Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-14-07008/USCOURTS-caDC-14-07008-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 16, 2015 Decided May 1, 2015

No. 13-7169

HELMERICH & PAYNE INTERNATIONAL DRILLING CO. AND 

HELMERICH & PAYNE DE VENEZUELA, C.A.,

APPELLEES

v.

BOLIVARIAN REPUBLIC OF VENEZUELA,

APPELLEE

PETROLEOS DE VENEZUELA, S.A. AND PDVSA PETROLEO,

S.A.,

APPELLANTS

Consolidated with 13-7170, 14-7008

Appeals from the United States District Court

for the District of Columbia

(No. 1:11-cv-01735)

Mary H. Wimberly argued the cause for 

appellant/cross-appellee Bolivarian Republic of Venezuela. 

Joseph D. Pizzurro argued the cause for 

appellants/cross-appellees Petroleos De Venezuela, S.A. and 

PDVSA Petroleo, S.A. With them on the briefs were Robert 

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B. Garcia, George E. Spencer, William L. Monts III, and Bruce 

D. Oakley

David W. Ogden argued the cause for 

appellee/cross-appellant Helmerich & Payne De Venezuela, 

C.A. With him on the briefs were David W. Bowker, 

Catherine M. Carroll, Elisebeth C. Cook, and Francesco 

Valentini. 

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 dissenting in part filed by

Senior Circuit Judge SENTELLE.

TATEL, Circuit Judge: The Foreign Sovereign Immunities 

Act (FSIA) grants foreign states immunity from suit in 

American courts unless one of several enumerated exceptions 

applies. In this case, after Venezuela forcibly seized oil rigs 

belonging to the Venezuelan subsidiary of an American 

corporation, both the parent and the subsidiary filed suit in the 

United States asserting jurisdiction under the FSIA’s 

expropriation and commercial activity exceptions. Venezuela 

moved to dismiss on the ground that neither exception applies. 

The district court granted the motion as to the subsidiary’s 

expropriation claim, but denied it in all other respects. For the 

reasons set forth in this opinion, we affirm in part and reverse 

in part. We agree with the district court that the parent 

corporation had sufficient rights in its subsidiary’s property to 

support its expropriation claim. But because the subsidiary’s 

expropriation claim is neither “wholly insubstantial” nor 

“frivolous”—this Circuit’s standard for surviving a motion to 

dismiss in an FSIA case—the district court should have 

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allowed that claim to proceed. And given that the subsidiary’s 

commercial activity had no “direct effect” in the United States, 

which the FSIA requires to defeat foreign sovereign immunity, 

the district court should have granted the motion to dismiss 

with respect to that claim. 

I

For more than half a century, Oklahoma-based Helmerich 

& Payne International Drilling Co. (H&P-IDC) successfully 

operated an oil-drilling business in Venezuela through a series 

of subsidiaries. Incorporated under Venezuelan law, the most 

recent subsidiary, Helmerich & Payne de Venezuela (H&P-V), 

provided drilling services for the Venezuelan government. 

Having nationalized its oil industry in the mid-70s, Venezuela 

now controls exploration, production, and exportation of oil 

through two state-owned corporations: Petróleos de 

Venezuela, S.A. (PDVSA) and PDVSA Petróleo, known 

collectively as PDVSA. From its creation in 1975 through 

2010, PDVSA depended on H&P-V’s highly valuable and rare 

drilling rigs because they were capable of reaching depths of 

more than four miles. Those rigs were originally purchased by 

H&P-IDC and then transferred to its subsidiary H&P-V. At 

issue here are ten contracts executed in 2007 between H&P-V 

and PDVSA, each involving one of these rigs—nine in 

Venezuela’s eastern region and one in the west. The contracts 

initially covered periods ranging from five months to one year, 

though all were subsequently extended. 

Soon after signing the contracts, PDVSA fell substantially 

behind in its payments. By August 2008, unpaid invoices 

totaled $63 million. PDVSA never denied its contractual debt; 

quite to the contrary, it repeatedly reassured H&P-V that 

payment would be forthcoming. But no payments were made, 

and after overdue receivables topped $100 million, H&P-V 

announced in January 2009 that it would not renew the 

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contracts absent “an improvement in receivable collections.” 

Compl. ¶ 50 (internal quotation marks omitted). By November 

of that year, H&P-V had fulfilled all of its contractual 

obligations, disassembled its drilling rigs, and stacked the 

equipment in its yards pending payment by PDVSA. 

PDVSA made no further payments. Instead, on June 12, 

2010, PDVSA employees, assisted by armed soldiers of the 

Venezuelan National Guard, blockaded H&P-V’s premises in 

western Venezuela, and then did the same to the company’s 

eastern properties on June 13 and 14. PDVSA acknowledged 

that it erected the blockade to “prevent H&P-V from removing 

its rigs and other assets from its premises, and to force H&P-V 

to negotiate new contract terms immediately.” Id. ¶ 63.

In the wake of the blockade, PDVSA issued a series of 

press releases that are central to H&P-V’s expropriation claim. 

The first, issued on June 23, stated that “[t]he Bolivarian 

Government, through [PDVSA had] nationalized 11 drilling 

rigs belonging to the company Helmerich & Payne[], a U.S. 

transnational firm.” Id. ¶ 65. A second press release, dated June 

25, declared that PDVSA’s “workers are guarding the drills” 

and that:

The nationalization of the oil production 

drilling rigs from the American contractor 

H&P not only will result in an increase of oil 

and gas production in the country, but also in 

the release of more than 600 workers and the 

increase of new sources of direct and indirect 

employment in the hydrocarbon sector. 

Id. ¶ 66. The June 25 release also “emphatically reject[ed] 

statements made by spokesmen of the American 

empire—traced [sic] in our country by means of the 

oligarchy.” Id. ¶ 108 (alterations in original). Another press 

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release, this one undated, stated that the nationalization would 

“guarantee that the drills will be operated by PDVSA as a 

company of all Venezuelans, . . . ensur[ing] the rights of 

former employees of H&P, who a year ago were exploited and 

then dismissed by this American company, but now they will 

become part of PDVSA.” Id. ¶ 109. 

On June 29, more than two weeks after the blockade 

began, the Venezuelan National Assembly issued an official 

“Bill of Agreement” declaring H&P-V’s property to be “of 

public benefit and good” and recommending that 

then-President Hugo Chavez promulgate a Decree of 

Expropriation. Id. ¶ 4. President Chavez issued the decree, 

which emphasized that “the availability of drilling equipment 

[such as H&P-V’s] is very low both in the country and at world 

level, and the lack thereof would affect [Venezuela’s national 

oil drilling] Plan.” Id. ¶¶ 4, 19 (alterations in original). The 

decree directed PDVSA to take “forcible” possession of 

H&P-V’s drilling rigs and other property. Id. ¶ 4. In response, 

PDVSA, having already taken possession of the property, 

issued a press release on July 2, which stated that H&P-V’s 

rigs “are specialized drills we need for more complex sites” 

and “will be very useful.” Id. ¶ 20.

That same day, Jesus Graterol, president of the 

Venezuelan National Assembly’s Committee on Energy and 

Mines, criticized opponents of the nationalization for acting 

“in accordance with the instructions of the [U.S.] Department 

of State” and trying to “subsidize the big business transnational 

corporations, so that they can promote what they know best to 

do, which is war . . . through the large military industry[] of the 

Empire and its allies.” Id. ¶ 105 (first alteration in original). 

Rafael Ramirez, Venezuela’s Minister of Energy and 

Petroleum and PDVSA’s President, led a political rally at 

H&P-V’s eastern site and declared: 

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The company Helmerich & Payne has 

operated in our country for many years. 

Today, the Revolutionary Government took 

control over that company. You have been 

here guarding assets that now belong to the 

Venezuelan State. I acknowledge and 

appreciate your constant watch in order to 

protect the people’s interests. Revolutionary 

salutation: Socialist Nation or Death. We 

shall be victorious!

Id. ¶ 5 (ellipses omitted). Ramirez also referred to H&P-V as 

an “American company” with “foreign gentlemen investors” 

and Venezuelan workers who would now “become part of 

[PDVSA’s] payroll.” Id. As Ramirez predicted, PDVSA now 

uses H&P-V’s rigs and other assets in its state-owned drilling 

business. 

Supposedly to compensate H&P-V for the expropriated 

property, PDVSA filed two eminent domain actions in 

Venezuelan courts. H&P-V has yet to receive service of 

process in the first proceeding, and the second has been stayed 

indefinitely. Believing that these proceedings are unlikely to 

result in adequate relief, H&P-V and its American parent,

H&P-IDC, filed a two-count complaint under the FSIA in the 

United States District Court for the District of Columbia. The 

first count, brought against PDVSA and Venezuela, alleges a 

taking of property in violation of international law and asserts 

jurisdiction under the FSIA’s expropriation exception. The 

second count, brought only against PDVSA, alleges breach of 

the ten drilling contracts and asserts jurisdiction under the 

statute’s commercial activity exception. 

Venezuela and PDVSA moved to dismiss on the grounds 

that neither FSIA exception applies and that the act-of-state 

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doctrine, under which American courts “will not question the 

validity of public acts (acts jure imperii) performed by other 

sovereigns within their own borders,” Republic of Austria v. 

Altmann, 541 U.S. 677, 700 (2004), bars the suit altogether. 

Before the district court could decide this motion, the parties 

filed a joint stipulation in which they agreed to brief four 

threshold issues: 

1. Whether, for purposes of determining if a “taking in 

violation of international law” has occurred under the 

FSIA’s expropriation exception, H&P-V is a national 

of Venezuela under international law;

2. Whether H&P-IDC has standing to assert a taking in 

violation of international law on the basis of 

Venezuela’s expropriation of H&P-V’s property; 

3. Whether plaintiffs’ expropriation claims are barred by 

the act-of-state doctrine, including whether this defense 

may be adjudicated prior to resolution of Venezuela’s 

challenges to the court’s subject matter jurisdiction; 

and

4. Whether, for purposes of determining the applicability 

of the FSIA’s commercial activity exception, plaintiffs 

have sufficiently alleged a “direct effect” in the United 

States within the meaning of that provision.

The district court resolved the first question in 

Venezuela’s favor but sided with Helmerich & Payne on the 

other three. Venezuela and PDVSA now appeal, reiterating 

arguments they made in the district court. H&P-V 

cross-appeals on the first question. We review de novo a 

district court’s resolution of a motion to dismiss for lack of 

jurisdiction under the FSIA. See de Csepel v. Republic of 

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Hungary, 714 F.3d 591, 597 (D.C. Cir. 2013). Critically, 

moreover, “we must accept as true all material allegations of 

the complaint, drawing all reasonable inferences from those 

allegations in plaintiffs’ favor.” Id. (internal quotation marks 

omitted). 

II

The FSIA “establishes a comprehensive framework for 

determining whether a court in this country, state or federal, 

may exercise jurisdiction over a foreign state.” Republic of 

Argentina v. Weltover, Inc., 504 U.S. 607, 610 (1992). The Act 

provides that “a foreign state shall be immune from the 

jurisdiction of the courts of the United States and of the 

States,” 28 U.S.C. § 1604 (emphasis added), unless one of 

several exceptions applies, id. §§ 1605–07. H&P-V and 

H&P-IDC invoke the expropriation exception for their takings 

claim. H&P-V invokes the commercial activity exception for 

its breach of contract claim. We address each in turn. 

Expropriation Exception

This exception, contained in FSIA section 1605(a)(3), 

denies foreign sovereign immunity “in any case . . . in which 

rights in property taken in violation of international law are in 

issue.” 28 U.S.C. § 1605(a)(3). According to Venezuela, the 

exception is inapplicable here for two reasons. First, as a 

Venezuelan national, H&P-V may not claim a taking in 

violation of international law. Second, under generally 

applicable corporate law principles, H&P-IDC has no “rights 

in property” belonging to its subsidiary and thus lacks 

standing.

In deciding a motion to dismiss for lack of jurisdiction, we 

are mindful of the distinction between jurisdiction—a court’s 

constitutional or statutory power to decide a case—and

ultimate success on the merits. As the Supreme Court has 

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explained, “[j]urisdiction . . . is not defeated . . . by the 

possibility that the averments [in a complaint] might fail to 

state a cause of action on which petitioners could actually 

recover.” Bell v. Hood, 327 U.S. 678, 682 (1946). What 

plaintiffs must allege to survive a jurisdictional challenge, 

then, “is obviously far less demanding than what would be 

required for the plaintiff’s case to survive a summary judgment 

motion” or a trial on the merits. Agudas Chasidei Chabad of 

U.S. v. Russian Federation, 528 F.3d 934, 940 (D.C. Cir. 

2008). In an FSIA case, we will grant a motion to dismiss on 

the grounds that the plaintiff has failed to plead a “taking in 

violation of international law” or has no “rights in property . . . 

in issue” only if the claims are “wholly insubstantial or 

frivolous.” Id. at 943. A claim fails to meet this exceptionally 

low bar if prior judicial decisions “inescapably render the 

claim[] frivolous” and “completely devoid of merit.” Hagans 

v. Lavine, 415 U.S. 528, 538, 543 (1974). “[P]revious decisions 

that merely render claims of doubtful or questionable merit do 

not render them insubstantial” for jurisdictional purposes. Id. 

at 538. Applying this standard to the present case, and viewing 

the complaint “in the light most favorable to the plaintiff,” 

Sachs v. Bose, 201 F.2d 210, 210 (D.C. Cir. 1952), we first 

consider whether H&P-V has asserted a non-frivolous 

international expropriation claim and then ask whether 

H&P-IDC has “put its rights in property in issue in a 

non-frivolous way,” Chabad, 528 F.3d at 941. 

As to the first inquiry, the parties begin on common 

ground. All agree that for purposes of international law, “a 

corporation has the nationality of the state under the laws of 

which the corporation is organized,” Restatement (Third) of 

Foreign Relations Law § 213 (1987), and that generally, a 

foreign sovereign’s expropriation of its own national’s 

property does not violate international law, United States v. 

Belmont, 301 U.S. 324, 332 (1937). The Supreme Court has 

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summarized the latter principle, known as the “domestic 

takings rule,” this way: “What another country has done in the 

way of taking over property of its nationals, and especially of 

its corporations, is not a matter for judicial consideration here. 

Such nationals must look to their own government for any 

redress to which they may be entitled.” Id.

According to Venezuela, the domestic takings rule ends 

this case because H&P-V, as a Venezuelan national, may not 

seek redress in an American court for wrongs suffered in its 

home country. This argument has a good deal of appeal. 

Having freely chosen to incorporate under Venezuelan law, 

H&P-V operated in that country for many years and reaped the 

benefits of its choice, including several extremely lucrative 

contracts with the Venezuelan government. Given this, and 

especially given that H&P-V expressly agreed that these 

contracts would be governed by Venezuelan law in 

Venezuelan courts, one might conclude that H&P-V should 

live with the consequences of its bargain. 

According to H&P-V, however, this case is not so simple. 

It argues that Venezuela has unreasonably discriminated 

against it on the basis of its sole shareholder’s nationality, thus 

implicating an exception to the domestic takings rule. In 

support, H&P-V cites Banco Nacional de Cuba v. Sabbatino, 

307 F.2d 845, 861 (2d Cir. 1962), in which the Second Circuit 

determined that the Cuban government’s expropriation of a 

Cuban corporation’s property qualified as a taking in violation 

of international law. More than 90% of the Cuban 

corporation’s shares were owned by Americans, and the 

official expropriation decree “clearly indicated that the 

property was seized because [the corporation] was owned and 

controlled by Americans.” Id. This, the Second Circuit held, 

justified disregarding the domestic takings rule: “When a 

foreign state treats a corporation in a particular way because of 

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the nationality of its shareholders, it would be inconsistent for 

[the court] in passing on the validity of that treatment to look 

only to the nationality of the corporate fiction.” Id. (internal 

quotation marks omitted). Although the Supreme Court 

vacated this decision on other grounds, the Second Circuit later 

reiterated “with emphasis” its decision to disregard the 

domestic takings rule in the face of Cuba’s anti-American 

discrimination. Banco Nacional de Cuba v. Farr, 383 F.2d 

166, 185 (2d Cir. 1967). 

H&P-V also relies on the most recent Restatement of 

Foreign Relations Law, which recognizes discriminatory 

takings as a violation of international law. Specifically, section 

712 suggests that “a program of taking that singles out aliens 

generally, or aliens of a particular nationality, or particular 

aliens, would violate international law.” Restatement (Third) 

of Foreign Relations Law § 712 cmt. f. (1987). 

“Discrimination,” the Restatement continues, “implies 

unreasonable distinction,” and so “[t]akings that invidiously 

single out property of persons of a particular nationality would 

be [discriminatory],” whereas “classifications, even if based on 

nationality, that are rationally related to the state’s security or 

economic policies might not be [discriminatory]” and thus not 

in violation of international law. Id. (emphasis added). The 

reporter’s notes to section 712 cite Sabbatino as an example of 

a discriminatory taking, explaining that Cuba’s express 

“purpose was to retaliate against United States nationals for 

acts of their Government, and was directed against United 

States nationals exclusively.” Id. § 712 reporter’s note 5. 

H&P-V insists that its complaint, which emphasizes the 

Venezuelan government’s well-known anti-American 

sentiment, as well as PDVSA’s statements decrying the 

“American empire,” successfully pleads a discriminatory 

takings claim. For its part, Venezuela urges us not to “be the 

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first to revive the overturned Second Circuit precedent” 

because “there is no internationally recognized 

exception—based on ‘discrimination’ or otherwise—to the 

domestic takings rule.” Defs.’ Cross Br. 28, 30. Dated and 

uncited as it may be, however, Sabbatino remains good law. 

See Farr, 383 F.2d at 166 (affirming Sabbatino’s 

discriminatory takings rationale “with emphasis”). Although 

“we are not bound by the decisions of other circuits,” Dissent 

at 3 (emphasis added), we may “of course . . . find the reasons 

given for such [decisions] persuasive,” Northwest Forest 

Resource Council v. Dombeck, 107 F.3d 897, 900 (D.C. Cir. 

1997) (quoting James Moore et al., Moore’s Federal Practice

¶ 0.402 (2d ed. 1996))—especially where, as here, our circuit 

has yet to consider the issue. Moreover, neither Venezuela nor 

the dissent cites any 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.” Hagans, 415 U.S. at 538 

(emphases added). Given this, and given the Restatement’s 

recognition of discriminatory takings claims, we believe that 

H&P-V has satisfied this Circuit’s forgiving standard for 

surviving a motion to dismiss in an FSIA case. 

Alternatively, Venezuela claims that even if international 

law recognizes discriminatory takings, “plaintiffs have failed 

to plead facts to support it” because “the motivation for the 

expropriation was Venezuela’s need for H&P-V’s uniquely 

powerful rigs.” Defs.’ Br. 31. As it points out, the official 

decrees cited only the scarcity of these powerful rigs as the 

reason for the expropriation. The Bill of Agreement, for 

example, declared H&P-V’s drilling rigs necessary for 

Venezuela’s “public benefit and good,” Compl. ¶ 4, and 

President Chavez’s decree stated that “the lack thereof would 

affect [Venezuela’s national oil drilling] Plan,” id. ¶ 19 

(alteration in original). Based on these statements, it may well 

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be, as the Restatement puts it, that the taking was “rationally 

related to [Venezuela’s] security or economic policies.” 

Restatement (Third) of Foreign Relations Law § 712 cmt. f 

(1987).

Other statements, however, went well beyond Venezuela’s 

economic and security needs and could be viewed as 

demonstrating “unreasonable distinction” based on nationality.

Id. PDVSA’s press release referred to the “American empire,” 

Compl. ¶ 108, and a National Assembly member warned that 

opponents of the expropriation were supporting America’s 

mission of “war[] . . . through the large military industry[] of 

the Empire and its allies,” id. ¶ 105. At this stage of the 

litigation, where we view the complaint “in the light most 

favorable to the plaintiff,” Sachs, 201 F.2d at 210, these 

statements are sufficient to plead a “non-frivolous” 

discriminatory takings claim, Chabad, 528 F.3d at 941. 

We turn next to Venezuela’s argument that H&P-IDC may 

not invoke the FSIA’s expropriation exception because it has 

no rights in H&P-V’s property. By its terms, the expropriation 

exception applies only to plaintiffs having “rights in property” 

taken in violation of international law. Moreover, and quite 

apart from the FSIA, plaintiffs must demonstrate Article III 

standing by asserting their “own legal rights and interests” 

rather than resting “claim[s] to relief on the legal rights or 

interests of third parties.” Warth v. Seldin, 422 U.S. 490, 499 

(1975). The “shareholder standing rule” is an example of this 

latter principle. Because corporations are legally distinct from 

their shareholders, the rule “prohibits shareholders from 

initiating actions to enforce the rights of the corporation unless 

the corporation’s management has refused to pursue the same 

action for reasons other than good-faith business judgment.” 

Franchise Tax Board of California v. Alcan Aluminium 

Limited, 493 U.S. 331, 336 (1990). Combining both of these 

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principles, Venezuela argues that as a mere shareholder, 

H&P-IDC has no rights in the property of its subsidiary and 

thus lacks standing. 

In support of this argument, Venezuela relies almost 

entirely on Dole Food Co. v. Patrickson, 538 U.S. 468 (2003), 

an FSIA case in which the Supreme Court held that “[a] 

corporate parent which owns the shares of a subsidiary does 

not, for that reason alone, own or have legal title to the assets of 

the subsidiary.” Id. at 475. This, according to Venezuela, 

means that “in enacting the FSIA, Congress specifically 

intended that basic corporate law concepts inform the 

interpretation of the statute,” Defs.’ Opening Br. 23, and thus 

“rights in property” must mean corporate ownership. 

Contrary to Venezuela’s assertion, however, Dole Food

does not represent a wholesale incorporation of corporate law 

into the FSIA. The issue in that case was whether a corporate 

subsidiary qualified as an instrumentality of a foreign state 

under the FSIA where the foreign state did not own a majority 

of the subsidiary’s shares but did own a majority of the 

corporate parent’s shares. Dole Food Co., 538 U.S. at 471. 

Answering that question in the negative, the Court focused on 

FSIA section 1603(b)(2), which defines “instrumentality” as 

“an organ of a foreign state or political subdivision thereof, or a 

majority of whose shares or other ownership interest is owned 

by a foreign state or political subdivision thereof[.]” Id. at 473. 

Given this definition, the Court refused to “ignore corporate 

formalities” not because the FSIA generally incorporates 

corporate law principles, but because section 1603(b)(2) 

expressly “speaks of ownership.” Id. at 474.

By contrast, FSIA section 1605(a)(3), the expropriation 

exception, speaks only of “rights in property” generally, not 

ownership in shares. The Supreme Court’s analysis of another 

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FSIA exception is instructive. In Permanent Mission of India 

to the United Nations v. City of New York, the Court examined 

the FSIA’s abrogation of sovereign immunity in cases 

involving “rights in immovable property situated in the United 

States.” 551 U.S. 193, 197 (2007) (quoting 28 U.S.C. § 

1605(a)(4)). An instrumentality of the Indian government 

argued that the FSIA “limits the reach of the exception to 

actions contesting ownership or possession.” Id. Seeing no 

such limitation in the statute’s text, the Court concluded that 

“the exception focuses more broadly on ‘rights in’ property.” 

Id. at 198. 

So too here. The expropriation exception requires only 

that “rights in property . . . are in issue,” § 1605(a)(3), and we 

have recognized that corporate ownership aside, shareholders 

may have rights in corporate property. In Ramirez de Arellano 

v. Weinberger, for example, we considered whether an 

American citizen, the sole shareholder of three Honduran 

corporations, had a “cognizable property interest” in land 

owned by the Honduran corporations and seized by the United 

States government. 745 F.2d 1500, 1517 (D.C. Cir. 1984), cert. 

granted, judgment vacated on other grounds, 471 U.S. 1113 

(1985). Whether Ramirez had property rights in the land, we 

held, “does not turn on whether certain rights which may 

belong only to the Honduran corporation may be asserted 

‘derivatively’ by the sole United States shareholders.” Id. at 

1516. Instead, property rights depend upon whether the 

shareholders have “rights of their own, which exist by virtue of 

their exclusive beneficial ownership, control, and possession 

of the properties and businesses allegedly seized.” Id. We thus 

concluded that notwithstanding corporate ownership, Ramirez 

had property rights in the Honduran property that he 

“personally controlled and managed . . . for over 20 years.” Id. 

at 1520. “The corporate ownership of land and property,” we 

held, “does not deprive the sole beneficial owners—United 

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States citizens—of a property interest.” Id. at 1518; see also

Bangor Punta Operations, Inc. v. Bangor & A. R. Co., 417 

U.S. 703, 713 (1974) (rejecting the argument that, in assessing 

standing, courts “may not look behind the corporate entity to 

the true substance of the claims and the actual beneficiaries”).

Our dissenting colleague questions the precedential value 

of Ramirez because it was vacated by the Supreme Court on 

other grounds. Dissent at 4–5. But we have held that “[w]hen 

the Supreme Court vacates a judgment of this court without 

addressing the merits of a particular holding in the panel 

opinion, that holding ‘continue[s] to have precedential weight, 

and in the absence of contrary authority, we do not disturb’ it.” 

United States v. Adewani, 467 F.3d 1340, 1342 (D.C. Cir. 

2006) (quoting Action Alliance of Senior Citizens of Greater 

Philadelphia v. Sullivan, 930 F.2d 77, 83 (D.C. Cir. 1991)). 

Because the Supreme Court did not address Ramirez’s holding 

that the shareholders had property rights in their corporation’s 

assets, but instead vacated and remanded in light of the U.S. 

military’s subsequent withdrawal of all personnel and facilities 

from the plaintiffs’ land, De Arellano v. Weinberger, 788 F.2d 

762, 764 (D.C. Cir. 1986) (en banc) (per curiam); see 

Weinberger v. Ramirez de Arellano, 471 U.S. 1113 (1985), that 

holding continues to have “precedential weight,” Adewani, 467 

F.3d at 1342. 

The dissent argues that even if Ramirez continues to have 

force, it “is not genuinely on point” because it concerned

property rights arising from the constitution’s due process 

clause. Dissent at 5. But as discussed above, the FSIA’s 

expropriation exception “focuses . . . broadly on ‘rights in’ 

property,” Permanent Mission, 551 U.S. at 198 (emphasis 

added), and its text imposes no limitation on the source of 

those rights. 

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Ramirez is especially persuasive in this case because 

H&P-IDC, like the American citizen in Ramirez, was the 

foreign subsidiary’s sole shareholder. Moreover, H&P-IDC 

provided the rigs central to this dispute, Compl. ¶¶ 9, 129–32, 

and as a result of the expropriation, has suffered a total loss of 

control over its subsidiary, which has ceased operating as an 

ongoing enterprise because all of its assets were taken, Compl. 

¶¶ 75, 81–82. Under these circumstances, H&P-IDC has “put 

its rights in property in issue in a non-frivolous way.” Chabad, 

528 F.3d at 941. No more is required to survive a motion to 

dismiss under the FSIA. See id. (“non-frivolous contentions” 

of rights in property suffice to survive a motion to dismiss).

One final point. In the district court, Venezuela urged 

dismissal of Helmerich & Payne’s expropriation claims 

pursuant to the act-of-state doctrine, which “precludes the 

courts of this country from inquiring into the validity of the 

public acts a recognized foreign sovereign power committed 

within its own territory.” Banco Nacional de Cuba v. 

Sabbatino, 376 U.S. 398, 401 (1964). The district court never 

reached the issue, opting instead to determine “whether 

subject-matter jurisdiction exists under the FSIA before 

deciding whether to dismiss the case under the act of state 

doctrine.” Helmerich & Payne International Drilling Co. v. 

Bolivarian Republic of Venezuela, 971 F. Supp. 2d 49, 63 

(D.D.C. 2013). Acknowledging that the district court’s 

decision is not subject to interlocutory appeal, see, e.g., 

Transamerica Leasing, Inc. v. La Republica de Venezuela, 200 

F.3d 843, 855 (D.C. Cir. 2000), Venezuela urges us to exercise 

pendant jurisdiction over this claim. But we “exercise such 

jurisdiction sparingly” and are especially reluctant to do so 

where “an issue . . . might be mooted or altered by subsequent 

district court proceedings.” Id. Here, Helmerich & Payne’s 

expropriation claims could well fail at the summary judgment 

stage or following trial on the merits, thus mooting the 

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act-of-state issue. Given this, we think it best not to exercise 

pendant jurisdiction over Venezuela’s act-of-state claim. 

Commercial Activity Exception

This brings us, finally, to H&P-V’s argument that the 

FSIA’s commercial activity exception extends to its breach of 

contract claim against PDVSA. This exception, contained in 

section 1605(a)(2), nullifies foreign sovereign immunity in any 

case

in which the action is based upon a 

commercial activity carried on in the United 

States by the foreign state; or upon an act 

performed in the United States in connection 

with a commercial activity of the foreign 

state elsewhere; or upon an act outside the 

territory of the United States in connection 

with a commercial activity of the foreign 

state elsewhere and that act causes a direct 

effect in the United States.

28 U.S.C. § 1605(a)(2)(emphases added). Because this case 

involves a contract executed and performed outside the United 

States, our analysis focuses on the exception’s third clause—

specifically, whether Venezuela’s breach of the drilling 

contracts “cause[d] a direct effect in the United States.” Id. A 

direct effect “is one which has no intervening element, but, 

rather, flows in a straight line without deviation or 

interruption.” Princz v. Federal Republic of Germany, 26 F.3d 

1166, 1172 (D.C. Cir. 1994). H&P-V alleges three such 

effects. 

First, relying on our decision in Cruise Connections 

Charter Management v. Canada, 600 F.3d 661 (D.C. Cir. 

2010), H&P-V argues that its contracts with third-party 

vendors in the United States, made pursuant to the drilling 

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contracts, constitute a direct effect. In Cruise Connections, we 

found a “direct effect” where the Royal Canadian Mounted 

Police (RCMP) cancelled a contract with a U.S. corporation to 

provide cruise ships during the 2010 Winter Olympics. Id. at 

662. H&P-V argues that just as in Cruise Connections, where 

the RCMP contract “required . . . subcontract[s] with two 

U.S.-based cruise lines,” id., its agreements with PDVSA 

required contracts with U.S.-based companies for various 

drilling rig parts. PDVSA responds that even if H&P-V 

subcontracted with U.S. vendors, nothing in the drilling 

contracts obligated them to do so. 

We need not resolve this dispute, however, because even 

assuming that the drilling contracts required subcontracts with 

American companies, those contracts had no direct effect in the 

United States. Our holding in Cruise Connections rested not on 

the mere formation of third-party contracts in the United 

States, but rather on “losses caused by the termination of [the] 

contract with [Royal Canadian Mounted Police].” Cruise 

Connections, 600 F.3d at 664 (emphases added); see also id. at 

666 (noting that the “alleged breach resulted in the direct loss 

of millions of dollars worth of business in the United States.”). 

Here, H&P-V concedes that none of the third-party contracts 

was breached. Compl. ¶¶ 126–128, 135. As a result, no losses, 

and therefore no “direct effect,” occurred in the United States. 

We are unpersuaded by H&P-V’s argument that its 

inability to renew the third-party contracts constitutes a direct 

effect caused by PDVSA’s breach. Pls.’ Br. 62. As noted 

above, H&P-V had already performed all of its obligations 

under the existing third-party contracts. Its claim of third-party 

loss is therefore based on expected loss from future contracts 

that H&P-V says it would have entered into had PDVSA 

renewed its own contracts with H&P-V instead of breaching 

them. But H&P-V makes no allegation that PDVSA had an 

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obligation to renew its contracts. See Compl. ¶ 33 (“All ten 

contracts . . . expired at the conclusion of an agreed-upon 

period unless the parties agreed to an extension or an extension 

occurred by the contract’s original terms.”). Accordingly, any 

losses to third parties based on expected future contracts were 

not a direct effect of PDVSA’s breach, but rather of PDVSA’s 

contractually permitted decision not to renew its agreement 

with H&P-V.

Contrary to H&P-V’s argument, Kirkham v. Société Air 

France, 429 F.3d 288 (D.C. Cir. 2005), does not require a 

different result. Kirkham involved the commercial activity 

exception’s first clause. See id. at 290. H&P-V invokes the 

exception’s third clause, under which the “direct effect” in the 

United States must arise from the foreign state’s allegedly 

unlawful act—here, the breach of contract. See Republic of 

Argentina v. Weltover, 504 U.S. 607, 609 (1992) (examining 

“whether the Republic of Argentina’s default on certain bonds” 

had a direct effect in the United States). 

Relying on the Supreme Court’s decision in Republic of 

Argentina v. Weltover, 504 U.S. 607 (1992), H&P-V claims a 

second effect in the United States: that PDVSA made 

payments to Helmerich & Payne’s Oklahoma bank account. In 

Weltover, Argentina had issued bonds providing for payment 

through a currency transfer on the London, Frankfurt, Zurich, 

or New York markets at the discretion of the creditor. Id. at 

609–10. Two Panamanian bondholders demanded payment in 

New York, and when Argentina failed to pay, brought suit in 

the United States, claiming jurisdiction under the commercial

activity exception. Id. at 610. The Court had “little difficulty” 

finding a direct effect because, as a result of Argentina’s failure 

to meet its payment obligations, a contractually required 

payment into an American bank was not made. Id. at 618–19. 

Relying on Weltover, H&P-V emphasizes that both the eastern 

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and western contracts permitted PDVSA to pay a portion of 

invoiced amounts in U.S. dollars into an American 

bank—indeed, PDVSA ultimately paid $65 million this way. 

Compl. ¶ 44. As in Weltover, then, PDVSA’s breach meant 

that money “that was supposed to have been delivered to [an 

American] bank for deposit was not forthcoming.” 504 U.S. at 

619. But as PDVSA points out, the contracts gave H&P-V no 

power to demand payment in the United States. Rather, under 

both the eastern and western contracts, PDVSA could choose 

to deposit payments in bolivars in Venezuelan banks 

whenever, in its “exclusive discretion” and “judgment,” it 

“deem[ed] it discretionally convenient.” Compl. ¶¶ 78, 85, 82. 

This case presents facts akin to those we examined in 

Goodman Holdings v. Rafidain Bank, 26 F.3d 1143, 1144 

(D.C. Cir. 1994), in which an Iraqi bank failed to pay on letters 

of credit, and the payee claimed that the bank’s prior payments 

from its accounts in the United States constituted a direct 

effect. We rejected this contention because pursuant to the 

letters of credit, Iraq “might well have paid . . . from funds in 

United States banks but it might just as well have done so from 

accounts located outside of the United States.” Id. at 1146–47. 

Such unlimited discretion, we concluded, meant that unlike in 

Weltover, no money was “‘supposed’ to have been paid” in the 

United States. Id. at 1146 (quoting Weltover, 504 U.S. at 608). 

In other words, where, as here, the alleged effect depends 

solely on a foreign government’s discretion, we cannot say that 

it “flows in a straight line without deviation or interruption.” 

Princz, 26 F.3d at 1172.

Finally, relying on McKesson Corp. v. Islamic Republic of 

Iran, 52 F.3d 346 (D.C. Cir. 1995), H&P-V contends that 

PDVSA’s breach halted a flow of commerce between 

Venezuela and the United States, thus causing a direct effect. 

McKesson, an American corporation, alleged that the Iranian 

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22

government had illegally divested it of its investment in a dairy 

located in Iran. Foremost-McKesson, Inc. v. Islamic Republic 

of Iran, 905 F.2d 438, 441 (D.C. Cir. 1990). In doing so, we 

concluded, Iran halted a “constant flow of capital, management 

personnel, engineering data, machinery, equipment, materials 

and packaging, between the United States and Iran to support 

the operation of [the dairy],” thereby causing a direct effect. Id. 

at 451. H&P-V insists that the same is true here. We think not. 

Iran’s actions in “freezing-out American corporations in their 

ownership of [the dairy]” had the direct and immediate effect 

of halting a flow of resources and capital between the United 

States and Iran. Id. By contrast, any interruptions in commerce 

between the United States and PDVSA flowed immediately 

not from PDVSA’s breach of contract, but rather from 

Helmerich & Payne’s decision to cease business in Venezuela. 

And, given that the contracts were for set periods of time 

ranging from five months to one year, there was no guarantee 

of future business between Helmerich & Payne and PDVSA 

beyond those contracts. 

III

We affirm the district court’s denial of Venezuela’s 

motion to dismiss H&P-IDC’s expropriation claim. In all other 

respects, we reverse and remand for further proceedings 

consistent with this opinion. 

So ordered. 

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SENTELLE, Senior Circuit Judge, dissenting in part and

concurring in part: I will not reiterate the facts in this

controversy, as the careful opinion of the majority sets them

forth in necessary detail and with inerrant accuracy. Further, I

fully concur in the majority’s discussion and conclusion

concerning the issues related to the commercial activity

exception set forth in 28 U.S.C. § 1605(a)(2). However, despite

my general agreement with the majority’s exposition of the facts

underlying the claim for expropriation, I dissent from the

conclusion that those facts bring this case within the

expropriation exception set forth in 28 U.S.C. § 1605(a)(3).

As the majority recognizes, the Foreign Sovereign

Immunities Act (“FSIA”), 28 U.S.C. § 1604, et. seq.,

“‘establishes a comprehensive framework for determining

whether a court in this country, state or federal, may exercise

jurisdiction over a foreign state.’” Maj. Op. at 8 (quoting

Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 610

(1992)). As the majority further recognizes, “[t]he Act provides

that ‘a foreign state shall be immune from the jurisdiction of the

courts of the United States and of the States.’” Maj. Op. at 8

(emphasis in original) (quoting 28 U.S.C. § 1604). Therefore,

unless the expropriation claim falls within one of the exceptions

set forth in 28 U.S.C. §§ 1605–07, the district court, and

derivatively this court, has no jurisdiction over the claim. The

majority concludes that claim falls within the exception created

by § 1605(a)(3). I disagree. 

That exception permits the courts of the United States to

exercise jurisdiction “in any case . . . in which rights in property

taken in violation of international law are in issue.” 

§ 1605(a)(3) (emphasis added). The majority states, Venezuela

argues that “as a Venezuelan national, H&P-V may not claim a

taking in violation of international law.” Maj. Op. at 8

(emphasis in original). Further, “under generally applicable

corporate law principles, H&P-IDC has no ‘rights in property’

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2

belonging to its subsidiary and thus lacks standing,” to bring this

action. Maj. Op. at 8. I again look to the majority’s statement

of the facts which acknowledges: “All [parties] agree that for

purposes of international law, ‘a corporation has the nationality

of the state under the laws of which the corporation is

organized.’” Maj. Op. at 9 (quoting Restatement (Third) of

Foreign Relations Law § 213 (1987)). 

The majority further recognizes “that generally, a foreign

sovereign’s expropriation of its own national’s property does not

violate international law.” Maj. Op. at 9 (citing United States v.

Belmont, 301 U.S. 324, 332 (1937)). This principle is known as

the domestic takings rule, which provides that “[w]hat another

country has done in the way of taking over property of its

nationals, and especially of its corporations, is not a matter for

judicial consideration here. Such nationals must look to their

own government for any redress to which they may be entitled.” 

Belmont, 301 U.S. at 332. 

Like the majority, I recognize that Venezuela’s position in

this litigation is that 

the domestic takings rule ends this case because H&P-V, as

a Venezuelan national, may not seek redress in an

American court for wrongs suffered in its home country. 

This argument has a good deal of appeal. Having freely

chosen to incorporate under Venezuelan law, H&P-V

operated in that country for many years and reaped the

benefits of its choice, including several extremely lucrative

contracts with the Venezuelan government. Given this, and

especially given that H&P-V expressly agreed that these

contracts would be governed by Venezuelan law in

Venezuelan courts, one might conclude that H&P-V should

live with the consequences of its bargain.

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Maj. Op. at 10. Unlike the majority, I believe that Venezuela’s

position is well taken. When appellees chose to incorporate

under Venezuelan law, they bargained for treatment under

Venezuelan law. To extend our examination of Venezuelan law

to adjudicate its fairness appears to me to violate Venezuela’s

sovereignty, the value protected by the FSIA.

The majority supports its extended examination with the

decision in Banco Nacional de Cuba v. Sabbatino, 307 F.2d 845,

861 (2d Cir. 1962). While that case may stand for the

proposition that the courts of the United States can examine the

fairness of a foreign sovereign’s expropriation, I cannot join the

majority’s conclusion that “Sabbatino remains good law.” Maj.

Op. at 12. Perhaps Sabbatino is good law in the Second Circuit,

but we are not bound by the decisions of other circuits, and I do

not conclude that Sabbatino has ever been or remains good law

in the District of Columbia Circuit. I would, therefore, conclude

that Venezuela’s reliance on the domestic takings rule is well

taken and should compel the dismissal of Helmerich & Payne’s

expropriation claim for want of jurisdiction.

I would further note that I differ with the majority’s

apparent belief that Venezuela’s reliance upon Dole Food Co.

v. Patrickson, 538 U.S. 468 (2003), is misplaced. See Maj. Op.

at 14. The majority asserts that “[c]ontrary to Venezuela’s

assertion, . . . Dole Food does not represent a wholesale

incorporation of corporate law into the FSIA.” Id. While this

may be literally accurate, it is at least equally accurate that

neither Dole Food nor any other case constitutes a wholesale

rejection of corporate law. As both the majority’s opinion and

mine have recognized, shareholders ordinarily have no standing

to assert claims on behalf of a corporation for its property.

Neither do I find compelling the majority’s reliance on two

cases from this circuit: Agudas Chasidei Chabad of U.S. v.

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Russian Federation, 528 F.3d 934, 940 (D.C. Cir. 2008), and

Ramirez de Arellano v. Weinberger, 745 F.2d 1500, 1517 (D.C.

Cir. 1984), cert. granted, judgment vacated on other grounds,

471 U.S. 1113 (1985). Chabad is authority, at most, for the

proposition that “[i]n an FSIA case, we will grant a motion to

dismiss on the grounds that the plaintiff has failed to plead a

‘taking in violation of international law’ or has no ‘rights in

property . . . in issue’ only if the claims are ‘wholly insubstantial

or frivolous.’” Maj. Op. at 9 (quoting Chabad, 528 F.3d at 942)

(emphasis in original). As the plaintiff here has, by reason of

the domestic takings rule, failed to plead a “taking in violation

of international law,” Chabad supports rather than undermines

Venezuela’s motion for dismissal. 528 F.3d at 943 (emphasis

added). Ramirez warrants no separate discussion. 

I would note first that the judgment in Ramirez was vacated

by the Supreme Court. Weinberger v. Ramirez de Arellano, 471

U.S. 1113 (1985). As the majority states,

we have held that, “[w]hen the Supreme Court vacates a

judgment of this court without addressing the merits of a

particular holding in the panel opinion, that holding

‘continue[s] to have precedential weight, and in the absence

of contrary authority, we do not disturb’ it.” United States

v. Adewani, 467 F.3d 1340, 1342 (D.C. Cir. 2006) (quoting

Action Alliance of Senior Citizens of Greater Philadelphia

v. Sullivan, 930 F.2d 77, 83 (D.C. Cir. 1991)).

Maj. Op. at 16. For what it’s worth, I question whether the

language quoted from Adewani and Action Alliance in fact states

a holding of this court to the effect that we are bound by the

reasoning of vacated opinions. Rather, each instance

paraphrases language of Justice Powell quoted in a parenthetical

following the quoted language from Action Alliance. Action

Alliance parenthetically quoted Justice Powell as stating:

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5

Although a decision vacating a judgment necessarily

prevents the opinion of the lower court from being the law

of the case, . . . the expressions of the court below on the

merits, if not reversed, will continue to have precedential

weight and, until contrary authority is decided, are likely to

be viewed as persuasive authority if not the governing law

. . . .

County of Los Angeles v. Davis, 440 U.S. 625, 646 n.10 (Powell,

J., dissenting) (quoted in Action Alliance, 930 F.2d at 83–84). 

In other words, the prior reasoning of the court in vacated

opinions may be persuasive, even powerfully persuasive, but I

question whether it is binding precedent.

Be that as it may, Ramirez is not genuinely on point. 

Ramirez dealt with the question of whether the shareholders of

a corporation ousted by acts of the United States government

had a property interest warranting due process protection under

the Constitution. The Ramirez Court had no occasion to

consider whether the statutory waiver of a foreign government’s

sovereign immunity encompasses the sort of second degree

property interest protected against invasion by our government

under the due process concepts of our Constitution.

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