Bolivarian Republic of Venez. v. Helmerich & Payne Int'l Drilling Co. - 137 S. Ct. 1312 (2017)

Rule:

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 of 28 U.S.C.S. § 1605(a)(3). Rather, state and federal courts can maintain jurisdiction to hear the merits of a case only if they find that the property in which the party claims to hold rights was indeed property taken in violation of international law. Put differently, the relevant factual allegations must make out a legally valid claim 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). A good argument to that effect is not sufficient. But a court normally need not resolve, as a jurisdictional matter, disputes about whether a party actually held rights in that property; those questions remain for the merits phase of the litigation.

Facts:

A wholly owned Venezuelan subsidiary (Subsidiary) of an American company (Parent) has long supplied oil rigs to oil development entities that were part of the Venezuelan Government. The American Parent and its Venezuelan Subsidiary (plaintiffs) filed suit in federal court against those entities (Venezuela), claiming that Venezuela had unlawfully expropriated the Subsidiary's rigs by nationalizing them. Venezuela moved to dismiss the case on the ground that its sovereign immunity deprived the District Court of jurisdiction. Plaintiffs argued that the case fell within the expropriation exception, but Venezuela claimed that international law did not cover the expropriation of property belonging to a country's nationals like the Subsidiary and that the American Parent did not have property rights in the Subsidiary's assets. The District Court agreed as to the Subsidiary, dismissing its claim on jurisdictional grounds. However, the District Court rejected the claim that the Parent had no rights in the Subsidiary's property. The District of Columbia Circuit reversed in part and affirmed in part, finding that both claims fell within the exception. The court decided only whether the plaintiffs might have a nonfrivolous expropriation claim, making clear that, under its standard, a nonfrivolous argument would be sufficient to bring a case within the scope of the exception. Given the factual stipulations, the court concluded that the Subsidiary had satisfied that standard for purposes of surviving a motion to dismiss.

Issue:

Did the District of Columbia Circuit err in applying the nonfrivolous-argument standard in deciding whether a plaintiff could bring a case within the scope of the expropriation exception?

Answer:

Yes.

Conclusion:

The Court held that the nonfrivolous-argument standard was not consistent with the Foreign Sovereign Immunities Act (FSIA). According to the Court, a case would fall within the scope of the expropriation exception only if the property in which the party claimed to hold rights was indeed property taken in violation of international law. A court should decide the foreign sovereign's immunity defense at the threshold of the action, resolving any factual disputes as near to the outset of the case as is reasonably possible. The Court held that an expropriation exception granted jurisdiction only where there was a legally valid claim that a certain kind of right was at issue (property rights) and that the relevant property was taken in a certain way (in violation of international law). Simply making a nonfrivolous argument to that effect was not sufficient. Thus, a party’s nonfrivolous, but ultimately incorrect, argument that property was taken in violation of international law was insufficient to confer jurisdiction under the expropriation exception of 28 U.S.C.S. § 1605(a)(3). State and federal courts could maintain jurisdiction to hear the merits of a case only if they found that the property in which the party claimed to hold rights was indeed property taken in violation of international law. Accordingly, judgment was vacated and the case was remanded.