1

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

HELMERICH & PAYNE 

INTERNATIONAL DRILLING CO. and 

HELMERICH & PAYNE DE 

VENEZUELA, C.A.,

 Plaintiffs,

 v.

BOLIVARIAN REPUBLIC OF 

VENEZUELA, PETRÓLEOS DE 

VENEZUELA, S.A., and PDVSA 

PETRÓLEO, S.A.,

 Defendants.

Civil Action No. 11-cv-1735 (RLW)

MEMORANDUM OPINION

I. INTRODUCTION

This case involves a longstanding and apparently formerly productive contractual 

relationship that has since broken down. Although Defendants filed motions to dismiss, 

subsequent to the filing of those motions all parties asked, and this Court agreed, to hold those 

motions in abeyance so as to first answer four questions central to the disposition of the motions. 

This Memorandum Opinion addresses those four questions, along with a motion filed by 

Plaintiffs asking the Court to “enforce” the parties’ Joint Stipulation regarding the handling of 

the four questions. As detailed below, the Court’s answers to the questions, and the resolution of 

Plaintiffs’ motion, do not fully resolve the motions to dismiss, and therefore additional briefing 

will be necessary on the remaining arguments raised in Defendants’ motions.
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II. FACTUAL SUMMARY

A. Issue Background1

Helmerich & Payne International Drilling Co. (H&P-IDC) is a Delaware-incorporated, 

Tulsa, Oklahoma-based corporation that wholly owns the subsidiary Helmerich & Payne de 

Venezuela, C.A. (H&P-V) (collectively, Plaintiffs). (Dkt. No. 1, ¶¶ 2, 9). H&P-V “is 

incorporated in Venezuela,” and “had its principal Venezuelan office in Anaco, Venezuela . . . .”

(Id. ¶ 10). Plaintiffs are oil and gas drilling companies. (Id. ¶¶ 9-10). H&P-V began providing 

contract oil and gas drilling services in Venezuela in the 1970s; H&P-IDC had been operating in 

Venezuela through wholly-owned subsidiaries since 1954. (See id. ¶ 16). Venezuela’s 

Superintendent of Foreign Investment, which is part of the country’s Finance Ministry, issued 

H&P-V a Company Qualification Certificate stating the company “is . . . considered a FOREIGN 

COMPANY at all relevant legal effects.” (Id. ¶¶ 100, 102) (capitalization in original).

There are three Defendants in this case. One is the Bolivarian Republic of Venezuela 

(Venezuela), which of course is a country on the northern coast of South America. The other 

two are entities owned and controlled by Venezuela: Petróleos de Venezuela, S.A. (PDVSA) 

and PDVSA Petróleo, S.A. (Petróleo). (See id. ¶ 2). PDVSA and Petróleo are energy 

corporations “that by law enjoy a monopoly on Venezuela’s oil reserves.” (Id.). Petróleo, a 

wholly owned subsidiary of PDVSA, is the exploration and operating arm of PDVSA. (Id. ¶ 13). 

The PDVSA Defendants concede they are agencies or instrumentalities of Venezuela, as that 

term is defined at 28 U.S.C. § 1603(b). (See Dkt. No. 22-1, at 13).

 1 Unless specifically noted otherwise, this summary is based on facts alleged in Plaintiffs’ 

Complaint, which are presumed true. (See Dkt. No. 34, at 3 (“The parties stipulate that they shall 

rely on no factual evidence, apart from the allegations of the complaint and documents 

referenced therein, and no arguments based upon such evidence, in connection with the 

resolution of the Initial Issues.”)).
3

Beginning around 1997, H&P-V provided contract drilling services exclusively to the 

PDVSA Defendants and other entities owned by Venezuela. (See Dkt. No. 1, ¶ 2). H&P-V and 

Petróleo signed each contract. (See id. ¶¶ 30, 32). This work involved, among other things, “the 

largest, most powerful, and deepest-drilling, land-based drilling rigs available.” (Id. ¶¶ 21, 26). 

At issue in this litigation are ten “fixed term” drilling contracts signed in 2007 to be performed 

by H&P-V on a “day-rate” basis. (Id. ¶¶ 30, 33-35). “The agreed-upon daily rates for H&P-V . . 

. were partially set forth in U.S. Dollars and partially in Venezuelan currency (‘Bolivars’ or 

‘Bolivar Fuertes’).” (Id. ¶ 37) (footnote omitted). “H&P-V separately invoiced the amounts due 

in U.S. Dollars (‘Dollar-based invoices’) and the amounts due in Venezuelan currency (‘Bolivarbased invoices’).” (Id. ¶ 38).

Of the ten contracts, one related to drilling in the western region of Venezuela, and the 

rest related to drilling in the eastern region. (Id. ¶¶ 39-40). The former contract required the 

Dollar-based invoices to be paid “in U.S. Dollars in the United States” under certain conditions. 

(Dkt. No. 40-3, at 21-22 (§ 18.14)).2

 2 Specifically, the western drilling contract provides at § 18.14 that: 

“If as a result of the exchange control measures established by the competent 

authorities, [H&P-V] is unable to obtain in a timely fashion the foreign currency 

required to perform its obligations abroad related to the performance of this 

CONTRACT, [Petróleo] agrees to pay in United States dollars the portion of the 

price of this CONTRACT set in said currency, in accordance with current 

regulation, “Norms and Procedures for the Payment of Foreign Exchange for 

Construction, Goods and Services in the Western Division,” for those items 

directly associated with the external component pursuant to the results of the 

corresponding audit. [H&P-V] shall indicate, for purposes of payment, the bank 

and account number where payments are to be made. [H&P-V] agrees:

a) That the deposits made by [Petróleo] in the referenced accounts will release 

[Petróleo] from its obligation to pay the portion of the price set in United 

States Dollars to the extent of the deposits made.

b) That it will not request from the commercial bank or other foreign exchange 

operators the acquisition of foreign currency corresponding to the amounts 
4

The remaining nine contracts “were supplemented” by a 2008 agreement signed by H&PV and PDVSA, (Dkt. No. 1, ¶¶ 40-41), that required the PDVSA Defendants to pay “invoices 

issued [by H&P-V] corresponding to the contract’s foreign currency component . . . in actual 

dollars at 61% . . . abroad in the [Tulsa, Oklahoma] account specified by [H&P-V],” while “the 

remaining portion, 39%, shall be paid in equivalent bolivars at the official exchange rate,” (Dkt. 

No. 40-7, at 2 (¶¶ 1-2). “This 2008 agreement reiterated the terms of an earlier 2003 agreement, 

which similarly provided for a set percentage of the PSVSA Defendants’ payments to be 

remitted in U.S. Dollars to a bank account in the United States.” (Dkt. No. 1, ¶ 118). “Thus, 

under each of the contracts at issue, the PDVSA Defendants were required to make payments to 

H&P-V in U.S. Dollars directly to H&P-V’s designated bank account at the Bank of Oklahoma 

in Tulsa, Oklahoma.” (Id. ¶ 43).

Around 2007,3 the PDVSA Defendants “began systematically to breach those contracts” 

in an amount that eventually amounted to over $32 million in unpaid invoices. (See id. ¶¶ 6, 56). 

In January 2009, H&P, Inc., the parent company of H&P-IDC, (id. ¶ 9), “announced it would 

‘cease[] operations on rigs as their drilling contracts expire’ and not renew its subsidiary’s 

contracts with the PDVSA Defendants absent an ‘improvement in receivable collections,’” (id. ¶ 

 

deposited by [Petróleo] in the aforementioned account; and that if it should do 

so, it will immediately return to [Petróleo], in dollars, the amounts that it 

would have deposited.

c) That the payment in U.S. dollars, as set forth in this section, is of a temporary 

nature and, consequently, [Petróleo] may pay the portion of the price 

established in US dollars in Bolivars, at the exchange rate in effect at the place 

and time of payment, when, in [Petróleo]’s judgment, the grounds that gave 

rise to this form of temporary payment have ceased. In no case shall 

[Petróleo] recognize expenses for commissions and/or transfers that [H&P-V] 

may incur for purchasing foreign exchange.” 3 The Complaint states both that “[s]tarting in 2007” the PDVSA Defendants “fell 

substantially behind in their payments to H&P-V,” (Dkt. No. 1, ¶ 46), and that they “began” to 

breach the contracts at issue “in late 2008 and 2009,” (id. ¶ 6).
5

50). By November 2009, H&P-V had finished its contractually-obligated work and 

disassembled its equipment. (See id. ¶ 53). In 2010, the PDVSA Defendants stopped making 

payments altogether. (Id. ¶¶ 44, 56). Prior to that, they “made at least 55 payments totaling 

roughly $65 million into H&P-V’s designated bank account in Tulsa,” in addition to payments 

made in Bolivars. (See id. ¶ 44). The PDVSA Defendants and Plaintiffs met in Houston on May 

24, 2010, in an attempt to work out a solution, but were unsuccessful. (See id. ¶ 55).

Between June 12 and 14, 2010, the PDVSA Defendants, with assistance from the 

Venezuelan National Guard, “surrounded and unlawfully blockaded” H&P-V’s business 

premises in western and eastern Venezuela. (Id. ¶ 3). “PDVSA’s Director of Services expressly 

informed H&P-V’s Administrative Manager that Defendants intended 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). On June 23, 2010, PDVSA issued a 

press release stating they had nationalized eleven drilling rigs belonging to “Helmerich & Payne 

(HP), a U.S. transnational firm.” (Id. ¶ 65). Two days later, PDVSA issued another press 

release, which referred to “[t]he nationalization of the oil production drilling rigs from the 

American contractor H&P . . . .” (Id. ¶ 66). 

On June 29, 2010, the Venezuelan National Assembly issued a Bill of Agreement 

declaring H&P-V’s property to be of public interest, and recommended to then President Hugo 

Chávez that he issue a Decree of Expropriation. (Id. ¶¶ 3-4). That day, President Chávez issued 

Presidential Decree No. 7532, directing PDVSA “or its designee affiliate” to seize H&P-V’s 

property. (See id. ¶ 4). Also on that same day, the PDVSA Defendants hired a notary to 

“conduct a judicial inspection of the rigs and other assets” in the eastern (but not western) region 

of Venezuela. (Id. ¶ 71). “H&P-V hired a notary to accompany the PDVSA Defendants’ notary; 
6

H&P-V’s notary simultaneously performed a rushed and incomplete inspection in the limited 

time available that day.” (Id.). The property encompasses more than just the drilling rigs, 

including, for example, real property, vehicles, and various equipment. (See id. ¶¶ 77-80). At 

some time after that, Minister Ramirez, Venezuela’s Minister of Energy and Petroleum and also 

President of PDVSA, spoke in eastern Venezuela at what had been H&P-V’s premises there

about the seizure, referring to H&P-V as an “American company” with “foreign gentlemen 

investors” that would now “become part of the payroll” of PDVSA. (Id. ¶ 5). On July 1, 2010, 

Petróleo filed two eminent domain proceedings in Venezuela, one in the eastern region and one 

in the western. (Id. ¶¶ 72-73). In the former, as of September 2011, “H&P-V still has not been 

afforded the opportunity to appear,” and in the latter “those proceedings have not progressed past 

the earliest stage of the case.” (Id.). Plaintiffs have received no compensation from Venezuela 

with respect to the seizure of their drilling rigs and related items. (Id. ¶ 86).

B. Procedural Background

Plaintiffs filed their Complaint in September 2011 against Defendants under two 

provisions of the Foreign Sovereign Immunities Act (FSIA): the commercial activities 

exception4 and the expropriation exception.5

 (Id. ¶ 1). The Complaint states two counts: 

 4 28 U.S.C. § 1605(a)(2) (“A foreign state shall not be immune from the jurisdiction of 

courts of the United States or of the States 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.”).

5 28 U.S.C. § 1605(a)(3) (“A foreign state shall not be immune from the jurisdiction of 

courts of the United States or of the States in any case . . . in which rights in property taken in 

violation of international law are in issue and that property or any property exchanged for such 

property is present in the United States in connection with a commercial activity carried on in the 

United States by the foreign state; or that property or any property exchanged for such property 

is owned or operated by an agency or instrumentality of the foreign state and that agency or 

instrumentality is engaged in a commercial activity in the United States.”).
7

Taking in Violation of International Law, and Breach of Contract. In three briefs filed separately 

on August 31, 2012—two by Venezuela, and one by the PDVSA entities—Defendants moved to 

dismiss. (Dkt. Nos. 22-24). Before opposing the motions to dismiss, Plaintiffs filed a motion to 

compel discovery, (Dkt. No. 29), which was fully briefed but ultimately denied without prejudice 

because the parties instead agreed to a Joint Stipulation, (see Dkt. No. 36).

The Joint Stipulation lists four issues raised in the motions to dismiss, termed the “Initial 

Issues,” that the parties “shall brief . . . in their next round of briefing and reserve argument on 

the additional issues raised in the motions to dismiss . . . .” (Dkt. No. 36, at 3). The four Initial 

Issues are:

(A) Whether, for purposes of determining whether a ‘taking in violation of 

international law’ has occurred under the expropriation exception of the Foreign 

Sovereign Immunities Act (FSIA), 28 U.S.C. § 1605(a)(3), Plaintiff Helmerich & 

Payne de Venezuela C.A. is a national of Venezuela under international law;

(B) Whether Plaintiffs’ expropriation claims are barred by the act of state 

doctrine, including the issue whether this defense may be adjudicated prior to the 

resolution of Defendants’ challenges to the Court’s subject matter jurisdiction;

(C) Whether, for purposes of determining the applicability of the commercial 

activities exception of the FSIA, 28 U.S.C. § 1605(a)(2), Plaintiffs have 

sufficiently alleged a ‘direct effect’ in the United States within the meaning of 

that provision; and

(D) Whether Plaintiff Helmerich & Payne International Drilling Co. has standing.

(Id. at 3). The Joint Stipulation states that these four issues “shall be adjudicated solely on the 

basis of the Plaintiffs’ allegations (including the materials attached as exhibits or referenced in 

the complaint), assuming the truth of all well-pleaded factual allegations in the complaint, and 

construing the complaint in the light most favorable to Plaintiffs.” (Id. at 2-3). It also states the 

following: “The parties stipulate that Plaintiffs shall brief the Initial Issues in their next round of 

briefing and reserve argument on the additional issues raised in the motions to dismiss (the 

ownership or operation of the expropriated assets, application and enforceability of what 
8

Defendants refer to as a forum selection clause, and forum non conveniens (hereafter ‘Additional 

Issues’)) until a second phase of briefing on the motions to dismiss.” (Id. at 3).

Following the agreement on the Joint Stipulation, the parties completed the briefing on 

the motions to dismiss. Shortly thereafter, Plaintiffs filed a motion to enforce the Joint 

Stipulation, claiming that the PDVSA Defendants violated the Joint Stipulation by arguing “that 

the Court cannot exercise personal jurisdiction over the PDVSA Defendants consistent with 

constitutional due process,” which Plaintiffs state is not among the four Initial Issues. (See Dkt. 

No. 45, at 3). Plaintiffs ask that portions of the PDVSA Defendants’ Reply that “contain the 

constitutional due process argument” be stricken. (See id. at 5-6). In their Opposition to the 

motion to enforce, the PDVSA Defendants argue that “a due process analysis is directly related 

to a determination of direct effect because the FSIA’s commercial activity exception cannot 

grant personal jurisdiction where the Constitution forbids it.” (Dkt. No. 46, at 9).

III. ANALYSIS OF INITIAL ISSUES

The Court will address the four Initial Issues in the order they appear in the parties’ Joint 

Stipulation. In addition, as part of answering the question regarding whether the Plaintiffs have 

sufficiently alleged a direct effect under the relevant FSIA provision, the Court will resolve 

Plaintiffs’ motion to enforce.

A. Corporate Nationality of H&P-V

Listed first among the four Initial Issues is the question of whether H&P-V is considered 

a national of Venezuela under international law for the purpose of determining if a taking in 

violation of international law occurred under the expropriation exception of the FSIA. Based on 

the weight of authority reviewed below, this Court concludes that H&P-V is considered a 

national of Venezuela under international law.
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1. Standard of Review

International law is based on, among other sources, international conventions, principles 

of law recognized by civilized nations, judicial opinions, and reputable scholarship. Doe v. 

Exxon Mobil Corp., 654 F.3d 11, 36-37 n.23 (D.C. Cir. 2011) (citations omitted). See also

RESTATEMENT (THIRD) OF FOREIGN RELATIONS LAW (the RESTATEMENT) § 103(2) (1987) (“In 

determining whether a rule has become international law, substantial weight is accorded to (a) 

judgments and opinions of international judicial and arbitral tribunals; (b) judgments and 

opinions of national judicial tribunals; (c) the writings of scholars; [and] (d) pronouncements by 

states that undertake to state a rule of international law, when such pronouncements are not 

seriously challenged by other states.”). In the absence of an applicable treaty or controlling 

federal precedent, “resort must be had to the customs and usages of civilized nations, and, as 

evidence of these, to the works of jurists and commentators who by years of labor, research, and 

experience have made themselves peculiarly well acquainted with the subjects of which they 

treat.” The Paquete Habana, 175 U.S. 677, 700 (1900).

2. Analysis of Relevant Authority

Because no treaty controls the determination of H&P-V’s nationality, the Court must 

examine the sources referenced by the RESTATEMENT § 103(2) to identify statements by 

authorities on international law in this area. A review of key sources from both the international 

and national arenas, and an analysis of their application to this case, follows.

a. International Sources

For several decades, the general practice in international law has been to consider a 

corporation a national of the country of its incorporation. This stems in no small part from the 

decision of the International Court of Justice (ICJ) in Case Concerning the Barcelona Traction, 
10

Light and Power Co. (Belg. v. Spain) 1970 I.C.J. 3 (Feb. 5) (Barcelona Traction). In Barcelona 

Traction, the ICJ stated that “[t]he traditional rule attributes the right of diplomatic protection of 

a corporate entity to the State under the laws of which it is incorporated and in whose territory it 

has its registered office. These two criteria have been confirmed by long practice and by 

numerous international instruments.” Id. ¶ 70. The case also later refers to “the general rule that 

the right of diplomatic protection of a company belongs to its national State . . . .” Id. ¶ 93. The 

case has been and remains “widely viewed not only as an accurate statement of the law on 

diplomatic protection of corporations but a true reflection of customary international law.” See

U.N. Int’l L. Comm’n, Fourth Report on Diplomatic Protection, U.N. Doc. A/CN.4/530, at 11 

(Mar. 13, 2003), available at http://untreaty.un.org/ilc/documentation/english/a_cn4_530.pdf.

The ICJ recently revisited Barcelona Traction and substantially affirmed its earlier 

decision. See Case Concerning Ahmadou Sadio Diallo (Republic of Guinea v. Democratic 

Republic of the Congo) 2007 I.C.J. 582 (May 24) (Diallo). In Diallo, the ICJ stated that since 

Barcelona Traction “the Court has not had occasion to rule on whether, in international law, 

there is indeed an exception to the general rule that the right of diplomatic protection of a 

company belongs to its national State, which allows for protection of the shareholders by their 

own national State by substitution, and on the reach of any such exception.” Id. ¶ 87 (quotation 

marks and citations to Barcelona Traction omitted). Given the opportunity to create such an 

exception, the ICJ in Diallo, after “having carefully examined State practice and decisions of 

international courts and tribunals,” declined to do so, finding that the universe of sources 

examined did not reveal, “at least at the present time,” such an exception. See id. ¶ 89.

In Diallo, the ICJ also stated it was “bound to note that, in contemporary international 

law, the protection of the rights of companies and the rights of their shareholders, and the 
11

settlement of the associated disputes, are essentially governed by bilateral or multilateral 

agreements for the protection of foreign investments, such as the . . . International Centre for 

Settlement of Investment Disputes (ICSID) . . . .” Id. ¶ 88. A recent pronouncement from the 

ICSID on corporate nationality, then, is instructive. In Tokios Tokelės v. Ukraine, the ICSID 

issued a Decision on Jurisdiction. Case No. ARB/02/18 (Apr. 29, 2004).6

 That decision states 

that “reference to the state of incorporation is the most common method of defining the 

nationality of business entities under modern [Bilateral Investment Treaties] and traditional 

international law.” Id. ¶ 63 (citing Christoph H. Schreuer, The ICSID Convention: A 

Commentary, at 277 (2001)). The ICSID approvingly cites to Barcelona Traction, calling it “the 

predominant approach in international law.” Id. ¶ 70. And the ICSID also cites to a treatise that 

similarly notes that “it is usual to attribute a corporation to the state under the laws of which it 

has been incorporated and to which it owes its legal existence; to this initial condition is often 

added the need for the corporation’s head office, registered office, or its siège social to be in the 

same state.” 1 OPPENHEIM’S INTERNATIONAL LAW 859-60 (Sir Robert Jennings and Sir Arthur 

Watts eds., 9th ed. 1996) (footnote omitted).

Given that H&P-V was incorporated in Venezuela and had multiple offices there, 

including its principal office in Anaco, a review of relevant international sources indicates that 

the company is to be considered a national of Venezuela. With that in mind, the Court now turns 

to national sources to confirm this understanding.

 6 The decision is available at the following cumbersome url: https://icsid.worldbank.org/

ICSID/FrontServlet?requestType=CasesRH&actionVal=showDoc&docId=DC639_En&caseId=

C220.
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b. National Sources

The RESTATEMENT is published by the American Law Institute, an organization that 

includes “judges, legal academicians, and lawyers in independent private practice, in 

government, and in law departments of business and other enterprises.” See RESTATEMENT at 

XI. The most recent version of the RESTATEMENT takes a clear position on corporate nationality 

in international law: “For purposes of international law, a corporation has the nationality of the 

state under the laws of which the corporation is organized.” Id. § 213. The comments to § 213 

support this clear statement, noting that “[t]he traditional rule stated in this section, adopted for 

certainty and convenience, treats every corporation as a national of the state under the laws of 

which it was created.” Id. cmt. c. See also id. cmt. d. (“[A] corporation has the nationality of the 

state that created it . . . .”). The RESTATEMENT cites approvingly to Barcelona Traction, noting 

that the case “gave preference to the state of incorporation over a state with other significant 

links, in representing a company against a third state.” Id. Reporters’ Notes No. 3. It also rejects 

the suggestion that the place of the siège social can be an alternative basis for corporate 

nationality under international law, instead finding that “[i]n practical effect it is an additional 

requirement, since jurisdictions using that standard require that a firm be incorporated in the state 

where it has its siège.” Id. cmt. c.

The Supreme Court has cited to § 213 of the RESTATEMENT, and the parties dispute the 

significance of that citation to this case. See JPMorgan Chase Bank v. Traffic Stream (BVI) 

Infrastructure Ltd., 536 U.S. 88, 91-92 (2002). Had the Supreme Court clearly held in 

JPMorgan that the state of incorporation is the definitive test of nationality, that would of course

be the end of the analysis. But that was not the case. Nonetheless, because the case is important 
13

and neither Plaintiffs nor Defendants squarely address its significance to these facts, a brief word 

on the case is warranted.

Defendants slightly overstate the import of JPMorgan. According to the PDVSA 

Defendants, “[t]he Supreme Court has held that ‘[f]or purposes of international law, a 

corporation has the nationality of the state under the laws of which the corporation is 

organized.’” (Dkt. No. 22-1, at 22-23) (quoting JPMorgan, 536 U.S. at 91-92 (in turn quoting

the RESTATEMENT § 213)). Similarly, Venezuela claims that in JPMorgan the Supreme Court 

“has held” that “a corporation has the nationality of the state under the laws of which the 

corporation is organized.” (Dkt. No. 44, at 10) (citation omitted). But there are several 

indications that what Defendants claim is a holding of the Supreme Court is not actually so. One 

is that the quote from the RESTATEMENT was used as a parenthetical following a “Cf.” cite, and 

the quote is never discussed or analyzed. Another is that JPMorgan is not a case applying 

international law—hence, the “Cf.” cite—but was rather constructing a rule for corporate 

nationality under domestic law. See 536 U.S. at 98-99 (“[O]ur jurisdictional concern here is with 

the meaning of ‘citizen’ and ‘subject’ as those terms are used in [28 U.S.C.] § 1332(a)(2).”)

(brackets and internal citation omitted). Thus, there is no clear holding from the Supreme Court 

in JPMorgan on the issue of corporate nationality under international law or the FSIA.

But that does not mean that Plaintiffs are correct when they state JPMorgan “has no 

bearing whatsoever on international law governing expropriations.” (Dkt. No. 39, at 38 n.22).7

 

As our Court of Appeals has explained, “[C]arefully considered language of the Supreme Court, 

even if technically dictum, generally must be treated as authoritative.” United States v. Oakar, 

 7 Plaintiffs’ Opposition appears to only address JPMorgan in this footnote. According to 

their Table of Authorities, the case appears once on page 30, (Dkt. No. 39, at 5), but the Court 

sees no mention of the case there.
14

111 F.3d 146, 153 (D.C. Cir. 1997) (citation omitted). Perhaps the Supreme Court’s passing 

citation to the RESTATEMENT fails to meet this standard, nonetheless the Court’s imprimatur of 

this RESTATEMENT provision carries considerable force.

Other United States courts, in line with the RESTATEMENT, have concluded that a 

corporation’s nationality is determined by its state of incorporation. For example, in Rong v. 

Liaoning Provincial Government, 362 F. Supp. 2d 83 (D.D.C. 2005), aff’d on other grounds, 452 

F.3d 883 (D.C. Cir. 2006), Broadsino, an entity incorporated in Hong Kong, claimed that its

property was expropriated by China. Plaintiffs in Rong argued that Broadsino should not be 

determined to be a national of China based in part on the fact that there had previously been an 

agreement that Hong Kong corporations would be considered foreign nationals with respect to 

China. See 362 F. Supp. 2d at 101. Judge Walton rejected this argument and looked to the state 

of incorporation to determine nationality. “[B]ecause Broadsino is a corporation organized 

under the laws of Hong Kong, [China]’s actions did not contravene international law. . . . 

[E]xpropriation by a sovereign state of the property of its own national does not implicate settled 

principles of international law.” Id. at 101-02. And recently in Best Medical Belgium, Inc. v.

Kingdom of Belgium, 913 F. Supp. 2d 230 (E.D. Va. 2012), an American company with “a 

controlling share” of a Belgian subsidiary challenged an alleged expropriation by the Belgian 

government. Id. at 234. The court in that case found no violation of international law, holding 

that the subsidiary was a Belgian national. Id. at 239-40.

On the other side of the ledger, so to speak, from the ICJ, ICSID, RESTATEMENT, U.S. 

Supreme Court, and other courts, Plaintiffs point to one case from the Second Circuit—Banco 

Nacional de Cuba v. Sabbatino, 307 F.2d 845 (2d Cir. 1962) (Sabbatino), rev’d on other 

grounds, 376 U.S. 398 (1964); see also Banco Nacional de Cuba v. Farr, 383 F.2d 166, 168 (2d 
15

Cir. 1967) (a continuing part of the “much-discussed previous [Sabbatino] opinions”). There is 

no doubt Sabbatino is a useful case for Plaintiffs. In that case, the Second Circuit disregarded 

the nationality of the corporation where it was different from the nationality of most of the 

corporation’s shareholders. 307 F.2d at 861. The court stated that “[w]hen a foreign state treats 

a corporation in a particular way because of the nationality of its shareholders, it would be 

inconsistent for us in passing on the validity of that treatment to look only to the ‘nationality’ of 

the corporate fiction.” Id. Plaintiffs claim that Sabbatino is a “seminal” case. (Dkt. No. 39, at 

33). However, if the case were truly seminal, it would have strongly influenced later 

developments, yet it appears that Sabbatino’s proposition that a corporation’s state of 

incorporation can be ignored has never been followed by any court in the United States. 

Plaintiffs point to none, and this Court has found none. 

3. Conclusion

Although Plaintiffs are not without any support in arguing that H&P-V is not a national 

of Venezuela under international law, the holding of the Second Circuit in Sabbatino is 

overwhelmed by authorities including cases from the International Court of Justice, a Decision 

on Jurisdiction from the International Center for the Settlement of Investment Disputes, other 

decisions from U.S. courts, and treatises (including one endorsed by the Supreme Court). The 

weight of authority therefore leads to the conclusion that H&P-V is considered a national of 

Venezuela under international law.

B. Act of State doctrine

The second of the parties’ Initial Issues is whether the act of state doctrine bars Plaintiffs’ 

expropriation claims. As part of that inquiry, the Court must determine “whether this defense 

may be adjudicated prior to the resolution of Defendants’ challenges to the Court’s subject 
16

matter jurisdiction.” (Dkt. No. 36, at 3). Because this Court must first determine it has 

jurisdiction before considering an act of state defense, the time is not yet ripe for resolving 

whether the act of state doctrine bars Plaintiffs’ expropriation claims.

1. Background on the act of state doctrine

The act of state doctrine “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). This doctrine “is 

applicable when ‘the relief sought or the defense interposed would require a court in the United 

States to declare invalid the official act of a foreign sovereign performed within’ its boundaries.” 

World Wide Minerals, Ltd. v. Republic of Kazakhstan, 296 F.3d 1154, 1164 (D.C. Cir. 2002) 

(internal brackets omitted) (quoting W.S. Kirkpatrick & Co. v. Environmental Tectonics Corp., 

493 U.S. 400, 405 (1990)). The doctrine is to be interpreted and applied in accordance with the 

policy interests of “international comity, respect for the sovereignty of other nations on their own 

territory, and the avoidance of embarrassment to the Executive Branch in its conduct of foreign 

relations.” W.S. Kirkpatrick, 493 U.S. at 408; Nemariam v. Fed. Democratic Republic of 

Ethiopia, 491 F.3d 470, 477 n.7 (D.C. Cir. 2007). However, the party raising the defense bears 

the burden to affirmatively show that an act of state has occurred and “that no bar to the doctrine 

is applicable under the factual circumstances.” Ramirez de Arellano v. Weinberger, 745 F.2d 

1500, 1534 (D.C. Cir. 1984) (en banc), judgment vacated on other grounds, 471 U.S. 1113 

(1985).

The Second Hickenlooper Amendment is an exception to the act of state doctrine. See 22 

U.S.C. § 2370(e)(2). Through this Amendment, Congress legislatively overruled Sabbatino so 

that the act of state doctrine would not preclude adjudication of an expropriation claim where the 
17

court has jurisdiction to hear it. See Nemariam, 491 F.3d at 477 n.8 (“Through the Hickenlooper 

Amendment, ‘Congress . . . adopted a specific statutory provision requiring federal courts to 

examine the merits of controversies involving expropriation claims. [It] overrides the judicially 

developed doctrine of act of state.’”) (quoting West v. Multibanco Comermex, S.A., 807 F.2d 

820, 829 (9th Cir. 1987)). Specifically, the Amendment bars application of the doctrine where 

there is: “[(1)] a claim of title or other right to property asserted by any party including a foreign 

state (or a party claiming through such state); [(2)] based upon (or traced through) a confiscation 

or other taking after January 1, 1959; [(3)] by an act of state in violation of the principles of 

international law . . . .” 22 U.S.C. § 2370(e)(2).

2. Jurisdictional considerations

“Federal courts are courts of limited jurisdiction.” Gunn v. Minton, 133 S. Ct. 1059, 

1064 (2013) (citation omitted). Jurisdiction is “the first and fundamental question” federal courts 

must ask when overseeing any case. Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94 

(1998). Thus, there is a threshold duty vested in every court to resolve jurisdictional disputes 

prior to any ruling on the merits. See Galvan v. Fed. Prison Indus., Inc., 199 F.3d 461, 463 

(D.C. Cir. 1999). 

Because “there is no unyielding jurisdictional hierarchy,” Ruhrgas A.G. v. Marathon Oil 

Co., 526 U.S. 574, 578 (1999), district courts have the discretion to resequence jurisdictional 

questions, United States v. Johnson, 254 F.3d 279, 287 n.11 (D.C. Cir. 2001); see also Galvan, 

199 F.3d at 463 (resolving a sovereign immunity challenge before subject-matter jurisdiction, 

holding “[s]overeign immunity questions clearly belong among the non-merits decisions that 

courts may address even where subject-matter jurisdiction is uncertain [because] the Supreme 

Court has characterized the defense as jurisdictional”) (citing FDIC v. Meyer, 510 U.S. 471, 475 
18

(1994)); cf. Ruhrgas AG, 526 U.S. at 586 (expressly allowing adjudication of challenges to 

personal jurisdiction prior to subject-matter jurisdiction where “concerns of judicial economy 

and restraint are overriding”).

In short, district courts cannot resolve a merits defense prior to resolving a challenge to 

subject-matter jurisdiction. See Steel Co., 523 U.S. at 94.

3. Application of jurisdictional considerations to the act of state doctrine

The act of state doctrine goes to the merits, and is not a jurisdictional defense. See 

Republic of Austria v. Altmann, 541 U.S. 677, 700 (2004) (“Unlike a claim of sovereign 

immunity, which merely raises a jurisdictional defense, the act of state doctrine provides foreign 

states with a substantive defense on the merits.”). This Circuit has repeatedly recognized the act 

of state doctrine as a merits defense requiring prior resolution of jurisdictional questions. See, 

e.g., World Wide Minerals, Ltd. v. Republic of Kazakhstan, 296 F.3d 1154, 1161 (D.C. Cir. 

2002) (“[J]urisdiction must be resolved before applying the act of state doctrine, because that 

doctrine is ‘a substantive rule of law.’”) (quoting In re Papandreou, 139 F.3d 247, 256 (D.C. Cir. 

1998)) (footnote omitted); Marra v. Papandreou, 216 F.3d 1119, 1122 (D.C. Cir. 2000) 

(reaffirming In re Papandreou’s holding that while standing, personal jurisdiction, and forum 

non conveniens are jurisdictional issues, the act of state doctrine is not); In re Papandreou, 139 

F.3d at 256 (“[W]e note that the Supreme Court has authoritatively classified the act of state

doctrine as a substantive rule of law. Accordingly, resolution of the case on this ground, before 

addressing the FSIA jurisdictional issue, would exceed the district court’s power.”) (citations 

omitted). This Circuit’s sequencing rule requires consideration of whether subject-matter 

jurisdiction exists under the FSIA before deciding whether to dismiss the case under the act of 
19

state doctrine. Therefore the determination of whether the act of state doctrine applies to the 

facts of this case must wait.

C. The Direct Effect test

The third of the Initial Issues is “[w]hether, for purposes of determining the applicability 

of the commercial activities exception of the FSIA, 28 U.S.C. § 1605(a)(2), Plaintiffs have 

sufficiently alleged a ‘direct effect’ in the United States within the meaning of that provision.” 

(See Dkt. No. 36 ¶ 1). The Circuits are divided on how direct a “direct effect” must be since the 

Supreme Court’s only case interpreting the relevant FSIA language. See Republic of Argentina 

v. Weltover, Inc., 504 U.S. 607 (1992). But based on a review of the developments in this area, 

particularly in this Circuit, Plaintiffs have sufficiently stated a direct effect under the FSIA’s 

commercial activities exception.

1. Standard of Review

As the Supreme Court has explained, “the FSIA [is] the sole basis for obtaining 

jurisdiction over a foreign state in our courts.” Argentine Republic v. Amerada Hess Shipping 

Corp., 488 U.S. 428, 434 (1989). The Act provides that foreign states are immune from the 

jurisdiction of both federal and state courts, subject to those specific exceptions embedded within 

the statute providing otherwise. See 28 U.S.C. §§ 1604-07. In a suit brought against a foreign 

state, a district court must decide, as a threshold question, whether any of the FSIA exceptions 

apply. See Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 493-94 (1983). 

Section 1605(a)(2) of the FSIA describes an exception to the presumption of foreign 

sovereign immunity where “the action is based 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). Therefore, the parties’ Joint 
20

Stipulation, requesting that the Court decide whether Plaintiffs have sufficiently alleged a direct 

effect in the United States, operates as an incremental and narrowly-tailored facial challenge to 

the Court’s jurisdiction. Federal jurisdictional pleading standards apply accordingly. See FED.

R. CIV. P. 12(b)(1).

The same standards that apply to a Rule 12(b)(6) motion to dismiss apply where the 

defendant raises a facial challenge to the court’s jurisdiction on the pleadings. See Muscogee 

Nation v. Okla. Tax Comm’n, 611 F.3d 1222, 1227 n.1 (10th Cir. 2010) (construing defendants’

challenge to jurisdiction as facial and therefore “apply[ing] the same standards under Rule 

12(b)(1) that are applicable to a Rule 12(b)(6) motion to dismiss for failure to state a cause of 

action.”); Kerns v. United States, 585 F.3d 187, 192 (4th Cir. 2009) (“When a defendant makes a 

facial challenge to subject matter jurisdiction, the plaintiff, in effect, is afforded the same 

procedural protections as he would receive under a Rule 12(b)(6) consideration.”); Ballentine v. 

United States, 486 F.3d 806, 810 (3d Cir. 2007) (“Pursuant to Rule 12(b)(1), the Court must 

accept as true all material allegations set forth in the complaint, and must construe those facts in 

favor of the nonmoving party.”).

Applying a Rule 12(b)(6) level of review means “[a] complaint must contain sufficient 

factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft 

v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 

(2007)). Iqbal’s plausibility determination is a “context-specific task” requiring a level of factual 

explication commensurate with the nature of the claim. Id. at 679. Rule 12(b)(1) motions in 

particular require “the plaintiff [to] assert facts that affirmatively and plausibly suggest that the 

pleader has the right he claims (here, the right to jurisdiction), rather than facts that are merely 

consistent with such a right.’” In re Schering Plough Corp. Intron/Temodar Consumer Class 
21

Action, 678 F.3d 235, 244 (3d Cir. 2012) (quoting Stalley v. Catholic Health Initiatives, 509 F.3d 

517, 521 (8th Cir. 2007)).

For an effect to be “direct” under the FSIA’s commercial activities exception, Plaintiffs 

must adequately allege that the effect “follows as an immediate consequence of the defendant’s 

activity.” See Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 618 (1992) (citation, 

internal quotations, and ellipses omitted); see also Princz v. Fed. Republic of Germany, 26 F.3d 

1166, 1172 (D.C. Cir. 1994). While jurisdiction may not be predicated on “purely trivial 

effects,” the effect need not be substantial or foreseeable. See Weltover, 504 U.S. at 618; Cruise 

Connections Charter Mgmt. 1, LP v. Attorney Gen. of Canada, 600 F.3d 661, 664 (D.C. Cir. 

2010) (citing Princz, 26 F.3d at 1172).

If Plaintiffs have alleged facts sufficient to fairly infer that Defendants “promised [and 

failed] to perform specific obligations in the United States,” then the “direct effect” requirement 

is satisfied. See de Csepel v. Republic of Hungary, 714 F.3d 591, 600-01 (D.C. Cir. 2013) (citing 

Weltover, 504 U.S. at 619). Plaintiffs have alleged Defendants breached nine contracts 

concerning drilling in the eastern region of Venezuela, and one contract concerning drilling in 

western region, pursuant to which the PDVSA Defendants agreed to pay a portion of the 

contracts in U.S. Dollars. (See Dkt. No. 1 ¶ 118). Each of the ten contracts contained a 

provision related to whether and under what conditions payments made in U.S. Dollars would be 

sent to the Bank of Oklahoma in Tulsa, Oklahoma. (See id. ¶ 43). 

A foreign state promising to perform specific obligations in the United States, and then 

breaking that promise, has a “direct effect” in the United States under FSIA, without regard to 

how important the place of that performance was to the parties or the agreement. See de Csepel, 

714 F.3d at 600-01; see also I.T. Consultants, Inc. v. Islamic Republic of Pakistan, 351 F.3d 
22

1184, 1186 (D.C. Cir. 2003) (“[A] foreign sovereign’s failure to make a contractually required 

deposit in a bank in the United States meets the statute’s definition of a ‘direct effect,’ without 

regard to whether the parties considered the place of payment ‘important,’ ‘critical,’ or 

‘integral.’”).

2. The contracts at issue in this litigation

Section 18.15 of the eastern drilling contracts provides:

“PDVSA” agrees to pay in United States Dollars, the portion of the price 

of this CONTRACT set forth in such currency, under the following 

conditions:

a) That the deposits made by PDVSA in the accounts previously identified 

or in any other accounts indicated by the CONTRACTOR will release 

PDVSA from its obligation to pay the portion of the price set in United 

States Dollars to the extent of the deposits made.

b) PDVSA will always have the right, at any time and at its sole 

discretion, to pay the portion of the price set in United States Dollars, in 

that currency or in bolivars at the current rate of exchange in Caracas on 

the date of payment. In the event that the payment is made in Bolivars and 

the CONTRACTOR believes it has suffered losses as a consequence of 

the variation in the rate of exchange applied on the date of issue of the 

invoice and at the rate in force on the payment date thereof, the 

CONTRACTOR will submit the relevant claim according to the 

provisions of Clause 18.12 of this CONTRACT.

(Dkt. No. 40-1, at 22 (§ 18.15)).

The eastern drilling contracts were later supplemented by an Agreement on June 2, 2008 

(the June 2, 2008 Agreement) whereby PDVSA agreed to “pay 61% of the invoices for services 

rendered in the eastern region in U.S. dollars to a foreign bank account designated by H&PVenezuela and the remaining 39% of the invoices for such services in bolivars.” (Dkt. No. 22-1, 

at 14; see also Dkt. No. 40-7, at 2 (¶¶ 1-2)). The PDVSA Defendants stress paragraph five of the 

June 2, 2008 Agreement, claiming they had no obligation to make payments in the United States 

because they retained an option not to do so:
23

Without prejudice to all that is indicated above, the present agreement of 

partial payment in foreign currency shall be without effect when PDVSA 

deems it discretionally convenient, in accordance with its interests and 

considering changes in its Policies and Internal Rules.

(Dkt. No. 40-7, at 2 (¶ 5)).

Once PDVSA received an invoice from H&P-V, PDVSA had 30 days to dispute a line 

item before payment was due. (Dkt. No. 40-1, at 21 (§ 18.4); see also Dkt. No. 1, ¶ 45). The 

eastern region contract also reads that “in the event that PDVSA, for any reason, has not made 

the payments within this thirty (30) day term, the parties agree that this does not entitle them to 

legal actions against the other party.” (Dkt. No. 40-1, at 21 (§ 18.4)). Nonetheless, until 2010, 

Defendants approved many invoices requiring payment in U.S. Dollars to the Tulsa, Oklahoma 

bank account, pursuant to the June 2, 2008 Agreement. (See Dkt. No. 1, ¶ 44). In all, there 

were approximately 55 payments totaling $65 million to the Oklahoma bank account during the 

time period relevant to this litigation. (See id.).

Under the western drilling contract, payment was to be made in bolivars unless the 

foreign exchange control measures in Venezuela prevented H&P-V from exchanging local 

currency for U.S. Dollars, as necessary to meet U.S. Dollar obligations outside of Venezuela:

If as a result of the exchange control measures established by the 

competent authorities, [H&P-V] is unable to obtain in a timely fashion the 

foreign currency required to perform its obligations abroad related to the 

performance of this CONTRACT, [Petróleo] agrees to pay in United 

States dollars the portion of the price of this CONTRACT set in said 

currency in accordance with current regulation, “Norms and Procedures 

for the Payment of Foreign Exchange for Construction, Goods and 

Services in the Western Division,” for those items directly associated with 

the external component pursuant to the results of the corresponding audit. 

[H&P-V] shall indicate, for purposes of payment, the bank and account 

number where payments are to be made.

(Dkt. No. 40-3, at 21 (§ 18.14)).
24

In addition to the provisions regarding payment, particularly relevant to the direct effects 

analysis are the contractual provisions requiring the procurement by H&P-V of products from 

American companies. For example, H&P-V had to buy transformers from a company in 

Fremont, Ohio (see Dkt. No. 40-1, at 37; Dkt. No. 39, at 64); equipment used with blowout 

preventers to space equipment apart from a company in Stephenville, Texas (see Dkt. No. 40-1, 

at 38; Dkt. No. 39, at 64); a top drive from a company in Erie, Pennsylvania (see Dkt. No. 40-6, 

at 36; Dkt. No. 39, at 64); a blow out preventer from a company in Houston, Texas (see Dkt. No. 

40-6, at 42; Dkt. No. 39, at 64); hardbanding from a different company in Houston, Texas (see

Dkt. No. 40-4, at 38; Dkt. No. 39, at 64); flanged fittings from a company in Willison, Florida 

(see Dkt. No. 40-4, at 41; Dkt. No. 39, at 64); a forklift from a company in Peoria, Illinois (see

Dkt. No. 40-6, at 44; Dkt. No. 39, at 64); and various products from a third company in Houston, 

Texas (see, e.g., Dkt. No. 40-3, at 35; Dkt. No. 39, at 64). (See also Dkt. No. 1, ¶ 124 (“H&P-V 

routinely entered into third-party agreements with vendors, suppliers, and services companies in 

the United States, for the purpose of delivering goods and services from the United States to 

Venezuela to permit H&P-V to perform its contracts with the PDVSA Defendants.”).

3. Direct effect regarding payments to United States

The Supreme Court has addressed the meaning of “direct effect” in the context of the 

FSIA’s commercial activities exception only once. See Republic of Argentina v. Weltover, Inc., 

504 U.S. 607 (1992). In Weltover, the government of Argentina issued a Presidential Decree to 

extend the time it had to pay certain bonds. Certain entities “refused to accept the rescheduling 

and insisted on full payment, specifying New York as the place where payment should be made.” 

Id. at 610. As to the “direct effect” component of 28 U.S.C. § 1605(a)(2), the Court rejected the 

suggestion that there is a “substantiality” or “foreseeability” requirement, and stated that “an 
25

effect is direct if it follows as an immediate consequence of the defendant’s activity.” 504 U.S.

at 618 (citation, quotation marks, and ellipses omitted). It then found a direct effect with “little 

difficulty” because the entities challenging Argentina “had designated their accounts in New 

York as the place of payment, and Argentina made some interest payments into those accounts 

before announcing that it was rescheduling the payments. . . . Money that was supposed to have 

been delivered to a New York bank for deposit was not forthcoming.” Id. at 618-19.

Two years after Weltover, the D.C. Circuit decided Goodman Holdings v. Rafidain Bank, 

26 F.3d 1143 (D.C. Cir. 1994). In Rafidain, two Irish corporations sought to recover payments 

on letters of credit from banks that were part of the Iraqi government. Previously, the banks had 

made installment payments on the letters “mostly from accounts in United States banks.” Id. at 

1144. The Rafidain court distinguished Weltover because “[n]either New York nor any other 

United States location was designated as the ‘place of performance’ where money was 

‘supposed’ to have been paid . . . . Rafidain might well have paid them from funds in United 

States banks but it might just as well have done so from accounts located outside of the United 

States, as it had apparently done before.” Id. at 1146-47 (footnote omitted). Even where there 

was no “‘immediate consequence’ in the United States from Rafidain’s failure to honor the 

letters,” the Court still found a “direct effect” in the United States under § 1605(a)(2). Id. 

Interesting to note about Rafidain is Judge Wald’s concurrence, where she “emphasize[d] that, 

for an act to have a ‘direct effect’ in the United States, there is no prerequisite that the United 

States be contractually designated as the place of performance. . . . [E]ven absent a contractual 

provision mandating the involvement of U.S. banks, if the longstanding consistent customary 

practice between Rafidain and Goodman had been for Rafidain to pay Goodman from its New 
26

York accounts, the breach of the letters of credit might well have had a direct and immediate 

consequence in the United States.” Id. at 1147 (Wald, J., concurring).

As a result of Weltover, Judge Wald’s concurrence in Rafidain, and other cases, Judges 

on the District Court for the District of Columbia have found that our Court of Appeals has “left 

open the possibility that a court could find a ‘direct effect’ based upon a non-express agreement 

to pay in the United States.” Idas Resources N.V. v. Empresa Nacional de Diamantes de Angola 

E.P., 2006 WL 3060017, at *9 (D.D.C. Oct. 26, 2006) (Huvelle, J.) (quoting Global Index, Inc. 

v. Mkapa, 290 F. Supp. 2d 108, 114 (D.D.C. 2003) (Kennedy, J.)); see also Agrocomplect, AD v. 

Republic of Iraq, 524 F. Supp. 2d 16 (D.D.C. 2007) (Walton, J.) (“[T]his court need not consider 

whether it is necessary for parties to enter into an agreement designating a place for payment or 

vesting one party with complete discretion to name a place for payment contemporaneously with 

a contract giving rise to a breach of contract suit . . . .”); cf. Cruise Connections, 600 F.3d at 666 

(stating “we have no need to consider . . . whether a foreign sovereign had to have agreed to the 

use of a U.S. bank account,” and distinguishing cases that addressed the issue in part because 

“none of those cases dealt with a situation like the one we face here: where the alleged breach 

resulted in the direct loss of millions of dollars worth of business in the United States.”) But 

whether or not Defendants’ pattern and practice of making numerous payments totaling millions 

of dollars to a bank in the United States constitutes a direct effect that trumps Defendants’ 

contractual discretion to pay Plaintiffs in Venezuela in Bolivars is not necessary for this Court to 

decide. There is a direct effect based on third-party impacts under the contracts based on D.C. 

Circuit precedent.
27

4. Direct effect regarding third party impacts

In Cruise Connections Charter Management 1, LP v. Attorney General of Canada, the 

D.C. Circuit indicated a broad view of the direct effect test. See 600 F.3d 661 (D.C. Cir. 2010). 

In Cruise Connections, the Royal Canadian Mounted Police (RCMP) cancelled a contract with 

the American company Cruise Connections to provide cruise ship services during the 2010 

Olympics. The company had subcontracted with two U.S.-based cruise lines, Holland America 

and Royal Caribbean. The district court found that the defendant enjoyed sovereign immunity in 

part because “Cruise Connections’ inability to perform its contractual obligations to the third 

party cruise lines constituted an intervening element between RCMP’s breach and the broken 

third-party agreements.” 600 F.3d at 664 (citation and quotation marks omitted). The D.C. 

Circuit reversed, finding not only that “the alleged breach resulted in the direct loss of millions 

of dollars worth of business in the United States,” but that the “direct effect” need not necessarily 

harm the plaintiff. Id. at 666. The FSIA “requires only that the effect be ‘direct,’ not that the 

foreign sovereign agree that the effect would occur.” Id. at 665 (citation omitted).8

Plaintiffs here allege an impact of the breach that is sufficiently similar to the breach 

found to have a direct effect in Cruise Connections. In Cruise Connections, the contract itself 

required the ships to come from U.S.-based companies. Relying on this fact, the D.C. Circuit 

found that “RCMP’s termination of the Cruise Connections contract led inexorably to the loss of 

revenues under the third-party agreements. This is sufficient.” Id. The material before this

Court indicates that Defendants agreed to contracts with Plaintiffs that required the purchase and 

use of specific parts from specific U.S.-based companies. The D.C. Circuit has previously 

 8 Cruise Connections also claimed that lost revenue expected from on-board purchases by 

security personnel staying on the ships constituted a direct effect, but the D.C. Circuit found it 

“need not decide whether non-payment of on-board revenues qualifies as a direct effect” because 

it found a direct effect through other factors.
28

indicated that such a finding is sufficient for a finding of direct effect. Accordingly, there is a 

direct effect here under the meaning of § 1605(a)(2).

This accords with the D.C. Circuit’s recent interpretation of Weltover. In Weltover, the 

Supreme Court stated: “Money that was supposed to have been delivered to a New York bank 

for deposit was not forthcoming.” 504 U.S. at 619 (emphasis added). In Cruise Connections, 

the D.C. Circuit extended this language, finding that “[b]ecause RCMP terminated the contract, 

revenues that would otherwise have been generated in the United States were ‘not 

forthcoming.’” 600 F.3d at 665 (emphasis added). The D.C. Circuit’s interpretation of 

Weltover, binding on this Court, indicates that the third party contracts at issue here, the breach 

of which allegedly resulted in the loss of “revenues that would otherwise have been generated in 

the United States,” have a direct effect as that term is used in the FSIA.

5. Plaintiffs’ motion to enforce

Because the issue of whether this Court can exercise personal jurisdiction over the 

PDVSA Defendants consistent with constitutional due process is not clearly encompassed within 

the Initial Issues, the question will not be answered at this time. The Joint Stipulation was forged 

in part to postpone any obligations by Defendants to respond to Plaintiffs’ discovery requests. 

Yet to resolve the question of constitutional due process in this case, discovery would likely be 

necessary. The parties came to an agreement to avoid discovery regarding the Initial Issues, and 

therefore deciding this issue without permitting any discovery would conflict with precedent 

from the D.C. Circuit. See El-Fadl v. Cent. Bank of Jordan, 75 F.3d 668, 676 (D.C. Cir. 1996)

(“A plaintiff faced with a motion to dismiss for lack of personal jurisdiction is entitled to 

reasonable discovery, lest the defendant defeat the jurisdiction of a federal court by withholding 

information on its contacts with the forum.”).
29

In addition, the PDVSA Defendants both indicated that the issues of statutory direct 

effect under the FSIA and constitutional due process, while related, are distinct, and also 

acknowledged that there are elements of the analysis of constitutional due process that are tied 

up with issues explicitly denoted as Additional Issues. As to the former point, the PDVSA 

Defendants indicated in their motion to dismiss that the statutory and constitutional issues are 

distinct. (See Dkt. No. 22-1, at 32). In their reply the PDVSA again indicated the issues are, 

though related, distinct. (See Dkt. No. 43, at 31 (“[N]ot only does H&P-Venezuela fail to satisfy 

the direct effect requirement of the FSIA, but the assertion of jurisdiction would also violate the 

due process protections to which the PDVSA Defendants are entitled.” (emphasis added; 

citation omitted)). While the PDVSA Defendants argue that Plaintiffs have conceded the due 

process issue because the issue was raised in the PDVSA Defendants’ motion to dismiss and not 

responded to, (see Dkt. No. 43, at 31 n.24), this argument fails to persuade. Defendants made a 

number of arguments in their motions to dismiss that went unaddressed by Plaintiffs because of 

the Joint Stipulation. Constitutional due process is among them, and was not simply conceded.

As to the latter point, Defendants describe the constitutional argument as inextricably 

bound with issues that are clearly articulated as Additional Issues. (See Dkt. No. 43, at 10 and 

n.2 (stating that an assertion of jurisdiction would violate due process in part because the 

contracts “were negotiated and performed entirely in Venezuela [and] governed by Venezuelan 

law with a Venezuelan forum-selection clause,” and arguing that this issue, clearly enumerated 

as an Additional Issue, should nonetheless “inform this Court’s determination of whether it 

would be reasonable to assert jurisdiction commensurate with due process”); id. at 32 

(referencing the alleged forum selection clauses again when arguing that “jurisdiction over the 

PDVSA Defendants would not comport with due process” (citation omitted))).
30

There are yet still other reasons why the constitutional due process argument should not 

be considered as part of the Initial Issues. For example, the D.C. Circuit has stated that “[t]he 

statutory requirements for personal jurisdiction do not affect the constitutional in personam 

jurisdiction requirement that, pursuant to the due process clause of the Fifth Amendment, certain 

‘minimum contacts’ must exist between the person and the jurisdiction.” Foremost-McKesson, 

Inc. v. Islamic Republic of Iran, 905 F.2d 438, 442 n.10 (D.C. Cir. 1990). Because the D.C. 

Circuit has previously separated the statutory and constitutional questions, because of the need 

for additional discovery, because of the way the issue was briefed by the PDVSA Defendants, 

and fundamentally because of the language of the Joint Stipulation, this Court finds that deciding 

the constitutional due process argument is not proper as part of the Initial Issues.

D. Standing of H&P-IDC

Standing jurisprudence springs from two sources: Article III’s case-or-controversy 

requirement, and judicially self-imposed, prudential limitations. See Elk Grove Unified Sch. 

Dist. v. Newdow, 542 U.S. 1, 11 (2004). To establish constitutional standing, a plaintiff must 

demonstrate that it has suffered a concrete and particularized injury in fact, fairly traceable to the 

defendant’s unlawful conduct, and show that the wrong is likely to be redressed by the relief 

sought. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). Defendants do not 

challenge whether Article III’s case-or-controversy requirements have been met, but only assert 

their challenge under the shareholder standing rule. (See Dkt. No. 22-1 at 18-20); (Dkt. No. 43 

at 10-12); (Dkt. No. 44 at 29-31); cf. (Dkt. No. 36, at 2-3) (clarifying that the Initial Issues are 

derived from Defendants’ motions to dismiss).

Plaintiffs concede that H&P-IDC does not have standing regarding the breach of contract 

claims. (Dkt. No. 39, n.26) (“Plaintiffs do not contend that H&P-IDC has standing to bring the 
31

breach of contract claims.”). The only issue regarding standing, then, is whether the company 

has standing regarding the expropriation claim.

Plaintiffs have alleged that H&P-IDC “suffered the expropriation of an entire company 

without compensation,” (Dkt. No. 1, ¶ 85), and that “Venezuela’s expropriation of the rigs 

deprived H&P-IDC of its ownership and control of H&P-V . . . depriv[ing] H&P-IDC of its 

subsidiary and its business as a going concern, directly impacting the operations and bottom line 

of H&P-IDC,” (id. ¶ 139). Plaintiffs have not only alleged that Venezuela took H&P-V’s real 

and personal property, but that “[t]he seizure constituted a taking of the entirety of H&P’s 

Venezuelan business operations . . . .” (Id. ¶ 75). Plaintiffs aver that “Defendants took the entire 

business, which they now operate as a state-owned commercial enterprise,” and as a result “H&P 

no longer . . . maintains any commercial operations in Venezuela,” (Id. ¶¶ 81, 85).

Defendants argue that, because H&P-IDC is not a party to any of the contracts at issue, 

they lack standing to bring a claim. As the PDVSA Defendants argue in their Reply, “H&PIDC’s standing argument has no merit. It has not, and cannot, cite a single case in which a court 

has permitted a shareholder to assert an injury to its corporation, as opposed to an injury to itself, 

when the corporation is able and willing to assert its own rights.” (Dkt. No. 43, at 8).

Particularly relevant here is the prudential restriction regarding standing referred to as the 

shareholder standing rule. See Franchise Tax Bd. v. Alcan Aluminum Ltd., 493 U.S. 331, 336 

(1990). As the Supreme Court has said, this equitable 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.” Id.; 

see also Am. Airways Charters, Inc. v. Regan, 746 F.2d 865, 873, n.14 (D.C. Cir. 1984) (“No 

shareholder—not even a sole shareholder—has standing in the usual case to bring suit in his 
32

individual capacity on a claim that belongs to the corporation.”). “A basic tenet of American 

corporate law is that the corporation and its shareholders are distinct entities.” Dole Food Co. v. 

Patrickson, 538 U.S. 468, 474 (2003). And, indeed, “[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. However, shareholders may still bring an action to enforce their own individual 

rights, “even where the corporation’s rights are also implicated.” Franchise Tax Board, 493 U.S.

at 336. Therefore, standing for the plaintiff-shareholder depends on whether the shareholder’s 

claim derives from the rights of the corporation or from a “direct, personal interest in [the] cause 

of action . . . .” Id.

According to the PDVSA Defendants, the shareholder standing “rule ‘prohibits 

shareholders from initiating actions to enforce the rights of the corporation.’” (Dkt. No. 22-1, at 

18 (quoting Franchise Tax Bd., 493 U.S. at 336)). But the word before that quote from 

Franchise Tax Bd. and omitted by the PDVSA Defendants is important: “generally.” The 

sentence following the quote is instructive as well: “There is, however, an exception to this rule 

allowing a shareholder with a direct, personal interest in a cause of action to bring suit even if the 

corporation’s rights are also implicated.” Franchise Tax Bd., 493 U.S. at 336.

Dole Food Co. v. Patrickson, 538 U.S. 468 (2003), also relied upon by Defendants, does 

not directly address this issue. As is relevant here, in Dole Food the Supreme Court addressed a 

specific question, namely “whether a corporate subsidiary can claim instrumentality status where 

the foreign state does not own a majority of its shares but does own a majority of the shares of a 

corporate parent one or more tiers above the subsidiary.” 538 U.S. at 471. The Court answered 

no to that question, and it also noted that “[t]he veil separating corporations and their 

shareholders may be pierced in some circumstances . . . .” 538 U.S. at 475. Thus, Dole Food is 
33

not directly on point, nor does it suggest that Plaintiffs’ standing argument in this case is 

foreclosed.

In Ramirez de Arellano v. Weinberger, 745 F.2d 1500 (D.C. Cir. 1984) (en banc), the 

D.C. Circuit rejected an argument similar to the one offered here by Defendants regarding the 

standing of H&P-IDC. However, although the case supports Plaintiffs’ argument about H&PIDC’s standing, it has a procedural history that Defendants suggest undercuts its precedential 

value. But considered together, the case and the developments that followed it suggest that 

Plaintiffs have the better argument.

In Ramirez, U.S. citizen Temistocles Ramirez de Arellano (Ramirez) was the sole 

shareholder of two U.S. corporations, which in turn wholly owned four subsidiaries incorporated 

in Honduras. Through this “chain of title,” Ramirez owned “a large agricultural-industrial 

complex in the northern region of Honduras.” 745 F.2d at 1506. The U.S. Department of 

Defense (DoD) seized “over half of the ranch’s 14,000 acres and nearly 90% of the year-round 

grazing land,” and the DoD’s operations helped to “destroy[] the plaintiffs’ investment and 

Ramirez’s life’s work.” 745 F.2d at 1508. Ramirez brought an action requesting declaratory and 

injunctive relief for the occupation and destruction of his property and for the deprivation of 

property without due process. The DoD raised a standing argument very similar to the one 

raised by Defendants in this case, and the D.C. Circuit rejected it. The Ramirez majority called 

the standing objection “a most extreme form of fanciful thinking. It is bizarre to posit that the 

claimed seizure and destruction of the United States plaintiffs’ multi-million dollar investment, 

businesses, property, assets, and land is not an injury to a protected property interest.” 745 F.2d 

at 1515. See also id. at 1518 (“The fact that the United States plaintiffs do not directly hold legal 

title to the real property does not deprive them of a property interest in the assets nor does it 
34

defeat their constitutional claims. Ramirez has a protected property interest in the allegedly 

occupied property both by virtue of his status as sole shareholder of the corporation and by virtue 

of his possession of the land for more than twenty years.”).

It is true that after the 1984 Ramirez decision, the Supreme Court vacated it. See 471 

U.S. 1113 (1985). The Supreme Court’s one paragraph decision vacated and remanded for 

reconsideration in light of legislation enacted after the D.C. Circuit issued its 1984 opinion. On 

remand, the Circuit did not address the standing issue, but did dismiss the case without prejudice 

“so as not to bar reinstatement of the suit in the event the challenged activity resumes.” See 788 

F.2d 762, 764 (D.C. Cir. 1986). Although a decision vacated by the Supreme Court does not 

have precedential value when vacated because of disagreement with the ruling, see Al Odah v. 

United States, 321 F.3d 1134, 1143 (D.C. Cir. 2003), such is not the case here.9 The Supreme 

Court did not address Ramirez’s discussion of standing. However, while the case is helpful to 

Plaintiffs, its value is somewhat obscured by subsequent developments. Other cases, however, 

further the argument for H&P-IDC’s standing.

The D.C. Circuit later recognized that a plaintiff could have standing for purposes of the 

FSIA expropriation exception under circumstances similar to those at issue here. See Nemariam, 

491 F.3d 470. In Nemariam, the D.C. Circuit addressed the reasoning of the court in Kalamazoo 

Spice Extraction Co. v. Provisional Military Government of Socialist Ethiopia, 616 F. Supp. 600 

(W.D. Mich. 1985). In its discussion of that case, the D.C. Circuit approvingly cited that court’s 

holding that “the seizure of the controlling stockholder’s interest in a corporation, triggered the 

[FSIA’s] expropriation exception.” See Nemariam, 491 F.3d at 478. The D.C. Circuit endorsed 

 9 The 1984 Ramirez decision continues to be cited approvingly by the D.C. Circuit, as well 

as other courts. See, e.g., Transohio Sav. Bank v. Dir., Office of Thrift Supervision, 967 F.2d 598 

(D.C. Cir. 1992); Munns v. Clinton, 822 F. Supp. 2d 1048 (E.D. Cal. 2011).
35

the Kalamazoo court’s reasoning that “a controlling interest in the corporation’s stock was no 

different from the corporation’s physical assets under section 1605(a)(3) because ‘[i]n either 

case, the foreign state has expropriated control of the assets and profits of the corporation.’” 

Nemariam, 491 F.3d at 478 (quoting Kalamazoo, 616 F. Supp. at 663) (footnote omitted).

The Ninth Circuit has also come to the same conclusion regarding standing with respect 

to the FSIA expropriation exception. See Siderman de Blake v. Republic of Argentina, 965 F.2d 

699 (9th Cir. 1992). In Siderman, the plaintiffs brought an action claiming, among other things,

that the Argentine military had unlawfully expropriated an Argentine corporation that was owned 

by four people, three with a 33% share each and a fourth with a 1% share. See 965 F.2d at 703. 

The corporation’s “assets comprised numerous real estate holdings including a large hotel in 

[Argentina].” 965 F.2d at 703. One plaintiff in Siderman was a U.S. citizen who owned a 33% 

share, and the Ninth Circuit found that she had asserted a “substantial and non-frivolous” claim 

that her “property had been taken in violation of international law,” and thus she had standing “to 

invoke the international takings exception.” 965 F.2d at 711-12. This parallels Plaintiffs’ 

allegations in this case, whereby the Venezuelan military seized H&P-V by physically taking its 

assets.10 The Siderman holding suggests H&P-IDC’s standing argument is even stronger, as 

H&P-IDC is the full owner of H&P-V, as opposed to the 33% owner as in Siderman.

It is generally maintained that “[t]he shareholders’ essential right is to share in the profits 

and in the distribution of assets on liquidation in proportion to their interest in the enterprise.” 1 

JAMES D. COX & THOMAS LEE HAZEN, TREATISE ON THE LAW OF CORPORATIONS § 7:2 (3d ed. 

 10 To the extent the PDVSA Defendants are trying to distinguish between the taking of 

corporate assets and the taking of a corporation, the parties have stipulated that the Court is to 

presume the truth of well-pleaded allegations in the complaint, and Plaintiffs have alleged more 

than the taking of a few corporate assets—they have alleged the taking of the entire corporation. 

(See Dkt. No. 1, ¶ 85).
36

2012). Thus, the complete physical seizure of a parent company’s wholly-owned subsidiary, to 

the point of eliminating the corporation entirely (or comprehensively taking its assets and 

profits), deprives the parent shareholder of its “essential” and unique rights, giving rise to claims 

that would not belong to the corporation. Plaintiffs have alleged that Venezuela completely 

expropriated all the physical property of H&P-V, such that H&P-IDC no longer has commercial 

operations in Venezuela. Construing Plaintiffs’ allegations favorably, Defendants’ actions have 

deprived H&P-IDC, individually, of its essential and unique rights as sole shareholder of H&P-V 

by dismantling its voting power, destroying its ownership, and frustrating its control over the 

company. Thus, H&P-IDC has “a direct, personal interest” in the complete taking of its wholly 

owned subsidiary, and has standing to bring its wrongful expropriation claim.11

CONCLUSION

To summarize, the Court finds that H&P-V is a national of Venezuela under international 

law, H&P-IDC has standing to pursue the expropriation claim, Plaintiffs have sufficiently 

alleged a direct effect under 28 U.S.C. § 1605(a)(2), and the time is not yet ripe for a decision on 

whether the act of state doctrine bars Plaintiffs’ expropriation claims. In addition, the issue of 

constitutional due process is not among the four Initial Issues, and therefore is not addressed as 

 11 International custom has also recognized that shareholders have certain direct and 

individual rights in these kinds of expropriation claims:

It is well known that there are rights which municipal law confers upon 

the [shareholder] distinct from those of the company, including the right to 

any declared dividend, the right to attend and vote at general meetings, the

right to share in the residual assets of the company on liquidation. 

Whenever one of his direct rights is infringed, the shareholder has an 

independent right of action. On this there is no disagreement between the 

Parties.

Barcelona Traction 1970 I.C.J. at 36. Plaintiffs have listed a number of additional sources for 

this practice in international law. (See Dkt. No. 39, at 43 n.25).
37

part of this Memorandum Opinion. Based on the foregoing analysis and the parties’ Joint 

Stipulation, there will now be “a second phase of briefing on the motions to dismiss.” (Dkt. No. 

36, at 3).

Accordingly, Defendants’ Motions to Dismiss (Dkt. Nos. 22, 23, and 24) are 

TEMPORARILY GRANTED IN PART and DENIED IN PART, and Plaintiff’s Motion to 

Enforce (Dkt. No. 45) is GRANTED.

Date: September 20, 2013 

 ROBERT L. WILKINS

United States District Judge