Oil Nationalization in Venezuela Faces Review

WASHINGTON (CN) — The U.S. Supreme Court agreed Tuesday to decide whether Venezuela violated international law by seizing oil-drilling facilities belonging to U.S. companies.

Venezuelan oil companies and the local subsidiaries of U.S. energy firms had enjoyed decades of cooperation when in 2010 Petroleos de Venezuela and the Venezuelan National Guard blockaded facilities owned by Oklahoma-based Helmerich & Payne International Drilling and its in-country subsidiary, Helmerich & Payne De Venezuela.

That June, the government of former president Hugo Chavez announced that it had nationalized the U.S. oil rigs, which would increase oil and gas production and open jobs for Venezuelans.

Helmerich & Payne and its subsidiary in turn filed a federal complaint in Washington, D.C., against the Venezuelan government.

Venezuela petitioned the high court relief after the D.C. Circuit decided 2-1 last year that the oil companies could pursue their takings claim because they had pleaded facts falling within the expropriation exception to the Foreign Sovereign Immunities Act.

Per its custom, the Supreme Court did not issue any comment in taking up the case Tuesday.

The justices did note that they would limit their review to the general standard for reviewing jurisdictional pleadings under the expropriation exception.

Venezuela had noted in its petition that courts of appeals are divided 4-2 on this question.

The D.C. Circuit fell in with the Ninth on the issue: dismissing "such a claim on jurisdictional grounds only if it is wholly insubstantial and frivolous, offering little protection for a foreign state's sovereignty at the pleading stage."

By contrast, the Second, Seventh, Eighth and 11th Circuits "will dismiss an expropriation-exception claim if it fails to meet the usual standards for facial and factual jurisdictional attacks under Fed. R. Civ. P. 12(b)(1)."

"They do so even when the jurisdictional and merits inquiries overlap, recognizing that foreign sovereigns enjoy immunity not only from liability, but from the burdens of litigation," Venezuela's petition said.

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