Venezuelan Oil Seizure Case Will Proceed in D.C.

WASHINGTON, D.C. (CN) - Venezuela must face claims that its seizure of oil drilling facilities belonging to American companies violated international law, the D.C. Circuit ruled.

In 2010, after decades of cooperation between Venezuelan oil companies and the local subsidiaries of American energy firms, Petroleos De Venezuela and the Venezuelan National Guard blockaded facilities owned by Oklahoma-based Helmerich & Payne International Drilling Co. and its in-country subsidiary, Helmerich & Payne De Venezuela, C.A.

Then, in June 2010, it was announced that the government of former president Hugo Chavez had nationalized the American oil rigs, which would increase oil and gas production and open jobs for Venezuelans.

Helmerich & Payne and its subsidiary sued the Venezuelan government under exemptions to the

Foreign Sovereign Immunities Act in D.C. District Court, alleging that PDVSA's seizure of its rigs constituted a taking of property in violation of international law, and alleging breach of contract against PDVSA.

Venezuela and PDVSA filed a motion to dismiss the lawsuit, arguing that the seizure did not fall under the FSIA's violation of international law or expropriation exceptions, and that the act-of-state doctrine bars the suit completely.

In September 2013, U.S. District Judge Robert Wilkins held that Helmerich & Payne International Drilling and its Venezuelan subsidiary have standing to pursue its expropriation claim against the Bolivarian Republic of Venezuela and its state-sponsored energy companies, Petroleos de Venezuela and PDVSA Petroleo.

Though Judge Wilkins refused to grant standing to Helmerich to sue for breach of contract under the Foreign Sovereign Immunities Act, he allowed the company's expropriation claim to proceed on account of its Venezuelan national status.

"To summarize, the Court finds that H&P-V is a national of Venezuela under international law, H&P-IDC has standing to pursue the expropriation claim ... and the time is not yet ripe for a decision on whether the act of state doctrine bars plaintiffs' expropriation claims," the judge ruled.

On review, the D.C. Circuit upheld Judge Wilkins denial of Venezuela's motion to dismiss the expropriation claim, but reversed his ruling in all other respects and remanded the case for further proceedings.

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