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Venezuela lobbies up in oil fight

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Venezuela is bringing in lobbying muscle in an international dispute with a U.S. oil company that could land before the Supreme Court. 

The South American country has registered part of its legal team as lobbyists, a step that enables them to sit down with Justice Department lawyers as the legal fight intensifies.

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Hogan Lovells, which has been representing Venezuela’s government in the case, will seek to meet with the Justice Department’s solicitor general, according to forms filed under the Foreign Agents Registration Act signed by counsel Bruce Oakley, the managing partner of the firm’s Houston office.

The case involves a legal challenge brought by oil-rigging company Helmerich & Payne against Venezuela.

Helmerich & Payne’s local subsidiary — H&P-V — had been operating in the country for decades. But in 2010, following a contract dispute with the state-owned oil company, Helmerich & Payne said its subsidiary would stop drilling in the country.

The country’s National Guard then blocked off 11 rigs with its boats, and Venezuela seized the subsidiary’s oil rigs and other equipment. The confiscation was part of then- Venezuelan President Hugo Chávez’s move to nationalize his country’s oil industry.

Helmerich & Payne filed a suit in U.S. courts, saying the confiscation breached a contract, hurting the Oklahoma-based parent company and violating international law.

Now both sides are petitioning the Supreme Court to take up the case. The justices last month asked the solicitor general to weigh in on the legal case before they decide whether to hear arguments.

One legal expert says the court is seeking the advice and wants to tread carefully because the defendant is a sovereign government.

“The Supreme Court justices don’t have ambassadors. They want to make sure they’re not stepping into some potholes — for the State Department, the Justice Department or the Treasury Department,” said Stuart H. Newberger, senior partner at Crowell & Moring, who has extensive experience litigating cases involving international disputes. 

Venezuela’s lobbyists will likely urge the administration to ask the high court to take up the case after filing documents with the court encouraging action. But all involved are remaining tight-lipped about any talks.

A Justice Department official declined to comment on specifics about the meetings, including whether any have been scheduled.

“When the Supreme Court asks the Office of the Solicitor General to submit a brief, it is common for them to meet with both parties involved,” the official said.

In those meetings, the administration brings in agency officials who may have a stake in the case but will not tip its hand on what it will recommend to the court, Newberger said.

Both Hogan Lovells and Helmerich & Payne declined to comment, citing policies not to discuss ongoing litigation.

The legal issues are complex, with each side citing lower court victories under different clauses of the Foreign Sovereign Immunities Act (FSIA). Federal courts have long been divided on whether U.S-based companies can claim damages under different FSIA clauses.

In May, a federal court tossed out the subsidiary’s claims under one clause. The court said the U.S. company couldn’t claim a “direct effect” under FSIA because its Venezuelan subsidiary lost rigs. 

But another FSIA clause gives U.S. courts jurisdiction to decide if a violation falls under international law.

That same court agreed that the parent company did have jurisdiction to sue over illegally taken property under international law, upholding a lower court ruling.

Venezuela, though, argues that FSIA clause also doesn’t apply since the lost rigs in dispute belonged solely to Helmerich & Payne’s Venezuelan subsidiary.

They hope the Supreme Court hears the case and overturns that ruling.

But Helmerich & Payne also want the court to hear the case and overturn the ruling that denied them “direct” damages under FSIA. The company says leaving that ruling in place would hurt U.S. businesses abroad.

“This rule would permit a foreign sovereign to form a contract in the United States, utilize parts, supplies, and services from the United States, and benefit from the knowledge and expertise of companies in the United States, while leaving those American parties with no remedy in U.S. courts if the foreign sovereign breached its obligations abroad,” the company wrote.

“This would defeat the expectations of the U.S. contracting parties and have a chilling effect on U.S. commerce.”

Although there are two international venues that can handle similar disputes through arbitration — the International Centre for Settlement of Investment Disputes at the World Bank and the Permanent Court of Arbitration at The Hague — the oil company has not filed cases in those bodies.

It’s unclear what the solicitor general will recommend, but Newberger believes that Venezuela’s appeal makes the case attractive to the justices.

“My guess — based on practice — is when a sovereign country has lost [a part of the FSIA argument] under international law, that’s the sort of issue that the Supreme Court will take a harder look at than just your average bear,” Newberger said. 

Timothy Cama contributed.