Helmerich & Payne Intl v. Bolivarian Rep. of Venezuela ( 2018 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 30, 2018 Decided August 7, 2018
No. 13-7169
HELMERICH & PAYNE INTERNATIONAL DRILLING CO.,
APPELLEE
HELMERICH & PAYNE DE VENEZUELA, C.A.
APPELLEE/CROSS-APPELLANT
v.
BOLIVARIAN REPUBLIC OF VENEZUELA, ET AL.,
APPELLANTS/CROSS-APPELLEES
Consolidated with 13-7170, 14-7008
On Remand from the Supreme Court of the United States
Catherine E. Stetson argued the cause for the
appellants/cross-appellees. With her on the briefs were William
L. Monts, III, Mitchell P. Reich, Bruce D. Oakley, Joseph D.
Pizzurro, Robert B. García, Kevin A. Meehan, and Juan O.
Perla.
Catherine M.A. Carroll argued the cause for
appellees/cross-appellant. With her on the briefs were David
W. Ogden and David W. Bowker.
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Jessie K. Liu, U.S. Attorney, and Douglas N. Letter,
Sharon Swingle, and Lewis S. Yelin, Attorneys, U.S.
Department of Justice, were on the brief for amicus curiae
United States of America.
Before: GARLAND, Chief Judge, TATEL, Circuit Judge, and
SENTELLE, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge TATEL.
Opinion concurring in part and concurring in the judgment
filed by Senior Circuit Judge SENTELLE.
TATEL, Circuit Judge: After Venezuela and two of its
agencies seized all assets of an American drilling company’s
Venezuelan subsidiary, both parent and subsidiary sued in
federal court. In a prior opinion, we held that, notwithstanding
the defendants’ efforts to invoke sovereign immunity, both
companies’ suits could go forward because each company had,
consistent with the then-governing circuit standard, made a
“non-frivolous” claim that its case fell into a statutory
immunity exception that permits suit against foreign-state
defendants in certain cases involving takings that violate
international law. Helmerich & Payne International Drilling
Co. v. Bolivarian Republic of Venezuela (Helmerich II), 784
F.3d 804, 814, 816 (D.C. Cir. 2015) (quoting Agudas Chasidei
Chabad of United States v. Russian Federation, 528 F.3d 934,
941 (D.C. Cir. 2008)). The Supreme Court, however,
overturned this circuit’s “nonfrivolous-argument standard” and
vacated our prior judgment. Bolivarian Republic of Venezuela
v. Helmerich & Payne International Drilling Co. (Helmerich
III), 137 S. Ct. 1312, 1324 (2017). Tasked now on remand with
determining whether either company has alleged facts that are
sufficient, if true, to establish that it has in fact suffered a taking
in violation of international law, we conclude that only the
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American parent—and not its Venezuelan subsidiary—has
done so. We therefore affirm the district court’s dismissal of
the subsidiary’s claims, as well as its denial of the defendants’
motions to dismiss the parent’s claims.
I.
The parties agree that we are to resolve the issues
presented here “solely on the basis of the allegations in the
complaint.” Joint Stipulation and Motion to Establish a
Briefing Schedule for the Adjudication of Defendants’ Motions
to Dismiss at 2, Helmerich & Payne International Drilling Co.
v. Bolivarian Republic of Venezuela (Helmerich I), 971 F.
Supp. 2d 49 (D.D.C. 2013) (No. 11-cv-1735) (“Stipulation”),
ECF No. 34. We therefore draw our factual recitation from the
complaint’s allegations, assuming their truth and construing
them in the light most favorable to the plaintiff companies. See
Helmerich II, 784 F.3d at 811.
Starting in the late 1990s, Venezuelan company Helmerich
& Payne de Venezuela, C.A. (H&P-V), a wholly owned
subsidiary of Oklahoma-based Helmerich & Payne
International Drilling Co. (H&P-IDC), began providing
exclusive oil- and gas-drilling services to Venezuelan state-
owned entities, including Petróleos de Venezuela, S.A., and
PDVSA Petróleo, S.A. (collectively, PDVSA), that own and
manage Venezuela’s oil reserves. Compl. ¶ 2. In order to
overcome Venezuela’s “difficult geological conditions,”
H&P-V acquired “some of the largest, most powerful, and
deepest-drilling, land-based drilling rigs available,” id. ¶ 21,
and developed “a substantial infrastructure needed to maintain,
repair, operate, and transport [its] drilling equipment,” id. ¶ 25.
The companies’ relationship with PDVSA soured after
Venezuela’s then-President Hugo Chávez replaced much of
PDVSA’s workforce in the wake of a 2002–03 strike. Id. ¶ 28.
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From then on, PDVSA “refused to make timely payments”
under its drilling contracts, id. ¶ 29, and by June 2009, PDVSA
had racked up over $113 million in debt to H&P-V, id. ¶ 51.
Consequently, when the contracts began expiring in early 2009,
H&P-V “made clear to [PDVSA] that it would not enter into
new contracts or restart drilling operations unless [PDVSA]
paid a substantial amount of [its] outstanding debt.” Id. ¶ 52.
Despite these warnings, PDVSA stopped all payments to H&P-
V in May 2010, with somewhere near $32 million in debt
remaining. Id. ¶ 56.
Matters deteriorated further the following month. In mid-
June 2010, seeking “to force H&P-V to negotiate new contract
terms immediately” and to forgive PDVSA’s outstanding debt,
id. ¶ 63, PDVSA employees, acting with assistance from the
Venezuelan National Guard and at the behest of the
Venezuelan government, blockaded eleven of H&P-V’s
drilling sites, id. ¶¶ 59–61, 65. According to contemporaneous
PDVSA press releases, the Venezuelan government had in
effect “nationalized” these drilling operations. Id. ¶ 65.
Venezuela made the nationalization official soon
thereafter. The Venezuelan National Assembly began by
“declar[ing] that the taking of all eleven of [H&P-V’s] oil
drilling rigs and associated property would be of ‘public benefit
and good.’” Id. ¶ 67. Taking up the Assembly’s
recommendation, then-President Chávez issued an
“Expropriation Decree,” which authorized the “forcible
taking” of H&P-V’s assets and declared that the “expropriated
property [would] become the unencumbered and unlimited
property of [PDVSA].” Id. ¶ 68. The complaint alleges that
Venezuela’s actions were driven, at least in part, by animus
against H&P-V due to its “U.S. ownership.” Id. ¶ 97.
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Days after the decree, PDVSA filed two eminent domain
suits in Venezuelan court to effectuate the expropriations. Id.
¶¶ 72–73. Neither proceeding, however, has progressed
beyond the earliest stages, leaving H&P-V and H&P-IDC
without compensation. Id. ¶¶ 86–87. In the meantime, PDVSA
“ha[s] been operating H&P-V’s Venezuelan business as a
going concern—employing not only the [company’s] real and
personal property but also [its] drilling rig managers, drilling
rig workers, and other professionals who were trained by, and
formerly worked for, H&P-V.” Id. ¶ 76. According to the
complaint, “[t]he seizure constituted a taking of the entirety of
[H&P-V and H&P-IDC’s] Venezuelan business operations.”
Id. ¶ 75. In other words, Venezuela and PDVSA “took the
entire business, which they now operate as a state-owned
commercial enterprise,” thus leaving H&P-V “[s]tripped of all
its productive assets,” id. ¶ 81, and without “any significant
tangible property or . . . any commercial operations in
Venezuela,” id. ¶ 85.
In late 2011, H&P-V and H&P-IDC (collectively, H&P)
sued PDVSA and Venezuela in the United States District Court
for the District of Columbia, claiming as relevant here that the
expropriation of H&P’s “business and assets” without
compensation violated international law. Id. ¶ 181. Venezuela
and PDVSA moved to dismiss for lack of jurisdiction under the
Foreign Sovereign Immunities Act of 1976, 28 U.S.C. §§ 1330,
1602–1611, which provides that a foreign state, including
“agenc[ies] or instrumentalit[ies]” like PDVSA, id. § 1603(a),
“shall be immune from the jurisdiction of the courts of the
United States” unless a statutory exception applies, id. § 1604.
In response, H&P maintained that the alleged takings fit within
one such exception, the “expropriation exception,” which
authorizes jurisdiction over a foreign state where “rights in
property taken in violation of international law are in issue” and
where—a matter not presently at issue—that property is
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sufficiently connected to commercial activity inside the United
States. Id. § 1605(a)(3).
To streamline resolution of this jurisdictional issue, the
parties agreed to seek the district court’s initial decision on
several threshold matters on the basis of the complaint alone.
Stipulation at 3. The parties asked the court to determine, first,
whether H&P-V is “a national of Venezuela under international
law” for purposes of the expropriation exception and, second,
whether H&P-IDC has prudential standing to assert an
expropriation claim. Id.
Based on its resolution of these threshold questions, the
district court dismissed H&P-V’s expropriation claim but held
that H&P-IDC’s could proceed. See Helmerich I, 971 F. Supp.
2d at 73. As for the Venezuelan-incorporated H&P-V, the court
concluded that it is “considered a national of Venezuela under
international law,” id. at 61, and so failed to satisfy the
expropriation exception’s requirements because a state’s
seizure of its own national’s property is not typically a
“violation of international law,” 28 U.S.C. § 1605(a)(3). As for
the U.S.-incorporated H&P-IDC, the district court
acknowledged that a corporate parent generally lacks
prudential standing to enforce the rights of its subsidiary, see
Helmerich I, 971 F. Supp. 2d at 70, but found that rule
inapplicable because H&P-IDC sought “to enforce [its] own
individual rights,” id. at 71 (emphasis added). According to the
complaint, Venezuela had “deprived H&P-IDC, individually,
of its essential and unique rights as sole shareholder of H&P-V
by dismantling its voting power, destroying its ownership, and
frustrating its control over the company.” Id. at 73. Because
“[i]nternational custom” protects such ownership rights, id. at
73 n.11, the district court concluded that H&P-IDC’s claim
falls within the expropriation exception as long as it satisfies
the exception’s commercial-activity requirement.
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On appeal, we ruled that both companies’ claims could
proceed. See Helmerich II, 784 F.3d at 808. Emphasizing that
circuit precedent established a “forgiving standard,” id. at 813,
under which we would “grant a motion to dismiss on the
grounds that the plaintiff has failed to plead a ‘taking in
violation of international law’ . . . only if the claims [were]
‘wholly insubstantial or frivolous,’” id. at 812 (quoting
Chabad, 528 F.3d at 943), we found that both companies’
expropriation claims cleared this “exceptionally low bar,” id.As for H&P-V, we acknowledged that, “generally, a
foreign sovereign’s expropriation of its own national’s
property does not violate international law,” id., but we went
on to observe that H&P-V alleged “that Venezuela ha[d]
unreasonably discriminated against it on the basis of its sole
shareholder’s nationality, thus implicating an exception” that
the Second Circuit had announced in Banco Nacional de Cuba
v. Sabbatino, 307 F.2d 845 (2d Cir. 1962), rev’d on other
grounds 84 S. Ct. 923 (1964). Helmerich II, 784 F.3d at 812.
Although characterizing Sabbatino as “[d]ated and uncited,”
we observed that it “remains good law” in the Second Circuit
and found “[no] decision from any circuit that so completely
forecloses H&P-V’s discriminatory takings theory as to
‘inescapably render the claim[] frivolous’ and ‘completely
devoid of merit.’” Id. at 813 (emphases and alteration in
original) (quoting Hagans v. Lavine, 415 U.S. 528, 538
(1974)).
As for H&P-IDC, we observed that, under United States
law, “corporate ownership aside, shareholders may have rights
in corporate property . . . ‘by virtue of their exclusive beneficial
ownership, control, and possession of the properties and
businesses allegedly seized.’” Id. at 815 (quoting Ramirez de
Arellano v. Weinberger, 745 F.2d 1500, 1516 (D.C. Cir. 1984)
(en banc), vacated 471 U.S. 1113 (1985)). Because H&P-IDC
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arguably “had property rights in [its] corporation’s assets,” id.,and because the expropriation of those assets arguably violated
international law, we concluded that H&P-IDC had satisfied
our circuit’s standard by “put[ting] its rights in property in issue
in a non-frivolous way.” Id. at 816 (quoting Chabad, 528 F.3d
at 941).
The Supreme Court vacated and remanded. Helmerich III,
137 S. Ct. at 1324. Rejecting the line of circuit precedent
establishing the permissive standard this court had employed,
the Supreme Court held that “a party’s nonfrivolous, but
ultimately incorrect, argument that property was taken in
violation of international law is insufficient to confer
jurisdiction” under the expropriation exception. Id. at 1316. It
therefore remanded for this court to consider whether H&P’s
“factual allegations . . . make out a legally valid claim”—and
not merely a non-frivolous one—“that a certain kind of right is
at issue (property rights) and that the relevant property was
taken in a certain way (in violation of international law).” Id.Accordingly, we ask whether H&P-V and H&P-IDC, now
deprived of the “forgiving standard” they previously enjoyed,
Helmerich II, 784 F.3d at 813, have pled facts that “do show
(and not just arguably show) a taking of property in violation
of international law,” Helmerich III, 137 S. Ct. at 1324.
Considering the question de novo, see Helmerich II, 784 F.3d
at 811, we separately address H&P-V and H&P-IDC’s
expropriation claims in Parts II and III, respectively. In Part IV,
we address Venezuela’s argument that any remaining claims
against it—as distinct from PDVSA—must be dismissed in
light of the expropriation exception’s commercial-activity
requirement. In conducting our analysis, we have benefited
from the helpful amicus briefs submitted by the United States.
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II.
All parties agree that H&P-V has adequately alleged that
Venezuela and PDVSA have taken property in which it has
rights, namely, its drilling rigs and related equipment. The
parties disagree, however, over whether the complaint
sufficiently alleges that those assets were taken “in violation of
international law,” as the expropriation exception requires. 28
U.S.C. § 1605(a)(3).
In arguing that H&P-V’s claim falls outside the ambit of
international law, Venezuela and PDVSA invoke the “so-called
‘domestic takings rule,’” which provides that, as a general
matter, “a foreign sovereign’s expropriation of its own
national’s property does not violate international law.” Simon
v. Republic of Hungary, 812 F.3d 127, 144 (D.C. Cir. 2016)
(quoting Helmerich II, 784 F.3d at 812). Acknowledging this
rule, H&P-V argues that it does not govern here for two
reasons: (1) H&P-V should be treated as a foreign company
under international law because Venezuelan law considers it
foreign for certain purposes, and (2) even if it is treated as a
Venezuelan company, Venezuela’s seizure of its property was
motivated by a desire to harm its foreign owner, H&P-IDC, and
so falls into an exception to the domestic-takings rule. We
consider each argument in turn.
A.
The domestic-takings rule bars H&P-V’s expropriation
claim only if, in seizing H&P-V’s assets, Venezuela
expropriated the property of “its own national[].” Helmerich II,
784 F.3d at 812. Under international law, “a corporation has
the nationality of the state under the laws of which the
corporation is organized.” Restatement (Third) of the Foreign
Relations Law of the United States (“Third Restatement”)
§ 213. Accordingly, H&P-V, a Venezuelan-incorporated
company with a legal identity distinct from that of its
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shareholders under local law, see Código de Comercio art.
201.3 (Venez.) (“Venezuelan Commercial Code”), is
considered a Venezuelan national under international law.
H&P-V rejects this straightforward reasoning. Instead, it
makes a two-step argument that international and Venezuelan
law combine to strip it of its Venezuelan nationality for
international-law purposes. First, it cites an International Court
of Justice opinion, The Barcelona Traction, Light and Power
Co. (Belg. v. Spain), 1970 I.C.J. 3 (Feb. 5), for the proposition
that “[m]unicipal law determines the [international] legal
situation . . . of . . . limited liability companies,” id. at 34, ¶ 41.
Next, it points out that a Venezuelan executive order in effect
at the time of the expropriations at issue, Decree 356,
denominated foreign-owned, domestically incorporated
companies such as itself “[i]nternational investment[s]”
entitled to special protections under domestic law. Decree
Having the Rank and Force of Law on Investment Promotion
and Protection, Decree No. 356, art. 3.2, Official Gazette No.
5,390 (Oct. 22, 1999) (Venez.) (“Decree 356”); see also id. art.
3.1 (defining “investment” to include “any of the corporate . . .
forms allow[ed] by Venezuelan law”). So, the argument runs
this way: international law directs us to “municipal law,” and
Venezuela’s “municipal law” considered H&P-V
“international” at the relevant time, so H&P-V must be
“international” vis-à-vis Venezuela for purposes of its
international-law claim.
This argument misconceives both international and
Venezuelan law. As to the former, Barcelona Traction
provides no support for the idea that a domestically
incorporated company characterized as “international” under
local law somehow loses its domestic status under international
law. The “[m]unicipal law” that, according to Barcelona
Traction, “determines [a company’s] legal situation” under
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international law, Barcelona Traction, 1970 I.C.J. at 34, ¶ 41,
consists of the “generally accepted” principles that appear time
and again in domestic legal systems throughout the world, and
not, as H&P-V would have it, “the municipal law of a particular
State,” id. at 37, ¶ 50. After studying the generally accepted
principles that govern the legal status of corporations under
domestic legal systems, the Barcelona Traction court
concluded that the limited liability company is typically
characterized by its “legal personality,” id. at 34, ¶ 40, and that
the place of legal incorporation therefore governs such a
company’s nationality under international law, see id. at 42,
¶ 70.
Nor, in any event, does Venezuelan law establish H&P-V
as “international” in any relevant sense. Purporting to create
only domestic rights capable of enforcement by “the national
courts or the Venezuelan arbitration tribunals,” Decree 356 art.
23 (emphases added), Decree 356 nowhere promised to allow
Venezuela’s domestic corporations to enforce these rights in
international tribunals. It is therefore not the sort of
governmental declaration that “ha[s] the effect of creating legal
obligations” under international law. Nuclear Tests (Austl. v.
Fr.), 1974 I.C.J. 253, 267, ¶ 43 (Dec. 20); cf., e.g., Military and
Paramilitary Activities in and Against Nicaragua (Nicar. v.
U.S.), 1984 I.C.J. 392, 418–19 (finding United States’
declaration about its intent to submit to the jurisdiction of an
international court to be binding).
In seizing H&P-V’s assets, Venezuela may well have
violated the local protections it promised foreign-owned,
domestically incorporated companies in Decree 356. But
because that decree does nothing to alter H&P-V’s status as a
Venezuelan company under international law, the domestic-
takings rule applies: the proper place for a Venezuelan
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company to assert its property rights against the Venezuelan
government is a Venezuelan court.
B.
Given H&P-V’s Venezuelan nationality, its takings claim
against Venezuela is a matter of domestic, not international,
law under the domestic-takings rule. H&P-V insists, however,
that the rule has a relevant exception: if a state expropriates the
property of a domestically incorporated company with the
discriminatory aim of harming the company’s foreign owners,
it violates customary international law notwithstanding the
domestic-takings rule. And because Venezuela’s seizure of its
assets was “discriminatory, based on . . . [its] connections to
the United States,” Compl. ¶ 180, H&P-V contends, it has
properly alleged that its property was “taken in violation of
international law,” 28 U.S.C. § 1605(a)(3).
Venezuela and PDVSA beg to differ. They respond, first,
that H&P-V has failed to demonstrate that international law
recognizes a discrimination exception to the domestic-takings
rule and, second, that even if such an exception exists, the
complaint’s factual allegations fail to plausibly establish that
Venezuela’s actions were motivated by discriminatory animus.
Because we agree with Venezuela and PDVSA on the former
point, we need not address the latter.
As an initial matter, H&P-V misunderstands its burden.
Pointing to the fact that a foreign-state defendant “bears the
burden of proving that the plaintiff’s allegations do not bring
its case within a statutory exception to immunity,” Phoenix
Consulting, Inc. v. Republic of Angola, 216 F.3d 36, 40 (D.C.
Cir. 2000), H&P-V apparently believes that in assessing its
claim that its property was taken “in violation of international
law,” 28 U.S.C. § 1605(a)(3), we must accept any
representation it chooses to make about the content of
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international law unless Venezuela and PDVSA somehow
definitively disprove it. This is not the law. Although H&P-V
is correct that Venezuela and PDVSA “bear[] the ultimate
burden of persuasion to show [an immunity] exception does not
apply,” H&P-V bears the “initial burden” of overcoming the
Act’s “presumption of immunity” by making out a legally
sufficient case that an exception does apply in the first place.
Bell Helicopter Textron, Inc. v. Islamic Republic of Iran, 734
F.3d 1175, 1183 (D.C. Cir. 2013). In other words, as the
Supreme Court made clear in this very case, H&P-V must
present “a valid claim that ‘property’ has been ‘taken in
violation of international law,’” Helmerich III, 137 S. Ct. at
1318 (quoting 28 U.S.C. § 1605(a)(3)), before the burden shifts
to Venezuela and PDVSA to disprove that claim.
Because H&P-V does not contend that any express
international agreement, such as a treaty, entitles it to assert a
cognizable discriminatory takings claim against its own state
of incorporation, we ask whether H&P-V has shown that
Venezuela has, in seizing its assets, violated customary
international law, see Third Restatement § 102(1), i.e., the
“general and consistent practice” that states follow out of “a
sense of legal obligation” to the international community, id.
§ 102(2). In conducting this inquiry, we give “substantial
weight” to the judgments and opinions of national and
international judicial bodies, scholarly writings, and
unchallenged governmental pronouncements that “undertake
to state a rule of international law.” Id. § 103(2).
H&P-V has failed to make the requisite showing. Instead,
it relies on an underwhelming hodgepodge of sources, none of
which unmistakably contemplates a discrimination exception
to the domestic-takings rule, and all of which derive from a
single country—the United States—that expressly argues in its
amicus brief in this case that no such exception exists. See U.S.
14
Br. 9–10 (“Customary international law does not ignore the
nationality of a corporation even when it is alleged that the
state’s expropriation of a domestically incorporated company
was motivated by discrimination against foreign
shareholders.”). Although this scattershot showing was
sufficient the first time around, i.e., to render H&P-V’s claim
that Venezuela violated international law neither “inescapably
. . . frivolous” nor “completely devoid of merit,” Helmerich II,
784 F.3d at 813 (quoting Hagans, 415 U.S. at 538, 543), it
cannot now clear the higher hurdle of demonstrating that the
discrimination exception H&P-V urges has in fact crystallized
into an international norm that bears the heft of customary law.
H&P-V principally relies on Sabbatino, a 1962 Second
Circuit decision that H&P-V reads to hold that a state violates
international law if it seizes the assets of a domestically
incorporated company out of a desire to harm the company’s
foreign owners. Decided against the backdrop of a Cuban
executive resolution that authorized the expropriation of all
American-owned property in Cuba, Sabbatino considered
whether Cuba’s uncompensated seizure of sugar belonging to
a Cuban company that was more than 90% American-owned,
see Sabbatino, 307 F.2d at 849–50, comported with “the rules
and principles of international law,” id. at 854. The court held
that it did not. See id. at 868. Despite acknowledging the
domestic-takings rule, the court “place[d] no significance . . .
on the fact that [the company] was chartered in Cuba” because
the expropriation was motivated by anti-American animus and,
in the court’s view, “[w]hen a foreign state treats a corporation
in a particular way because of the nationality of its
shareholders, it would be inconsistent . . . in passing on the
validity of that treatment to look only to the ‘nationality’ of the
corporate fiction.” Id. at 861. Although Sabbatino was reversed
on other grounds, see Banco Nacional de Cuba v. Sabbatino,
376 U.S. 398 (1964), the Second Circuit on remand reaffirmed
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“with emphasis” that the Cuban company’s nationality was “of
no particular significance” under international law because the
expropriation targeted the company’s American shareholders,
Banco Nacional de Cuba v. Farr, 383 F.2d 166, 185 (2d Cir.
1967).
Venezuela and PDVSA, together with the United States,
argue that H&P-V misreads Sabbatino. Pointing to the
opinion’s statement that “the nationality of the corporation is
disregarded” under international law “when it is different from
the nationality of most of the corporation’s shareholders,”
Sabbatino, 307 F.2d at 861, they contend that the case relied on
this “incorrect premise,” U.S. Br. 9, rather than any
discrimination principle, as the basis for rejecting application
of the domestic-takings rule.
We agree that Sabbatino is wrong to the extent it suggests
that corporate nationality under international law depends on
the nationality of the corporate owners rather than the place of
incorporation. See supra at 9–12. We need not, however,
determine whether Sabbatino rested its rejection of the
domestic-takings rule on this mistaken suggestion. Even
assuming that it relied on the discrimination theory H&P-V
urges, Sabbatino—a single, half-century-old case from a single
intermediate court in a single country—is by itself insufficient
to establish a “general and consistent practice of states.” Third
Restatement § 102(2); see also Simon, 812 F.3d at 146 (urging
“caution before concluding that a state’s actions against its own
nationals infringe a prohibition of sufficiently universal
acceptance to amount to a ‘violation of international law’”
(quoting 28 U.S.C. § 1605(a)(3))).
Nor do the scattered authorities beyond Sabbatino to
which H&P-V points contain any clear suggestion that
international law recognizes a discrimination exception to the
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domestic-takings rule. As an initial matter, the authorities
Sabbatino itself cited contain no such suggestion. Some
sources it cited were voluntary settlements that made no
pronouncement on the scope of international law. See, e.g.,
Settlement of the Claim of the Standard Oil Company of New
Jersey Arising Out of the Destruction of Property in 1916, in
U.S. Dep’t of State, 3 Papers Relating to the Foreign Relations
of the United States, 1929, at 757–58, Docs. 858–59 (1944);
Settlement of the Controversy of the Tlahualilo Company with
the Government of Mexico, in U.S. Dep’t of State, Papers
Relating to the Foreign Relations of the United States, with the
Address of the President to Congress, December 2, 1913, at
993–1010, Docs. 1295–99 (1920). And of the authorities
Sabbatino cited that did evaluate a domestic taking under
international law, none indicated that the motive of the state
effecting the taking was relevant to legality. See, e.g.,
Arbitration of the Claim of Alsop and Company, an American
Corporation, v. Chile, Award, in U.S. Dep’t of State, Papers
Relating to the Foreign Relations of the United States, with the
Annual Message of the President Transmitted to Congress,
December 7, 1911, at 38–53, 41, Doc. 35 (1918) (rejecting
Chile’s attempt to invoke domestic-takings rule as
“inconsistent with the terms” upon which the parties presented
the case for arbitration); Arbitration of Claims of the Salvador
Commercial Company et al. v. Salvador, in U.S. Dep’t of State,
Papers Relating to the Foreign Relations of the United States,
with the Annual Message of the President Transmitted to
Congress, December 2, 1902, at 838–73, 849, Docs. 799–800
(1903) (allowing a domestic-takings claim to proceed against a
state that had granted a domestic concession to a foreigner on
the condition that the foreigner incorporate domestically).
Just as the authorities upon which Sabbatino relied provide
no support for a discrimination exception to the domestic-
takings rule, neither do those that followed in Sabbatino’s
17
wake. H&P-V cites the United States’ amicus brief in
Sabbatino’s Supreme Court proceedings, but that brief—in
contrast to the brief, adverse to H&P-V, that the United States
has submitted here—takes no position on whether a state’s
discriminatory action against a domestic company violates
international law. See Brief for the United States as Amicus
Curiae at 2–3, Banco Nacional de Cuba v. Sabbatino, 376 U.S.
398 (1964), in 2 I.L.M. 1009, 1012 (1963) (arguing only that
United States courts should decline to adjudicate foreign
governments’ domestic acts). And of the law review articles
H&P-V cites that agree with Sabbatino that the discriminatory
confiscation of foreign property violates international law,
none make any effort to justify applying that rule to the
confiscated property of a domestic corporation. See Roland A.
Paul, The Act of State Doctrine: Revived but Suspended, 113
U. Pa. L. Rev. 691, 706–07 (1965); John R. Stevenson, The
Sabbatino Case—Three Steps Forward and Two Steps Back,
57 Am. J. Int’l L. 97, 97 (1963); Martin Domke, Foreign
Nationalizations: Some Aspects of Contemporary International
Law, 55 Am. J. Int’l L. 585, 602–03 (1961); Comment, The Act
of State Doctrine—Its Relation to Private and Public
International Law, 62 Colum. L. Rev. 1278, 1311 (1962).
Equally unpersuasive are H&P-V’s citations to a U.S.
ambassador’s responses to the Cuban expropriation resolution
that lay at the heart of the Sabbatino litigation. Although the
ambassador characterized the resolution as “manifestly in
violation of . . . international law” because it was “in its essence
discriminatory,” he, like the law review articles just mentioned,
focused his criticism on the fact that the resolution “specifically
limited . . . its application to the seizure of property owned by
nationals of the United States.” Press Release, U.S. Dep’t of
State, U.S. Protests New Cuban Law Directed at American
Property (July 16, 1960), in 43 Department of State Bulletin
171, 171 (1960) (emphasis added); see also Press Release, U.S.
18
Dep’t of State, United States Protests Cuban Seizures of
Property (Aug. 9, 1960), in 43 Department of State Bulletin
316, 316 (1960) (expressing “indignant protest” over “the
expropriation of property located in Cuba of citizens of the
United States” (emphasis added)).
H&P-V next cites U.S. legislation enacted in response to
the Cuban expropriations. It first points to a program
established pursuant to the International Claims Settlement Act
of 1949, 22 U.S.C. §§ 1621 et seq., that provided a mechanism
for “nationals of the United States” to submit expropriation
claims against Cuba to the U.S. Foreign Claims Settlement
Commission in order to allow that body to “obtain information
concerning the total amount of such claims” for diplomatic
purposes, id. § 1643. This program lends H&P-V no support.
To be sure, the Commission, in at least one case, upheld the
claim of an American parent company “for the value of its
ownership interest” in a wholly owned Cuban subsidiary that
Cuba had “seized.” Foreign Claims Settlement Commission,
Final Report of the Foreign Claims Settlement Commission’s
Adjudication of Claims in Its Cuba Program 374 (1972). But
the fact that a nation violates a foreign company’s rights under
international law if it effects a discriminatory taking of that
company’s property, including an entire domestically
incorporated subsidiary, see infra at 22–24, hardly suggests
that international law gives a domestic company protection
against its own government for the seizure of its property.
H&P-V also points to a Foreign Assistance Act amendment
that requires the President to suspend assistance to any foreign
government that “has nationalized or expropriated or seized
ownership or control of property owned by . . . any corporation,
partnership, or association not less than 50 per centum
beneficially owned by United States citizens” unless that
government “take[s] appropriate steps . . . to discharge its
obligations under international law toward such citizen or
19
entity.” Act of Aug. 1, 1962, Pub. L. No. 87-565, § 301(d)(3),
76 Stat. 255, 261 (codified at 22 U.S.C. § 2370(e)(1)(A)). That
amendment, however, offers no insight into what “steps”
international law might require, especially where the majority
American-owned company is incorporated domestically within
the expropriating state. Finally, H&P-V contends that the
expropriation exception to the Foreign Sovereign Immunities
Act was intended to offer protection from the sorts of takings
that Congress has elsewhere characterized as efforts by “radical
governments” to “strik[e] a blow at the United States
Government.” S. Rep. No. 93-676, at 26 (1974). But H&P-V
identifies nothing suggesting that Congress intended to extend
this protection to companies organized under the laws of those
very governments. See generally H. Comm. on Foreign Affairs,
88th Cong., Expropriation of American-Owned Property by
Foreign Governments in the Twentieth Century 22–28 (1963),
in 2 I.L.M. 1066, 1091–97 (1963).
Moving beyond the 1960s, H&P-V points to several
bilateral investment treaties that prohibit a signatory from
seizing the assets of a corporation organized under its laws if
that corporation is the wholly owned subsidiary of a parent
incorporated in a different signatory. These treaties, however,
are specific, bargained-for agreements between nations and
therefore offer little evidence that the signatories would
perceive “a sense of legal obligation” to follow the same rules
under international custom absent a negotiated treaty. Third
Restatement § 102(2).
Finally, H&P-V turns to the Restatements, both Second
and Third, of the Foreign Relations Law of the United States.
This move is unavailing as well. The Third Restatement,
although citing Sabbatino, Third Restatement § 712 Reporter’s
Note 5, points to no other authority that has adopted the
discrimination theory it purportedly embraced. And while that
20
Restatement acknowledges that a nation with “significant
links” to a company incorporated in a foreign country can
sometimes represent that company diplomatically “against the
state of incorporation itself,” id. § 213 Reporter’s Note 3, or
can even choose to “treat the corporation as its national” for
diplomatic purposes, id. § 213 cmt. d, it nowhere suggests that
the company itself has an international-law claim against its
state of incorporation in the event of a discriminatory
expropriation, see also Barcelona Traction, 1970 I.C.J. at 41–
45, ¶¶ 69–84 (noting that “the lack of capacity of [a] company’s
national State to act on its behalf” can be grounds for the
corporate owners’ state to offer diplomatic protection, id. 41
¶ 69, but pointing out that “the claim of the State is not identical
with that of the individual or corporate person whose cause is
espoused,” id. 44 ¶ 79).
Finding scant support in the more recent Third
Restatement, H&P-V looks back fifty years to the Second.
There, in the comments accompanying a rule involving dual
citizens that never made its way into the Third Restatement, it
finds a helpful example, also absent from the Third
Restatement. See Restatement (Second) of the Foreign
Relations Law of the United States § 171 cmt. d. The problem
for H&P-V, however, is that the Restatement cites no support
for the example. And given that the Restatement purports to
codify international law, not to create it, its pronouncements
are useful only if they flow from sources of positive law such
as judicial authority or reasoned scholarly commentary.
In the end, then, aside from Sabbatino, H&P-V has pointed
to a smattering of United States sources, most decades old, that
stand for little beyond the proposition that a state violates
international law by effecting the uncompensated or
discriminatory seizure of foreign-owned assets. Nothing in
these sources, however, casts doubt on the United States’
21
established position that this rule stops short of protecting
assets that belong to a domestically incorporated company,
even if international law under certain circumstances might
permit a foreign state with ties to that company to intercede
diplomatically on that company’s behalf. Because H&P-V has
therefore failed to show that the alleged seizure of its assets
amounts to a “violation of international law,” 28 U.S.C.
§ 1605(a)(3), we shall affirm the dismissal of its claim.
III.
We turn now to H&P-IDC’s expropriation claim. When
this case was previously before us, we concluded that
H&P-IDC had adequately put at issue its “rights in property
taken in violation of international law” for purposes of the
expropriation exception because (1) H&P-V presented a non-
frivolous claim that its physical assets had been “taken in
violation of international law,” and (2) H&P-IDC made a non-
frivolous argument that it had “rights in” H&P-V’s property.
28 U.S.C. § 1605(a)(3); see also Helmerich II, 784 F.3d at 814–
16. Having now concluded that H&P-V’s property was not
taken in violation of international law, however, see supra at
9–21, we are left to ask whether H&P-IDC has adequately
alleged rights in some other property that was.
As a starting point, international law prohibits a state from
taking “the property of a national of another state,” unlike the
property of its own national, without compensation. See Third
Restatement § 712(1)(c) (emphasis added). Therefore,
although the domestic-takings rule bars H&P-IDC from basing
an expropriation claim on Venezuela’s seizure of H&P-V’s
property, the rule does nothing to prohibit H&P-IDC from
basing such a claim on Venezuela’s seizure of its own property.
Carefully heeding this distinction, H&P-IDC argues that it has
put at issue two distinct property rights of its own that
Venezuela and PDVSA have “taken in violation of
22
international law.” 28 U.S.C. § 1605(a)(3). First, it argues
broadly that Venezuela has unlawfully seized its ownership
interest in its subsidiary, H&P-V. Second, and more narrowly,
it argues that Venezuela has unlawfully seized its allegedly
direct right under Venezuelan law to exercise some degree of
control over H&P-V’s expropriated assets.
A.
Most broadly, H&P-IDC contends that its right of
ownership in its wholly owned subsidiary, H&P-V, constitutes
“property taken in violation of international law.” 28 U.S.C.
§ 1605(a)(3). Venezuela and PDVSA do not dispute that this
right qualifies as “property” within the meaning of the
expropriation exception. Cf. Nemariam v. Federal Democratic
Republic of Ethiopia, 491 F.3d 470, 480 (D.C. Cir. 2007)
(finding “no reason to distinguish between tangible and
intangible property” for purposes of the exception). Our
question, therefore, is whether H&P-IDC has adequately
alleged that Venezuela and PDVSA expropriated H&P-V itself
in violation of international law.
International law undisputedly protects the “direct rights”
shareholders enjoy in connection with corporate ownership,
including “the right to any declared dividend, the right to attend
and vote at general meetings, [and] the right to share in the
residual assets of the company on liquidation.” Barcelona
Traction, 1970 I.C.J. at 36, ¶ 47; see U.S. Supp. Br. 4–5. It is
also well established that a state violates international law if it
takes “measures that have an effect equivalent to a formal
expropriation of [a foreign] shareholder’s own property rights,”
even if the state does not formally divest the shareholder of its
shares. Id. at 4; see also, e.g., 2012 U.S. Model Bilateral
Investment Treaty, Annex B (taking the view that customary
international law prohibits actions that have “an effect
equivalent to direct expropriation without formal transfer of
23
title”); Tidewater Investment SRL v. Bolivarian Republic of
Venezuela, ICSID Case No. ARB/10/5, Award, ¶ 104 (Mar. 13,
2015) (“[I]t is well accepted in international law that
expropriation need not involve a taking of legal title to
property.”); Third Restatement § 712, cmt. g (defining takings
to include “not only . . . avowed expropriations in which the
government formally takes title to property, but also . . . other
actions of the government that have the effect of ‘taking’ the
property, in whole or in large part”).
To be sure, not every state action that has a detrimental
impact on a shareholder’s interests amounts to an indirect
expropriation of the shareholder’s ownership rights. See, e.g.,
Barcelona Traction, 1970 I.C.J. at 36, ¶ 46 (“[A]n act directed
against and infringing only [a] company’s rights does not
involve responsibility towards the shareholders, even if their
interests are affected.”); U.S. Br. 12–13 (“[A] shareholder’s
direct rights generally are not implicated by state action that
depreciates the value of a corporation’s shares, even
severely.”). But where state action “is aimed at the direct rights
of the shareholder as such,” it can form the basis for an
international expropriation claim. Barcelona Traction, 1970
I.C.J. at 36, ¶ 47. As the United States explains in its amicus
brief:
[W]hen a state permanently takes over
management and control of [a foreign
shareholder’s] business, completely destroying
the beneficial and productive value of the
shareholder’s ownership of their company, and
leaving the shareholder with shares that have
been rendered useless, it has indirectly
expropriated the ownership of that business and
has responsibility under customary
24
international law to provide just compensation
to the shareholder.
U.S. Supp. Br. 12. Venezuela and PDVSA concede that this
explanation is “accurate,” Defendants-Appellants’ Supp. Br. 1,
and we agree, see, e.g., Pope & Talbot Inc. v. Government of
Canada, Interim Award, ¶ 100 (NAFTA/UNCITRAL Arb.
Trib. June 26, 2000) (understanding the “ordinary meaning” of
expropriation “under international law” to include situations in
which a foreign investment “has been nationalized” and
determining whether nationalization has occurred by asking,
among other things, whether “the Investor remains in control
of the Investment” and “directs [its] day-to-day operations”).
As it turns out, the parties’ only real dispute in connection
with H&P-IDC’s attempt to ground an expropriation claim on
the seizure of H&P-V itself is over whether the complaint
adequately alleges that Venezuela and PDVSA have
“permanently take[n] over management and control of
[H&P-V’s] business, completely destroying the beneficial and
productive value of [H&P-IDC’s] ownership of [its] company,
and leaving [H&P-IDC] with shares that have been rendered
useless.” U.S. Supp. Br. 12. We have little trouble concluding
that it does. The complaint expressly alleges that Venezuela
and PDVSA have taken H&P-V’s “entire business, which they
now operate as a state-owned commercial enterprise,” Compl.
¶ 81, and that H&P-V “no longer possesses any significant
tangible property or maintains any commercial operations in
Venezuela,” id. ¶ 85. In other words, Venezuela and PDVSA
are alleged to have taken over “the entirety of [H&P-IDC’s]
Venezuelan business operations,” id. ¶ 75, thus “depriv[ing]
H&P-IDC of its ownership and control of H&P-V,” id. ¶ 139.
These allegations describe the indirect expropriation of a
shareholder’s direct rights to a T.
25
Venezuela and PDVSA disagree. They complain that
Venezuela has neither “appointed ‘government directors’ to
run H&P-V,” Defendants-Appellants’ Supp. Br. 7, nor
“asserted the right . . . to direct legal action on H&P-V’s
behalf,” id. at 8. They also point to financial filings
unmentioned in the complaint that, according to them, show
that H&P-V has been actively pressing its own legal claims and
collecting millions of dollars in consequence. See id. at 9.
These are certainly relevant considerations that could
ultimately shed light on how much control H&P-IDC maintains
over H&P-V and whether its ownership of H&P-V retains
meaningful value. And, if propped up with evidentiary support,
they might be considered along with other such relevant facts
as part of the district court’s ultimate “fact intensive, case-by-
case inquiry” into whether Venezuela and PDVSA have in fact
committed the act of which they stand accused, namely the
wholesale nationalization of H&P-V. U.S. Supp. Br. 6.
At this point in the litigation, however, we look only to the
facts alleged in the complaint, take them as true, and construe
them in H&P-IDC’s favor. See Helmerich II, 784 F.3d at 811;
Stipulation at 2. Viewed through that lens, we think it quite
obvious that those allegations sufficiently contend that
Venezuela and PDVSA have entirely commandeered all of
H&P-V’s on-the-ground operations, leaving H&P-V with
nothing but a nominal right to compensation that has proven
worthless in Venezuela’s courts and that, we hold today, cannot
be vindicated here. In thus alleging that Venezuela and PDVSA
have expropriated its subsidiary corporation, H&P-IDC has
presented “a valid claim that ‘property’ has been ‘taken in
violation of international law.’” Helmerich III, 137 S. Ct. at
1318 (quoting 28 U.S.C. § 1605(a)(3)). We shall therefore
affirm the district court’s denial of the motions to dismiss
H&P-IDC’s expropriation claim and remand for the parties to
26
address any remaining threshold jurisdictional issues,
including whether the expropriation exception’s commercial-
activity requirement has been satisfied.
B.
Invoking a second, far narrower property interest alleged
to have been “taken in violation of international law,” 28
U.S.C. § 1605(a)(3), H&P-IDC argues that Venezuela and
PDVSA have unlawfully expropriated its allegedly direct right
under Venezuelan law to exercise some level of control over
H&P-V’s drilling equipment. Though acknowledging that the
equipment itself belonged to H&P-V, see Venezuelan
Commercial Code art. 208 (“[P]roperty contributed by
[corporate] partners becomes the property of the company
. . . .”), H&P-IDC argues that as H&P-V’s sole owner it
enjoyed certain rights in those assets under Venezuelan law,
such as the right to approve their sale, see id. art. 280(4).
Accordingly, it goes on, when Venezuela and PDVSA seized
H&P-V’s drilling rigs, they seized not only the rigs themselves,
but also H&P-IDC’s direct rights in those rigs. And those
rights, the argument runs, while less comprehensive than the
full bundle of rights that ownership affords, nonetheless
constitute legally recognized “property” subjected to
uncompensated, and therefore unlawful, expropriation by a
foreign government.
Given that we shall remand for further district-court
proceedings in connection with H&P-IDC’s broader claim, that
Venezuela and PDVSA expropriated H&P-V in its entirety, see
supra at 22–25, we think it best not to address this narrower
claim in the first instance, especially given that it raises
difficult questions about the scope of a parent company’s rights
in its subsidiary’s assets under Venezuelan law and about the
extent to which international law protects those rights,
whatever they might be. Should it become necessary for us to
27
reach these tricky questions, we would be greatly aided by the
considered judgment of the district court, which has yet to
weigh in. We shall therefore leave it to that court to consider
H&P-IDC’s narrower claim, if necessary, on remand.
IV.
One loose end remains. Venezuela argues that Simon v.
Republic of Hungary, 812 F.3d 127 (D.C. Cir. 2016), requires
the dismissal of all remaining claims against it, such that only
claims against PDVSA may proceed. Simon held that the
expropriation exception’s commercial-activity requirement
authorizes jurisdiction over expropriation claims against a
foreign state itself—as distinct from its agency or
instrumentality—only if the expropriated property “or any
property exchanged for such property is present in the United
States in connection with a commercial activity carried on in
the United States by the foreign state.” Id. at 146 (quoting 28
U.S.C. § 1605(a)(3)). Because H&P’s complaint contains no
allegation that this condition has been satisfied, Venezuela
argues, Simon requires this court to find that sovereign
immunity protects Venezuela from ongoing proceedings in this
case.
The district court declined to rule on this issue, principally
because it is “not one of the initial issues that the parties jointly
agreed to brief prior to jurisdictional discovery.” Helmerich I,
185 F. Supp. 3d at 239. We, too, decline to do so, for the same
reason. We understand that de Csepel v. Republic of Hungary,
859 F.3d 1094 (D.C. Cir. 2017), forecloses what appears to be
H&P’s main argument—that courts in our circuit are free to
disregard Simon in light of an earlier decision, distinguished in
de Csepel, that allowed an expropriation claim to proceed
against Russia without requiring that the expropriated property
(or property exchanged for it) be present in the United States.
See id. at 1104–07 (making clear that Simon, not the earlier
28
decision, is binding circuit law on this point). That said, we are
mindful that H&P may yet have other arguments that it has not
yet had the chance to present due to the way the parties have
chosen to structure this litigation. The district court, with its
insight into the twists and turns this case has taken, is in the
best position to determine how to proceed, and we leave it to
that court to rule on this issue in the first instance.
V.
For the foregoing reasons, we affirm the district court’s
dismissal of H&P-V’s expropriation claim for lack of
jurisdiction, as well as its denial of Venezuela and PDVSA’s
motions to dismiss H&P-IDC’s claim, and remand for further
proceedings consistent with this opinion.
So ordered.
SENTELLE, Senior Circuit Judge, concurring in part and
concurring in the judgment: I fully concur in my colleagues’
opinion with respect to the claims of Helmerich & Payne de
Venezuela, C.A. I have misgivings concerning Part III of the
court’s opinion.
In my dissent from the original circuit opinion, Helmerich
& Payne International Drilling Co. v. Bolivarian Republic of
Venezuela, 784 F.3d 804, 819 (D.C. Cir. 2015), I set out my
reasons for concluding that we do not have jurisdiction under the
Foreign Sovereign Immunities Act, 28 U.S.C. § 1604, over the
claims of Helmerich & Payne International Drilling Co.
Nothing in the Supreme Court’s opinion or in my colleagues’
present opinion has changed my mind. However, I recognize
the wisdom of the majority’s determination that:
Given that we shall remand for further district-
court proceedings in connection with H&P-
IDC’s broader claim, that Venezuela and
PDVSA expropriated H&P-V in its entirety, see
supra at 22-25, we think it best not to address
this narrower claim in the first instance,
especially given that it raises difficult questions
about the scope of a parent company’s rights in
its subsidiary’s assets under Venezuelan law and
about the extent to which international law
protects those rights . . . .
Maj. Op. at 26-27. I therefore, with some reluctance, join the
judgment of the court.