Supreme Court sides with Venezuela over American oil rigs dispute

The US Supreme court has ruled against an American oil drilling company, Helmerich & Payne, which claimed Venezuela unlawfully seized 11 drilling rigs in 2010.

A unanimous Supreme Court decision on Monday gave the government of Venezuela another chance to fend off the lawsuit alleging that Caracas illegally seized 11 oil drilling rigs from the Oklahoma-based company in 2010, according to AP.

The justices ruled 8-0 that the lower courts set the bar too low in allowing the lawsuit, brought by Helmerich & Payne International Drilling Company, to move forward.

Justice Stephen Breyer said companies must make a stronger argument at the outset of a case that property was actually taken in violation of international law. He said such cases must be more than just “non-frivolous” to avoid being tossed out.

“A sovereign’s taking or regulating to its own nationals’ property within its own territory is often just the kind of foreign sovereign’s public act that the restrictive theory of sovereign immunity ordinary leave immune from suit,”wrote Justice Breyer.
He argued if cases against foreign governments are allowed to proceed too easily in American courts, it could “create friction with other nations and reciprocal actions against this (US) country.”

The US government sided with Venezuela, arguing that a ruling in favour of the company could harm foreign relations and lead other countries to retaliate against American interests.

At issue, was whether Venezuela violated international law when it expropriated drilling equipment from the Venezuelan subsidiary of the US-based corporation, Helmerich & Payne in 2010.

Venezuela had argued that the seizure did not violate international law because the rigs were owned by a Venezuelan subsidiary of the US company.

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 SA and PDVSA Petroleo.

From 1975 to 2010, PDVSA contracted with Helmerich & Payne -Venezuela (H&P-V) for use of its specialized deep water oil-drilling equipment. At the beginning of 2007, PDVSA fell behind in its payments under ten different contracts with H&P-V in excess of $100 million US dollars.

In 2009 H&P-V said it would not renew its contracts unless all existing payments improved. In 2010, then President Hugo Chavez, ordered the expropriation of the 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 parent company in the US, H&P-IDC, filed suit in the US District Court for DC against both Venezuela and PDVSA claiming there was an illegal seizure of property in violation of international law.

Venezuela and PDVSA countered that they could not be sued in US 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.

Justice Gorsuch took no part in the consideration or decision of this case.