GALVESTON, Texas (CN) - A dispute between Iraq and Kurdistan over 1 million barrels of oil "raises legal, not political questions" that can be resolved by a U.S. court, a federal judge ruled.
The Ministry of Oil of the Republic of Iraq (MoO) sued the Ministry of Natural Resources of the Kurdistan Regional Governate of Iraq (KRG) on July 28, 2014, seeking possession of 1,032,212 barrels of crude oil it claims "belongs to the people of the Republic of Iraq."
The Kurdistan Regional Government is a semi-autonomous entity that controls oil-rich northeastern Iraq.
The oil came from wells in Kurdistan-held Iraq, according to the lawsuit.
"In December of 2013, without the consent of the MoO ... the Kurdistan Regional Government began pumping the illegally produced crude oil through a pipeline originating in Iraq and running to Ceyhan in Turkey," Iraq said in the complaint.
Iraq claimed it told the pipeline operator to hold the crude, but at the instruction of the Kurdish government the operator loaded the oil onto the United Kalavrvta, a Marshall Islands-flagged tanker.
The tanker then headed for Augusta, Ga. but changed its destination to Galveston mid-trip, according to the complaint.
Kurdistan has reportedly sold the oil to a U.S. buyer, identified in court records as John Doe.
But in light of Iraq's lawsuit, Kurdistan has kept the oil on the United Kalavrvta, outside U.S. waters and jurisdiction, so Iraq cannot seize it. The tanker has been circling a buoy 60 miles offshore Galveston since July 2014, according to vesselfinder.com.
The oil's fate rests with U.S. District Judge Gray Miller.
Miller ruled for Kurdistan in August 2014 and dismissed the lawsuit, finding that U.S. maritime law doesn't apply because the alleged oil theft happened far from sea.
But that did not resolve the matter, because Iraq filed an amended complaint with a new argument that the Foreign Sovereign Immunities Act establishes jurisdiction.
Kurdistan once again moved to dismiss, claiming the "political question doctrine" barred Iraq's claims.
The doctrine excludes from judicial review disputes involving policy decisions better suited to Congress and the executive branch.
In court filings, Kurdistan told Miller he shouldn't "take sides in a political and constitutional impasse over Iraq's most critical resource," and brought the judge's attention to U.S. State Department press briefings that support an oil management deal between Iraq and Kurdistan.
But Iraq claims the State Department has also said it considers the oil dispute to be a commercial transaction that doesn't involve the U.S. government. And the State Department even warned Kurdistan it could face legal ramifications over the oil, Iraq said.
Miller sided with Iraq in a Jan. 7 order and declined to dismiss its amended complaint.
"The political question doctrine deals with 'political questions,' not merely 'political cases.' The MoO's claims seek an interpretation of the text of the Iraqi Constitution. ... This does not involve political questions, but classic judiciary functions," Miller wrote.
Kurdistan also tried to persuade Miller the Foreign Sovereign Immunities Act gives foreign states immunity from U.S. courts' jurisdiction.
Though Miller said it is "undisputed" Kurdistan qualifies as a foreign state under the FSIA, he found the oil feud falls under a "commercial activities" exception in the statute that gives U.S. courts jurisdiction.
"The conduct being challenged in this court is the alleged converting and selling of Iraqi oil. When considered in this way, the activity is clearly commercial," Miller wrote in the 24-page ruling.
He ordered the parties to update him on the status of settlement talks by Jan. 17.
Kurdistan's attorney, Harold Watson of Chaffe McCall in Houston, did not respond to a comment request.