Published On: Wed, May 18th, 2016

U.S. firm wins discovery fight in oil rig case

pdvsaWASHINGTON - Venezuela's national oil company must provide information regarding its 2010 nationalization of oil rigs owned by an American energy company, a federal judge ruled.

Venezuelan oil companies and the local subsidiaries of U.S. energy firms had enjoyed decades of cooperation before the government of former president Hugo Chavez announced in June 2010 that he would nationalize U.S. oil rigs to increase oil and gas production and open jobs for Venezuelans.

The move led Petroleos de Venezuela (PVDSA) and the Venezuelan National Guard to blockade facilities owned by Oklahoma-based Helmerich & Payne International Drilling Co. and its in-country subsidiary, Helmerich & Payne de Venezuela C.A.

Venezuela nationalized 11 drilling rigs formerly owned by Helmerich & Payne, according to court records.

Citing the Foreign Sovereign Immunities Act (FSIA), Helmerich & Payne and its subsidiary filed a federal complaint in Washington, D.C., against the Venezuelan government, alleging that the seizure of its rigs constituted a taking of property in violation of international law. The lawsuit also accuses PDVSA of breach of contract.

Venezuela and PDVSA moved to dismiss the lawsuit, arguing that the seizure did not fall under FSIA exceptions for violations of international law or expropriation. They also claimed that the act-of-state doctrine bars the lawsuit completely.

The D.C. Circuit ruled last year that both the parent and subsidiary's expropriation claims may proceed.

Venezuela petitioned for a stay, but Chief Justice John Roberts, sitting in his capacity as Circuit Justice, shot the measure down without comment in September.

On remand, U.S. District Judge Christopher Cooper granted Helmerich & Payne's motion to compel discovery on Friday.

PDVSA must provide information pertaining to its legal control and practical influence over the expropriated property, as well as information concerning whether PDVSA is an agency or instrumentality of the Venezuelan government, and documentation of its alleged commercial activity in the U.S.

The Venezuelan defendants urged Cooper to grant a stay, pending the U.S. Supreme Court's ruling on their petition for certiorari, for which the high court invited the Solicitor General to weigh in with the government's views on the case's FSIA implications.

"Empirical research bears out, at least to some extent, defendants' contention that the [call for the view of the Solicitor General, or CVSG] changes the state of play," with certiorari rates standing at 42 percent for similarly positioned cases, Cooper said.

"The Supreme Court's interest in the case, signaled by the CVSG order, does lend some support to the notion that defendants have raised substantial legal questions in their petition. But a CVSG 'is hardly dispositive' in this situation," the judge wrote. "The D.C. Circuit and the Chief Justice considered similar criteria in denying a stay of the D.C. Circuit's mandate, and the CVSG - on its own - does not sufficiently alter the calculus to justify granting a stay."

Cooper said the court may reconsider the motion for a stay, but in the meantime, "fairness to plaintiffs and the public interest counsel in favor of no further delays."

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