Helmerich & Payne Int'l Drilling Co. v. Venezuela, No. 13-7169 (D.C. Cir. 2015) [click for opinion]
Helmerich & Payne International Drilling Co. ("H&P-IDC") is a Delaware corporation and the sole shareholder of Helmerich & Payne de Venezuela ("H&P-V"), a corporation formed under Venezuelan law. H&P-V owned and operated offshore drilling rigs which it used to provide drilling services to Petróleos de Venezuela, S.A. ("PDVSA"), the state-owned oil and natural gas company of Venezuela. In 2007, PDVSA began falling behind on payments to H&P-V. With PDVSA owing more than $100 million in November 2009, H&P-V ceased providing services to PDVSA, placed its drilling rigs in storage, and laid off 600 Venezuelan workers. In June 2010, Venezuela seized the drilling rigs and announced their absorption into PDVSA. Notably, the statements of Venezuela and Venezuelan officials regarding this incident were colored with anti-American rhetoric, identifying H&P-V as an American company and at one point going so far as to allege that PDVSA's prior arrangement with H&P-V indirectly supported America's foreign wars.
H&P-IDC and H&P-V filed suit against Venezuela and PDVSA in the U.S. District Court for the District of Columbia, seeking redress under the expropriation exception of the Foreign Sovereign Immunities Act ("FSIA"),28 U.S.C. § 1605(a)(3). The FSIA provides that the federal or state courts may not exercise jurisdiction over a foreign state except in certain enumerated exceptions, including "in any case… in which rights in property taken in violation of international law are in issue." The district court found that it had jurisdiction as to H&P-IDC's expropriation claim but not as to H&P-V's expropriation claim. Despite international and U.S. precedent suggesting that a country's taking of property from its own nationals, "and especially of its corporations," is not a violation of international law, the D.C. Circuit overturned the district court's holding as to H&P-V and held that both Plaintiffs could proceed.
The D.C. Circuit reasoned that the takings could have been discriminatory—i.e., the taking could have violated international law by unfairly singling out H&P-V due to its association with an American company. Because the drilling rigs were a unique asset, the court could not find an implied motive based on which property was taken and which was not. The court instead looked to the public statements surrounding the taking. Taking the facts in the light most favorable to H&P-V, the court found that the abundance of blatantly anti-American statements demonstrated that Venezuela's motives were unreasonable and violated international law.
In affirming jurisdiction over H&P-IDC's expropriation claim, the court considered whether the American parent had sufficient property rights in the subsidiary's assets. The court held that H&P-IDC need not have legal title to any of the taken assets; it can assert those rights "derivatively" if it can show a "cognizable property interest" such as exclusive beneficial ownership, control, and possession.
Separately, the court also considered whether H&P-V could bring a breach of contract claim under the FSIA's commercial activity exception. Overturning the district court on that point, the D.C. Circuit held that the contracts—formed between two Venezuelan entities and governed by Venezuelan law—did not have a "direct effect" on the U.S. sufficient to establish U.S. jurisdiction over Defendants regarding the alleged breach of contract.