Supreme Court hears case of an oil company expropriation in Venezuela


Washington (AFP)

Against the background of crisis in Venezuela, the US Supreme Court heard arguments Wednesday in a case involving the late leader Hugo Chavez's expropriation of a US oil company's assets in 2010.

The question of law before the court's eight justices is under what condition can a sovereign state -- in this case Venezuela -- be sued in US courts.

Oklahoma-based Helmerich & Payne International Drilling Company accuses Venezuela of having illegally seized 11 of its oil exploration towers.

At the time, Chavez was president of the South American country and his "Bolivarian revolution" was in full swing.

The former army lieutenant colonel, famous for his criticism of "Yankee imperialism," had embarked on a course of nationalizations, vowing to lead Venezuela on the path of "21st century socialism."

- Expropriation -

Government takeovers ranged across entire industries -- from agrobusinesses to banking to wholesale distribution -- forcing multinationals to reduce the scope of their operations.

The energy industry, whose strategic importance made it a particularly vulnerable target, did not escape the "reappropriation" movement.

Compared to Halliburton or Schlumberger, Helmerich & Payne is a relatively modest player in the oil exploration business.

It had its own derricks and other exploration equipment in Venezuela, but it was a subcontractor for the state-owned oil giant PDVSA.

By 2009, PDVSA had run up about $100 million in unpaid bills owed Helmerich & Payne, which decided to cut its losses and dismantle its installations in Venezuela.

In response, the regime in June 2010 blocked the movement of its equipment and Chavez signed a decree expropriating the company's assets in Venezuela.

Helmerich & Payne then took Venezuela to court in the United States, despite the fact that sovereign states have generally been shielded from US lawsuits for more than two centuries.

- Sacrosanct immunity -

In 1976, however, the US Congress provided for some limited exceptions to the immunity sovereign powers enjoy.

The "Foreign Sovereign Immunities Act" made it possible to sue a foreign country when it has seized American goods or when its actions have a direct impact on US trade.

Basing itself on this law, a court in Washington gave Helmerich & Payne the okay to sue Caracas over the expropriation.

The Venezuelan state countered that authorizing lawsuits for such insubstantial reasons was unthinkable, and against the rules of international law.

In this complicated affair, Caracas paradoxically has the support of the United States, which worries that it would be exposed to all kinds of lawsuits if the sacrosanct principle of state sovereignty is weakened.

Following that reasoning, President Barack Obama recently opposed a law that allows victims of the September 11, 2001 attacks to sue Saudi Arabia.

At Wednesday's hearing, the justices seemed stumped by the case.

"I came in on your side, but I swing back and forth," Justice Stephen Breyer told Elaine Goldenberg, assistant to the US solicitor general.

Justice Sonia Sotomayor, a liberal like Breyer, also said she found it confusing, noting that the US State Department and Venezuela both were "upset" that the lower court had found a "viable legal argument" to support a suit.