Helmerich & Payne International Drilling Co. v. Bolivarian Republic of Venezuela
415 U.S. App. D.C. 21
D.C. Cir.2015Background
- Helmerich & Payne International Drilling Co. (H&P-IDC, U.S. parent) operated in Venezuela through Helmerich & Payne de Venezuela (H&P-V), a Venezuelan corporation that owned ten specialized rigs contracted to PDVSA.
- PDVSA fell behind on payments, unpaid receivables exceeded $100 million, and H&P-V ceased performance and stacked rigs pending payment.
- In June–July 2010 PDVSA (with Venezuelan National Guard support) blockaded and then seized H&P-V’s rigs; Venezuelan authorities issued a Bill of Agreement and presidential decree directing forcible possession and nationalization; PDVSA began operating the rigs.
- H&P-V and H&P-IDC sued in D.C. federal court under the FSIA: (1) expropriation (28 U.S.C. §1605(a)(3)) against Venezuela/PDVSA, and (2) breach of contract relying on the commercial-activity exception (28 U.S.C. §1605(a)(2)) against PDVSA.
- The district court found H&P-V was a Venezuelan national (foreclosing a straightforward expropriation claim) but allowed the parent’s standing, declined to dismiss on act-of-state grounds, and denied dismissal on the commercial-activity claim. On appeal the D.C. Circuit: affirmed some rulings, reversed others.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether H&P-V is a national of Venezuela for expropriation exception purposes | H&P-V argued the taking was discriminatory against U.S. interests allowing U.S. jurisdiction despite corporate nationality | Venezuela argued corporate nationality (incorporation under Venezuelan law) invokes the domestic-takings rule barring U.S. adjudication | Court upheld district court: H&P-V is a Venezuelan national, but discriminatory-takings allegations were non-frivolous so the subsidiary’s expropriation claim survives dismissal at jurisdictional stage |
| Whether U.S. parent (H&P-IDC) has standing/"rights in property" under §1605(a)(3) | H&P-IDC argued sole-shareholder status, provision of the rigs, and loss of control created cognizable property rights | Venezuela invoked corporate-separateness and Dole Food to say parent lacks direct property rights in subsidiary assets | Court held parent sufficiently alleged rights in property; parent’s expropriation claim was allowed to proceed |
| Whether act-of-state doctrine bars adjudication | Plaintiffs argued FSIA jurisdictional showing should be decided before or without dismissing on act-of-state; act-of-state was not ripe for interlocutory review | Venezuela argued act-of-state precludes judicial inquiry into Venezuelan public acts | Court declined to resolve act-of-state on appeal (would not exercise pendent jurisdiction) and left it for district court proceedings |
| Whether PDVSA’s breach caused a “direct effect” in the U.S. under the commercial-activity exception | H&P-V alleged: (a) subcontract and vendor losses in U.S., (b) payments to H&P-IDC’s Oklahoma bank, (c) disrupted U.S.–Venezuela flow of commerce | PDVSA argued (a) no U.S. subcontract losses occurred, (b) payment location was discretionary, (c) any commerce interruption resulted from H&P’s stopping operations, not PDVSA’s breach | Court held no direct effect in the U.S.; commercial-activity exception did not apply and district court’s denial should be reversed |
Key Cases Cited
- Republic of Argentina v. Weltover, 504 U.S. 607 (1992) (establishes analysis for direct-effect commercial-activity exception claims)
- Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964) (act-of-state doctrine; historic treatment of foreign expropriations)
- Dole Food Co. v. Patrickson, 538 U.S. 468 (2003) (corporate separateness limits parent’s direct ownership of subsidiary assets under FSIA contexts)
- Permanent Mission of India to the United Nations v. City of New York, 551 U.S. 193 (2007) (FSIA exception focuses on broad "rights in" property, not limited to ownership)
- Agudas Chasidei Chabad of U.S. v. Russian Federation, 528 F.3d 934 (D.C. Cir. 2008) (FSIA jurisdictional-dismissal standard: dismiss only if claims are wholly insubstantial or frivolous)
- Ramirez de Arellano v. Weinberger, 745 F.2d 1500 (D.C. Cir. 1984) (shareholder beneficial ownership can support property interests despite corporate title)
- Princz v. Federal Republic of Germany, 26 F.3d 1166 (D.C. Cir. 1994) (direct effect requires no intervening element; flows in a straight line)
- Cruise Connections Charter Mgmt. v. Canada, 600 F.3d 661 (D.C. Cir. 2010) (third-party U.S. contracts can support direct-effect showing where U.S. losses are caused)
- Goodman Holdings v. Rafidain Bank, 26 F.3d 1143 (D.C. Cir. 1994) (discretionary choice of payment forum defeats a Weltover-style direct-effect claim)
- McKesson Corp. v. Islamic Republic of Iran, 52 F.3d 346 (D.C. Cir. 1995) (continuous flow of commerce between U.S. and foreign state can produce a direct effect)