After the government of Venezuela nationalized a General Motors factory in that country late last month, the Detroit-based car company vowed to “vigorously take all legal actions, within and outside of Venezuela, to defend its rights.” If those promised actions include a lawsuit in the United States, GM could face a tougher battle after a ruling today by the U.S. Supreme Court in another case involving the jurisdiction of U.S. courts over lawsuits brought against the Venezuelan government.
The case decided by the court today was filed by Helmerich & Payne International, a U.S. company, and its Venezuelan subsidiary, Helmerich & Payne de Venezuela. Helmerich & Payne de Venezuela started drilling for the state-owned oil company in the 1970s, but in 2010, then-President Hugo Chavez issued a decree appropriating the subsidiary’s drilling rigs, which the state-owned oil company now uses. A little over a year later, the two companies filed a lawsuit in federal court in Washington, D.C.
Under the Foreign Sovereign Immunities Act, a federal law enacted in 1976, foreign countries generally cannot be sued in U.S. courts. But the two companies relied on the “expropriation” exception to that rule, which applies to situations in which a foreign government has nationalized privately owned property. That exception allows lawsuits against foreign governments to go forward in the United States when “rights in property taken in violation of international law are in issue” and there is a commercial connection to the United States.
Venezuela argued that the case should be dismissed because the expropriation exception did not apply. The court of appeals (in an opinion joined by Chief Judge Merrick Garland, whom President Barack Obama nominated to the Supreme Court) rejected that argument, holding that the claims by Helmerich & Payne and its subsidiary could go forward as long they were not “wholly insubstantial or frivolous.” The court of appeals explained that the two companies only needed to clear “an exceptionally low bar” – which, the court concluded, they had. Venezuela asked the Supreme Court to weigh in, and today eight justices (the court’s ninth and newest justice, Neil Gorsuch, did not participate) unanimously agreed that the bar is in fact higher.
In an opinion by Justice Stephen Breyer, the court explained that when there is no dispute about the facts of a case, the expropriation exception will apply, and a U.S. court will have jurisdiction, only when the facts “do show (and not just arguably show) a taking of property in violation of international law.” As an example, the court described a scenario in which the owner of a house that had been nationalized in a foreign country filed a lawsuit in the United States. If the foreign government asserted sovereign immunity from the lawsuit, the court reasoned, the owner would have to show both that “he claimed ‘property’ (which a house obviously is) and also that the property was ‘taken in violation of international law.’” But, to survive a motion to dismiss, the owner would not need to show that he owned the property: “That question,” the court emphasized, “is part of the merits of the case and remains ‘at issue.’” And it added that in cases like this one, U.S. courts should decide any questions about whether they have jurisdiction “as close to the outset” of the case “as is reasonably possible.”
The court stressed that its interpretation of the expropriation exception is most consistent with both the text and the history of the law. In particular, it observed, setting the higher bar for jurisdiction will provide clarity to foreign governments and minimize the extent to which they are involved in litigation in U.S. courts. And that, the court suggested, will in turn reduce the likelihood of friction with other countries and retaliatory litigation against the United States overseas.
The justices sent the dispute back to the lower courts “for further proceedings consistent with this opinion” – presumably, for them to determine whether Helmerich & Payne and its subsidiary can meet the significantly more stringent standard announced today. By raising the bar, today’s ruling is likely to make it more difficult to bring future cases under the expropriation exception, including perhaps against Venezuela in the not-too-distant future.
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