circuit's standard for granting a motion to dismiss an expropriation claim under the FSIA, Venezuela was required to show that H&P-V's claims were "wholly insubstantial or frivolous" and that H&P-IDC, the parent company "put its rights in property in issue in a non-frivolous way." The circuit panel asserted that H&P-V's claims were, in fact, "sufficient to plead a 'non-frivolous' discriminatory taking claim" under the FSIA. The panel also held that H&P-IDC did not lack rights in property because "the expropriation exception requires only that 'rights in property ... are in issue' ... we have recognized that corporate ownership aside, shareholders may have rights in corporate property ... H&P-IDC provided the rights central to this dispute ... and as a result of the expropriation, has suffered a total loss of control over its subsidiary ... Under these circumstances, H&P-IDC has 'put its rights in property in issue in a non-frivolous way.' ... No more is required to survive a motion to dismiss under the FSIA."[2]

    The commercial activity exception

    H&P-V argued that PDVSA's breach of contract caused "a direct effect in the United States", which would allow H&P-V to bring suit under the commercial activity exception of the FSIA in a U.S. court. H&P-V advanced three separate arguments as evidence of direct effect: that H&P-V's contracts with third-party vendors in the U.S. were affected, that PDVSA made payments to H&P-V via a U.S.-based bank account, and PDVSA's breach "halted a flow of commerce between Venezuela and the United States, thus causing a direct effect." None of these arguments, however, influenced the panel, who ruled against H&P-V on all three argument raised under the commercial activity exception.[2]

    As a result of this opinion, the district court's denial of Venezuela's motion to dismiss H&P's expropriation claim was affirmed, but the other portions of the district court's decision were reversed and remanded. Venezuela appealed to the Supreme Court of the United States.

    Petitioner's challenge

    Venezuela is challenging the current standard by which expropriation claims can proceed under the FSIA. In the D.C. Circuit, a FSIA expropriation claim may go forward so long as the claim is not "wholly insubstantial or frivolous." Venezuela asserted a split among the federal circuit courts on the correct standard for such claims in its certiorari petition, a position echoed in a brief filed by the United States. Under Rule 10 of the Supreme Court's rules of procedure, a split among the circuits heightens the court's assessment for granting certiorari.

    Certiorari granted

    On October 5, 2015, Venezuela, the petitioner, initiated proceedings in the Supreme Court of the United States in filing a petition for a writ of certiorari to the United States Court of Appeals for the District of Columbia Circuit. The U.S. Supreme Court granted Venezuela's certiorari request on June 28, 2016, limiting argument to question 3 of the petition. Oral argument before the Supreme Court was held on November 2, 2016.

    Arguments


    Question presented

    Question presented:

    "Whether the pleading standard for alleging that a case falls within the FSIA's expropriation exception is more demanding than the standard for pleading jurisdiction under the federal-question statute, which allows a jurisdictional dismissal only if the federal claim is wholly insubstantial and frivolous."[4]


    Audio

    • Audio of oral argument:[5]



    Transcript

    • Transcript of oral argument:[6]

    Outcome

    Decision

    Justice Stephen Breyer delivered the opinion for a unanimous court. The court held that the D.C. Circuit's standard to review cases falling within the Foreign Sovereign Immunities Act's (FSIA) expropriation exemption was too lenient. The expropriation exemption applies to "any case .. in which rights in property taken in violation of international law are in issue and that property ... is owned or operated by an agency or instrumentality of the foreign state ... engaged in a commercial activity in the United States.'" The D.C. Circuit had held that any nonfrivolous claim raised under the expropriation exemption conferred jurisdiction under the FSIA. The Supreme Court, however, held that this standard was too lenient and ruled that the exemption only grants jurisdiction in cases where a court finds the factual record supports a claim that property was taken in violation of international law.[1]

    Opinion

    After a review of the factual and procedural history of the case, Justice Stephen Breyer rejected the assertion that a nonfrivolous claim was sufficient to confer jurisdiction under the FSIA. In his words,[1]

    “

    In our view, the expropriation exception grants jurisdiction only where there is a valid claim that 'property' has been 'taken in violation of international law.' ... A nonfrivolous argument to that effect is insufficient. ... To be sure, there are fair arguments to be made that a sovereign’s taking of its own nationals’ property sometimes amounts to an expropriation that violates international law, and the expropriation exception provides that the general principle of immunity for these otherwise public acts should give way. But such arguments are about whether such an expropriation does violate international law. To find jurisdiction only where a taking does violate international law is thus consistent with basic international law and the related statutory objectives and principles that we have mentioned. But to find jurisdiction where a taking does not violate international law (e.g.,where there is a nonfrivolous but ultimately incorrect argument that the taking violates international law) is inconsistent with those objectives. And it is difficult to understand why Congress would have wanted that result. ...

    We conclude that the nonfrivolous-argument standard is not consistent with the statute. Where, as here, the facts are not in dispute, those facts bring the case within the scope of the expropriation exception only if they do show (and not just arguably show) a taking of property in violation of international law. Simply making a nonfrivolous argument to that effect is not sufficient.[3]

    		”

    As a result of the court's opinion, the judgment of the D.C. Circuit was vacated and the case was remanded for further proceedings.

    Concurring opinions

    There were no concurring opinions filed in this case.

    Dissenting opinions

    There were no dissenting opinions filed in this case.


    The opinion

    Filings

    The court granted Venezuela's certiorari request on June 28, 2016.

    Merits filings

    Parties' filings

    • Venezuela, the petitioner, filed a merits brief on August 19, 2016.
    • Helmerich and Payne International, the respondent, filed a merits brief on September 26, 2016.
    • Venezuela filed a reply brief on the merits on October 21, 2016.

    Amicus curiae filings

    The following groups filed an amicus curiae brief in support of the petitioner, Venezuela.

    • Brief of the United States of America


    The following individuals filed an amicus curiae brief in support of the respondent, Helmerich and Payne International.

    Certiorari filings

    Parties' filings

    • Venezuela, the petitioner, filed a petition for certiorari on October 5, 2015.
    • Helmerich and Payne International, the respondent, filed a brief in opposition to certiorari on January 6, 2016, after two orders extending time to file were granted by the court.

    Amicus curiae

    The following group filed an amicus curiae brief in support of granting certiorari.

    • Brief of the United States of America

    See also

    Footnotes

    1. ↑ 1.0 1.1 1.2 Supreme Court of the United States, Bolivarian Republic of Venezuela et al. v. Helmerich & Payne International Drilling Co. et al., decided May 1, 2017
    2. ↑ 2.0 2.1 2.2 2.3 2.4 2.5 U.S. Court of Appeals for the District of Columbia Circuit, Helmerich & Payne International Drilling Co. et al. v. Bolivarian Republic of Venezuela et al., decided May 1, 2015
    3. ↑ 3.0 3.1 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
    4. ↑ Supreme Court of the United States, Venezuela v. Helmerich & Payne International, June 28, 2016
    5. ↑ Supreme Court of the United States, Bolivarian Republic of Venezuela v. Helmerich & Payne International Drilling Co., argued November 2, 2016
    6. ↑ Supreme Court of the United States, Venezuela v. Helmerich & Payne, argued November 2, 2016
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