US Supreme Court Holds That the Existence of Property and its Expropriation “in Violation of International Law” Must be Established at the Outset of Litigation for the FSIA’s “Expropriation Exception” to Apply

The World in U.S. Courts: Summer 2017 - Foreign Sovereign Immunity Act (FSIA)/Political Question Doctrine

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Bolivarian Republic of Venezuela v. Helmerich & Payne International Drilling Co., US Supreme Court, May 1, 2007

Plaintiff Helmerich & Payne (H&P), a supplier of drilling equipment, sued Venezuela to obtain compensation for the alleged expropriation of oil rigs owned by H&P’s Venezuelan subsidiary that had been used by Venezuelan governmental entities. H&P argued that the suit could proceed under the “expropriation” exception to the FSIA, which provides that the sovereign immunity conferred by the FSIA does not apply where “rights in property taken in violation of international law are in issue and that property . . . is owned or operated by an agency or instrumentality of the foreign state . . . engaged in a commercial activity in the United States.”

In this case, the US Supreme Court determined that courts applying the Expropriation Exception must make a threshold determination “as near to the outset of the case as is reasonably possible” that (i) property rights were taken and (ii) the manner in which they have been taken violates international law. Notably, the question whether a party “actually” held rights in that property may be left for adjudication of the case on the merits. The Court stated, however, that where questions of fact exist as to whether the Expropriation Exception applies, they must be resolved even if extending into the merits of a dispute.

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