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Case number 13-7169 at L. Hemric and Payne International Drilling Co.

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and Hemric and Payne D. Venezuela CA versus Bolivarian Republic of Venezuela Petrolios D. Venezuela S.A.

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and PDVSA Petrolio S.A.

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Appellants.

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Ms.

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Wimberley for Appellant Bolivarian Republic of Venezuela.

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Mr. Presurio for Appellants Petrolitos D. Venezuela S.A.

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at L and Mr. Ogden for the Appellees.

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Good morning, Your Honors, and may it please the Court.

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My name is Mary Helen Wimberley, and I represent the Republic of Venezuela this morning.

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I'm going to be splitting my time with Mr. Pizuro, counsel for PDVSA.

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I'll be addressing the expropriation issue, and Mr. Pizuro will be addressing the breacher contracts issue.

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The gravamen of the expropriation claim in this case is the seizure of oil rigs and related property in Venezuela by sovereign Venezuelan entities.

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In order to assert this court's or U.S.

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court's jurisdiction, the plaintiffs had to show that they put rights in property taken in violation of international law in issue.

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That they failed to do.

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H&P IDC, the American parent company, has failed to do that because it didn't own or possess the rigs for the property that was seized.

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Can I pause over this for one second?

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We're here on a collateral order doctrine theory, is that right?

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That is correct.

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So I'm a little confused as to how this issue has been conclusively determined in the court.

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How the IDC issue has been conclusively determined?

[00:01:50] Speaker 01:
Yes, well, on how the lack of sovereign immunity has been determined.

[00:01:57] Speaker 08:
Well, this court, and I believe it actually may have been the Chabad case, has held where there's a partial motion to dismiss that is denied.

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even that partial denial of sovereign immunity is sufficient.

[00:02:09] Speaker 01:
When you say partial, what does partial mean in those cases?

[00:02:11] Speaker 08:
Meaning that on one particular issue, even.

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I don't remember a case like that.

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And I apologize.

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I can't recall the case on the hand, but I remember.

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It is a case that we've said that if it's on the law and not also on the facts, I just don't remember the partial issue part.

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It seems to me that even if there are rights and property here,

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Certainly you agree that that's not enough to deprive you of sovereign immunity, right?

[00:02:39] Speaker 08:
That's correct.

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And there has to at least be violation of international law.

[00:02:44] Speaker 08:
Yes, that's correct.

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And the district court didn't decide that there was a violation of international law.

[00:02:48] Speaker 08:
That's correct.

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And the district court, and then the second part,

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Are we talking about property, the second part of the requirement, which is itself a two-fold part.

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Yes, Your Honor.

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Which of the two folds are we on here?

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That property was exchanged as present in the United States, or that the property exchanged as owner-operated by instrumentality?

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Which of the two folds here?

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The nexus requirement is not before this court right now.

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I know, but which of the two nexus requirements are at issue below?

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Yeah.

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I believe the owner-operated nexus requirement is still at issue below.

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And I take it you certainly disagree, take the position that wouldn't be satisfied.

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Yes, Your Honor, that's correct.

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So I'm unclear as to why we have interlocutory jurisdiction here.

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It's one thing to say that

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A sovereign should not be required to go forward in the court below on the merits or even on the facts, but here we don't even know that you're going to be required to go forward.

[00:03:54] Speaker 08:
Well, I think there was a sufficient basis for dismissal on sovereign immunity grounds that was rejected below.

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And that is sufficient to bring this case up on appeal.

[00:04:03] Speaker 01:
Then we would be up here with every word of the statute, every single element.

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You come up, you lose, you go back down, and you start again.

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You come up, and it doesn't really seem like an efficient way to do this.

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Nor is it one that deprives the sovereign of its immunity from a merits determination.

[00:04:21] Speaker 08:
Well, what we were trying to do is separate the issues that were potentially required jurisdictional discovery from those that were straightforward questions of law.

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The nexus issue was, I believe, the other side requires some extensive jurisdictional discovery.

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So in terms of efficiency and in terms of protecting the sovereigns from the burdens of litigation, which this Court has held is the purpose of sovereign immunity,

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We've asked to, both sides have actually stipulated to questions of law for the court to determine on appeal under the collateral order doctrine.

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No, I understand that we can't stipulate to our jurisdiction.

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Yes, I understand your honor.

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But you're saying that on the latter set of questions, those are fact and not law.

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There are no law questions on the second half?

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of the requirements of the foreign sovereignty.

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What about the violation of international law?

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Isn't that a law question?

[00:05:14] Speaker 08:
Yes, that's correct, Your Honor, and that's the H&P Venezuela issue that we'll be discussing as well this morning.

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I don't believe the final judgment rule that you're referring to about, you know, ensuring essentially that all the individual issues have been decided applies quite as

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clearly as it does in other cases when we're referencing sovereign immunity, I think it is and can be an issue-specific determination.

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And in this case, there's certainly been extensive briefing on these issues, I think, sufficient to bring it to this Court's ability to resolve the case and certainly

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We're arguing these decisions, the issues that are on appeal, will resolve the case.

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When you sit down and have a chance to look, if you find a case that says this can be done on an issue basis, I'd appreciate knowing that.

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Yes, yes.

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Go ahead.

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So, again... Before the Chief Judge asked you that series of questions about jurisdiction, you said...

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You said that with respect to the rights and property issue that HPIDC did not own the property here.

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Right.

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But this part of the statute doesn't talk about ownership.

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It talks about rights and property.

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And the instrumentality section of the Sovereign Immunity Act does talk about ownership.

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So I mean, Congress knew the difference.

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And so I'm not sure why ownership is the issue here.

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Rights and property are the issue here.

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We certainly agree.

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Yeah, good.

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It says that.

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But you said that means ownership.

[00:06:49] Speaker 08:
I believe I said owner possess.

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And that was dealing with a different section of the statute, one that actually does deal with ownership, whereas this section deals with something different, rights and property.

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And they seem different to me.

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I think, for example, your rights and property can be interfered with without your right to ownership to be interfered with.

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But generally, for example, possession would derive from your right of ownership, which is essentially what's happened here.

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The right to possession of H&P Venezuela's right to possession has been interfered with, even though it retains title.

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But, you know, these rights and property don't exist in the air.

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They have to be tethered to something.

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Most commonly, it's ownership, but it can also be contractual rights, such as in the Numarium case, where this court found a property right arising out of the contractual right to demand payment.

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What we're saying is, given the corporate separation and the corporate formalities, which both they did say Congress had taken into consideration, but it wasn't actually.

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But on different provisions.

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Suppose I don't agree with you about this.

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Suppose I think rights and property is different from ownership.

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What's your argument then?

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then still, HPIDC does not have rights in property and the assets of its subsidiary.

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That's a universal principle of corporate law.

[00:08:08] Speaker 02:
Well, no, now you're going back to the concept of ownership.

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I mean, as I understand the record, HPIDC bought this equipment, right?

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Managed it?

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They're 100 percent owner.

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They own 100 percent of the stock of HPV.

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It sounds, in other words, it sounds like the cases that the other side cites, Franchise Tax and Franchise Tax Board in Ramirez.

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Respectfully, I don't believe I'm going back to ownership.

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I believe there is a right line between what the right in the corporation, which is distinct from the corporation's rights and its assets, and I believe it's stated most expressly in the Barcelona Traction case,

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where I think it, in order for clarification, talks about a shareholder's interests and the corporation and then the corporation's rights and its property.

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So there is a bright line that HNP itself adopted when it elected to incorporate separately in Venezuela and when it elected to give its Venezuelan subsidiaries the oil rigs and not retain ownership over them.

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HNP's

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problem in asserting this court's jurisdiction is of its own making.

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It did not have to, under Venezuelan law or the contracts here, separately incorporate in Venezuela.

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It certainly did not have to hand over the oil rigs to its Venezuelan subsidiary.

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It also could have inserted some sort of contractual provision, an arbitration clause, for example, to protect its rights.

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It didn't do that.

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Now, the other side says these are rare and exceptional circumstances.

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Well, we disagree with that.

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It's rare and exceptional that the suit is in the United States, but most commonly, these cases are arbitrated, pursuant to arbitration provisions resolved through diplomatic channels or through ICJ proceedings, for example.

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So again, H&P's business decisions are what present the bind it finds itself in today.

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And we're briefly with respect, and I certainly don't want to go intrude on my colleague's time.

[00:10:21] Speaker 01:
It's all right, because I have some more questions.

[00:10:24] Speaker 08:
OK.

[00:10:26] Speaker 01:
So what about the decision in our Ramirez

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that if you take, if it's a sole shareholder, and he basically sees all the interests, that that counts.

[00:10:44] Speaker 08:
Well, the Ramirez case, I think there's several problems with the Ramirez case.

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What's the first problem?

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The first problem, it was, of course, GVR'd.

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It was vacated and remanded by the Supreme Court.

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You understand what our rule is about those?

[00:10:58] Speaker 08:
Well, the judgment, I understand, was vacated.

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I'm going to read you our rule.

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This is from a 2006 case called Attawani.

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When the Supreme Court vacates a judgment of this court without addressing the merits of a particular holding in the panel opinion, that holding continues to have presidential weight.

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In the absence of contrary authority, we do not disturb it.

[00:11:17] Speaker 08:
Yes, I understand that.

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I think that on top of the fact that it's never been cited in the 30 years since then on the property rights issue, only on the political question issue where all the judges agreed.

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Why does it matter whether it's ever been cited?

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We don't have a rule that says if we don't cite something for 30 years, it self-destructs.

[00:11:35] Speaker 08:
Well, I think.

[00:11:36] Speaker 01:
Might not be a bad rule, but they say a lot of paper and stuff.

[00:11:39] Speaker 08:
Let me move to the second reason.

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It's a due process case.

[00:11:42] Speaker 02:
Well, the problem with that is that this talks about rights and property.

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And due process is a basis for a right and property.

[00:11:50] Speaker 08:
And not to split hairs, but the due process clause.

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That's what we do here.

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We split them.

[00:11:56] Speaker 08:
That's such a deal.

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The due process clause has been interpreted to apply to interests and property, which

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I've noticed in the ICJ decisions, like I just said earlier, seems to be distinct from rights in property.

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Interest seems to allow for a broader understanding.

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And of course, here we're talking of rights that have to be taken, not just interests that are affected or diminished, but the right to the property has to be taken, which I think is a distinct

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area of the law.

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And again, the Court of Ramirez repeatedly limited itself to the due process clause.

[00:12:34] Speaker 01:
But it cited its principal support as Fletcher's Cyclopedia of the Law of Private Corporations.

[00:12:39] Speaker 01:
Yes, sir.

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It's basically analysis of corporation law, whether you think it's right or wrong.

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That's what it's based on.

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And I think

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It was an unusual decision.

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It's not entirely clear what the basis for the decision was, because it seems that... All that doesn't really cut any ice with a panel.

[00:12:57] Speaker 01:
You can make that argument to the en banc court, but...

[00:13:00] Speaker 01:
The question of whether this case was rightly decided is one that we just don't have any authority to even think about.

[00:13:06] Speaker 08:
Well, I think it can distinguish the case on the due process grounds.

[00:13:09] Speaker 08:
I think that's a fair distinction when you're talking about different sources of law, and particularly when you have Dole Food coming in as intervening authority with respect to the Foreign Sovereign Immunities Act saying that

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Congress had corporate formalities in mind when it was enacting the Foreign Sovereign Immunities Act.

[00:13:25] Speaker 01:
But it's a different section that they were talking about in Delphi.

[00:13:27] Speaker 08:
Well, I think the Court used broad language to say the Act generally.

[00:13:30] Speaker 08:
Of course, its support was that particular section.

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I agree with you, Chief Judge Garland.

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But it said that the Act generally demonstrated that it had corporate formalities in mind.

[00:13:38] Speaker 02:
Yeah, but it didn't have this provision before it.

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And this provision has a different language.

[00:13:43] Speaker 08:
I agree, but I think it would be passing strange that the court had corporate formalities in mind in one provision and then, and the same enactment in another provision and abandoned them, which by the way... Well, but that's because Congress wrote the two provisions differently and used different language.

[00:13:58] Speaker 08:
Well, I believe rights and property has a distinct meaning in corporate law.

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So for the same reason ownership has a distinct meaning in corporate law, rights and property do as well.

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And again, if the court was planning, or Congress, excuse me, was planning to legislate an abrogation of the common law, it needed to be clearer.

[00:14:17] Speaker 04:
Could you give a one-sentence definition of what that clear meaning

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I believe.

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You're the one who's right.

[00:14:28] Speaker 04:
I know.

[00:14:29] Speaker 04:
I know.

[00:14:29] Speaker 08:
I'm asking for that question.

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I believe it's either right of ownership or possession.

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That is the only thing that I have seen in the case law when it comes to property rights, ownership, or possession, at least with respect to when property is being taken.

[00:14:52] Speaker 08:
If there are other rights, this would be the first time I believe the court would be recognizing them in this context.

[00:15:00] Speaker 08:
Certainly the right to control through ownership of shares is considered a right, but again, that's a right grounded in ownership.

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Like I said before, the broader rights we're talking about, use, possession, control, are grounded in something more concrete typically, such as contract or ownership.

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And again, this would be a remarkable ruling that in this one area of the law, which as this court held in Peterson, is not a particularly generous exception to sovereign immunity, that this court is going to read shareholders' rights more generously than it does in any other area of the law.

[00:15:39] Speaker 01:
Isn't all that's required here is that their claim be colorable?

[00:15:44] Speaker 08:
The Agudis case at 941 and note 3 said that the

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plaintiff has to put its own rights at issue.

[00:15:53] Speaker 08:
Then if you look at Peterson, this court analyzed fairly closely whether the plaintiff had put its own rights at issue, and that was with respect to employer contributions to a Saudi Arabian retirement fund.

[00:16:11] Speaker 01:
Are you saying that the question, that element of the sovereign immunity's defense

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rights of the exception, rights and property you think is not subject to the rule that all that's required is colorable claim?

[00:16:28] Speaker 08:
I don't think I have to disagree with that proposition because here we're talking about categorical legal rules.

[00:16:35] Speaker 08:
So if we're saying as a categorical legal matter, the corporate parent has no rights and it's subsidiary's property, then that's not a colorable claim.

[00:16:45] Speaker 01:
So I think... No, is it after the Arianos case?

[00:16:48] Speaker 01:
Isn't at least color... I forgot the pronunciation.

[00:16:53] Speaker 01:
Arianos.

[00:16:55] Speaker 01:
Okay.

[00:16:55] Speaker 01:
Isn't it a colorable argument that they have rights and property?

[00:17:00] Speaker 08:
I don't believe so.

[00:17:01] Speaker 01:
Not even colorable?

[00:17:02] Speaker 08:
No, Your Honor, because of these categorical legal rules that we're asking this Court to apply.

[00:17:06] Speaker 08:
And I mean, certainly, if you want to say, OK, just the fact that they've stated in their complaint that they have that right, then this Court's analysis will keep it.

[00:17:15] Speaker 01:
No, no, I get the law.

[00:17:17] Speaker 01:
The question of whether it's a colorable argument that you have legal rights, that a sole owner has legal rights in the circumstances that they've described here.

[00:17:28] Speaker 08:
No, Your Honor.

[00:17:30] Speaker 01:
What if they had seized the subsidiary outright?

[00:17:35] Speaker 08:
Well, and just so we're clear on terms, if they'd taken the shares... No, not if they'd taken the shares.

[00:17:40] Speaker 01:
What if they'd prevented it from operating as a going concern, taken every single asset of it so that it is nothing but a shell?

[00:17:49] Speaker 08:
No.

[00:17:50] Speaker 01:
No.

[00:17:50] Speaker 01:
No what?

[00:17:50] Speaker 01:
No.

[00:17:53] Speaker 08:
No, that would not be a colorable claim.

[00:17:54] Speaker 08:
Because if you look at Barcelona Attraction as an example, there's a very straightforward and categorical rule that if it still exists as a legal entity, that corporation can assert its own rights.

[00:18:06] Speaker 08:
It still exists.

[00:18:07] Speaker 08:
It has not been taken.

[00:18:09] Speaker 04:
Suppose the government entity actually

[00:18:17] Speaker 04:
corporations then have a protected or at least colorable legal right.

[00:18:25] Speaker 08:
I have to be careful with what precisely you're asking, because if, as a matter of political inflammatory rhetoric, they say to the, you know, crowds they take in the company, no, I don't think that.

[00:18:36] Speaker 04:
I don't mean a political pronounciation.

[00:18:37] Speaker 04:
I don't know what the legal structure is under which the weather sees these things.

[00:18:43] Speaker 04:
Suppose they say, we hereby seize the issue in order.

[00:18:47] Speaker 04:
The ministry of something right.

[00:18:49] Speaker 04:
Say, we hereby seize this corporation.

[00:19:01] Speaker 08:
I believe that's the Cuban bank cases, Your Honor.

[00:19:04] Speaker 08:
That's exactly what happened.

[00:19:06] Speaker 08:
And they said, we take all shares, we take all title, delete the corporation's name, and put our name in its place.

[00:19:12] Speaker 08:
In that case, yes, there has been a taking of the corporation.

[00:19:15] Speaker 08:
Here, of course, HMP Venezuela, as you'll notice, is a plaintiff asserting its own claims.

[00:19:20] Speaker 08:
And again, HNP Venezuela has voluntarily taken on the nationality of Venezuela, therefore subjecting it to Venezuelan governance, Venezuelan laws, and limiting the remedies that are available to it in this court, in this forum.

[00:19:35] Speaker 08:
So again, I have to return back to the fact that we're asking this court to apply bright-line, well-defined rules that are universally applicable,

[00:19:44] Speaker 08:
that render HNP IDC claims not colorable because it does not have rights in a corporation's assets, the corporation that still exists and is a co-claimant in this case, and that HNP Venezuela has not stated a colorable claim because as a national Venezuela, it has no ability to assert an international law violation.

[00:20:04] Speaker 08:
And at least on that ground, we agree with the district court.

[00:20:07] Speaker 08:
Now, I see I'm a little bit over my time.

[00:20:09] Speaker 08:
I don't want to continue or to prejudice my co-colleagues' rights.

[00:20:14] Speaker 08:
So if there are no further questions.

[00:20:17] Speaker 08:
OK.

[00:20:17] Speaker 08:
Thank you, Your Honors.

[00:20:38] Speaker 03:
Morning, Your Honors.

[00:20:39] Speaker 03:
Please, the Court.

[00:20:40] Speaker 03:
My name is Joseph Pizzoro.

[00:20:41] Speaker 03:
I represent the Pedavesa defendants, Pedavesa and Pedavesa Petroleum.

[00:20:47] Speaker 03:
I'm going to address the contract claims, the jurisdictional issues on the contract claims.

[00:20:52] Speaker 03:
But before I do, perhaps I can answer the question that Judge Garland had.

[00:20:56] Speaker 01:
Before you're doing that, just to be sure, I'm a little slightly confused with how we're going to go through these.

[00:21:01] Speaker 01:
What about HMPV's expropriation claim?

[00:21:04] Speaker 01:
Their expropriation claim.

[00:21:06] Speaker 03:
HMPV's expropriation claim?

[00:21:08] Speaker 03:
Yeah.

[00:21:08] Speaker 03:
I'm happy to address any questions, Your Honor.

[00:21:11] Speaker 03:
That was Council for the Republic.

[00:21:13] Speaker 03:
I see.

[00:21:15] Speaker 03:
But I'm happy, if the Court has any questions for me, I'm happy to answer them.

[00:21:19] Speaker 01:
Well, I guess it seemed like we didn't quite get to that one, Barry.

[00:21:22] Speaker 01:
We only got to the other one.

[00:21:27] Speaker 01:
This is the question of whether discrimination against a

[00:21:36] Speaker 01:
a company based on its foreign ownership is a violation of international law, et cetera.

[00:21:43] Speaker 01:
Yes.

[00:21:44] Speaker 01:
Would you like me to address that?

[00:21:45] Speaker 01:
Yeah, I think that would be helpful.

[00:21:47] Speaker 01:
Okay.

[00:21:47] Speaker 01:
Before we get on to the other one.

[00:21:49] Speaker 03:
The rule of international law, which was extant at the time the FSIA was passed and continues to be the rule of international law today, is that the nationality of a corporation is deemed to be its place of incorporation

[00:22:05] Speaker 03:
And the international law obligations of a foreign state or any state are never engaged with respect to the actions it takes with respect to its own citizens, at least in respect to the expropriation of property.

[00:22:19] Speaker 01:
HMP Venezuela is a Venezuelan corporation.

[00:22:22] Speaker 01:
So again, my question is a variant on the question I was asking before about colorability.

[00:22:27] Speaker 01:
Given Sabatino and FAR isn't the argument of the least colorable,

[00:22:31] Speaker 01:
And under our Chabad case, isn't that all that's required?

[00:22:36] Speaker 03:
We don't think it's culpable at all, Your Honor.

[00:22:38] Speaker 01:
Even when there's Second Circuit authority on the opposition?

[00:22:41] Speaker 03:
Your Honor, Second Circuit authority, first of all, predates the Foreign Sovereign Immunities Act.

[00:22:45] Speaker 03:
It was based upon what the Second Circuit perceived to be as a trend in international law.

[00:22:51] Speaker 03:
They were wrong.

[00:22:53] Speaker 03:
It was not a trend.

[00:22:54] Speaker 03:
And in fact, it was

[00:22:56] Speaker 03:
repudiated by the ICJ and Barcelona Traction, and it was that repudiation was, again, in the Diallo case, I believe, relatively recently, was reaffirmed.

[00:23:12] Speaker 02:
But the restatement continues to describe it as a legitimate principle.

[00:23:18] Speaker 03:
No, it doesn't, Your Honor.

[00:23:20] Speaker 03:
In fact, the restatement second had, there was some ambiguity in the restatement second of the Foreign Relations Law as to whether or not this was the case.

[00:23:27] Speaker 03:
The restatement third is very clear and it's different.

[00:23:30] Speaker 03:
And it says that the nationality is the nationality of the place of incorporation.

[00:23:35] Speaker 02:
We know of no authority to... But it says, it goes on to say, it goes on to continue to describe Sabatino.

[00:23:40] Speaker 02:
It just limits its facts to situations where the seizure is actually aimed at Americans because they're Americans, right?

[00:23:48] Speaker 03:
I'm not sure, Your Honor, that that's... And even if that is the case, no case is ever so held, and

[00:23:56] Speaker 03:
I want to point something out to the court.

[00:23:58] Speaker 03:
When you read the complaint and when you read the declarations and official proclamations that are incorporated therein by reference, there is absolutely nothing to suggest that the expropriation of these rings was done because I.D.

[00:24:12] Speaker 03:
– HMP Venezuela was owned by an American company.

[00:24:14] Speaker 02:
Nothing.

[00:24:14] Speaker 02:
Okay.

[00:24:14] Speaker 02:
Well, then if you're – if you're arguing – if what you're doing is attempting to distinguish Sabatino,

[00:24:22] Speaker 02:
Then if that's it, then Chief Judge Garland's question comes right back, which is, is it a colorable distinction?

[00:24:31] Speaker 02:
In other words, it's one thing for you to say Sabatino's no longer good law.

[00:24:36] Speaker 03:
That is our position.

[00:24:37] Speaker 02:
Yeah.

[00:24:37] Speaker 02:
But the restatement suggests that, at least on his facts, it is good law.

[00:24:43] Speaker 02:
And if that's what the argument is about... Well, I'm not sure, Your Honor, with respect.

[00:24:49] Speaker 03:
I'm not sure I agree with Your Honor that the restatement is so categorical.

[00:24:53] Speaker 03:
And even if the restatement was so categorical, that would have to stand on the one hand and face the ICJ

[00:25:03] Speaker 03:
uh... pronouncements on what international law is and we believe that this court would have to go with what the international court has said international law is as opposed to what

[00:25:16] Speaker 03:
the restatement third might imply, and I'm not sure if it is that strong.

[00:25:21] Speaker 01:
So we're bound, in other words, the Foreign Sovereign Immunity Act is bound to honor a single decision by the ICJ?

[00:25:30] Speaker 01:
It's not a single decision.

[00:25:31] Speaker 03:
It's not a single decision in honor.

[00:25:33] Speaker 03:
And the question is,

[00:25:35] Speaker 03:
What is international law?

[00:25:37] Speaker 03:
This entire issue is whether there was a taking of rights and property in violation of international law.

[00:25:44] Speaker 01:
But is the intention of the Foreign Sovereign Immunities Act to leave that question to a single panel of the ICJ making a decision?

[00:25:56] Speaker 03:
No, Your Honor.

[00:25:57] Speaker 01:
So just because that, even if the panel is as you describe it,

[00:26:01] Speaker 01:
Sure, we're going to hear from the other side that it's not, as you described it.

[00:26:04] Speaker 01:
But if it is, how does that resolve the matter for us?

[00:26:10] Speaker 03:
Because, Your Honor, when Congress passed the Foreign Sovereign Immunities Act, it must be assumed that it was aware of what the state of international law was at that time.

[00:26:21] Speaker 03:
And there was no real dispute.

[00:26:23] Speaker 03:
Remember, you have a single decision, essentially a single decision by one circuit court in the United States based upon what it identified as a trend in international law in and around 1962, I believe was the date of the decision.

[00:26:36] Speaker 03:
Subsequent to that, in 1970, Barcelona Traction came down.

[00:26:40] Speaker 03:
The doctrine, the writings of what is international law were very clear that the view in international law was the Barcelona Traction view, not the Sabatino view.

[00:26:51] Speaker 03:
And when Congress passed the statute, it had to have understood that this was the state of international law at that time.

[00:26:59] Speaker 03:
And that has been reaffirmed by the ICJ since then, not obviously the Sovereign Meanings Act, but this principle of international law.

[00:27:06] Speaker 03:
So we believe that that is why a binding principle in the sense of stare decisis, no, Your Honors.

[00:27:12] Speaker 03:
But in terms of understanding what Congress meant when it used that language in the statute, yes, we do think that those decisions of the ICJ have to be taken into account.

[00:27:25] Speaker 03:
I'm sorry, go ahead.

[00:27:38] Speaker 03:
351 F 3rd, 1184.

[00:27:41] Speaker 01:
That I thought was on the question of facts versus law.

[00:27:46] Speaker 03:
Yes, Your Honor, and I just wanted to, that's, you asked the question as to whether a case could be brought to your attention, and that's the case.

[00:27:53] Speaker 01:
So, but that doesn't resolve the particular problem I have here, which is one part of the law has been decided and the other part hasn't been.

[00:28:01] Speaker 03:
That's what I was wondering whether there was.

[00:28:05] Speaker 03:
more familiar with that part of the case, I think, representing the parties at the time.

[00:28:11] Speaker 03:
When we made the motion to dismiss based on sovereign immunity, we were faced with a series of discovery requests that the plaintiffs put out.

[00:28:21] Speaker 03:
Those discovery requests tended to revolve around two issues.

[00:28:24] Speaker 03:
One was the foreign non-convenience part of the motion that we made, and the other was this nexus under the expropriation provision, because

[00:28:33] Speaker 03:
It's our position that the entity which owns and operates those rigs is not an agency or instrumentality of a foreign state.

[00:28:41] Speaker 03:
And the plaintiffs said that they were entitled to significant amounts of discovery in order to determine the relationship between Penedesa, Penedesa Petroleum and Suvisis.

[00:28:51] Speaker 01:
Your argument that it's not as a matter of law or not as a matter of fact?

[00:28:55] Speaker 03:
As a matter of fact and as a matter of law.

[00:28:57] Speaker 01:
And are they independent of each other?

[00:28:58] Speaker 03:
I think that one is a question of Venezuelan law because the other issue which they want to explore is whether or not even if this subsidiary of Petavesa, which would not be an agency of instrumentality under the Dole decision, even if that in fact is the entity operating the ribs, that the relationship between the subsidiary and Petavesa is such that the corporate veil should be disregarded and should be considered to be Petavesa and therefore they would satisfy the statute.

[00:29:27] Speaker 01:
Are you telling me that on the nexus issue, which I'll call the nexus issue, that that can't be resolved on the law, only on the facts, and therefore under the IT case?

[00:29:37] Speaker 01:
appropriate to justice?

[00:29:39] Speaker 03:
Yes, Your Honor.

[00:29:40] Speaker 03:
And that's why, in order to obviate the problem, the problem that one was faced with is, of course, even when you have the right to some jurisdictional discovery, the law in this circuit, as in others, is that every effort is to be undertaken to see whether the case can be disposed of on grounds which would obviate

[00:29:58] Speaker 03:
the inquiry.

[00:29:59] Speaker 01:
I understand that point, but obviously the other claims are being attempted to be resolved just on the pleadings.

[00:30:08] Speaker 01:
And the question is whether this could also be resolved on the pleadings.

[00:30:11] Speaker 01:
You're telling me that the second half can't be decided on the pleadings.

[00:30:15] Speaker 03:
No, Your Honor, we don't believe so.

[00:30:17] Speaker 03:
If they're going to make a factual, their position, the plaintiff's position, is that in fact the statute's nexus requirement is met because of this set of facts which they intend to accept.

[00:30:30] Speaker 01:
Right, but I'm asking you whether you have a legal argument which would, regardless of the facts, resolve this question.

[00:30:38] Speaker 03:
Well, Your Honor, our legal argument is that the entity which is operating the rigs, and we made this argument, is not an agency or instrumentality of a foreign state.

[00:30:46] Speaker 03:
Therefore, the nexus requirement does not apply.

[00:30:49] Speaker 03:
They've taken issue with that as a factual matter.

[00:30:53] Speaker 03:
If the court, and to obviate the need to have the discovery and the intrusiveness on the state and the burdens, we entered into the stipulation, which the district court judge approved, which attempted to see whether or not the case could be completely resolved on these legal issues.

[00:31:11] Speaker 03:
If it can't be, we'll be back there.

[00:31:12] Speaker 01:
I thought, now what about the violation of international law part of the requirement?

[00:31:16] Speaker 01:
that it be rights and property taken in violation of international law.

[00:31:20] Speaker 01:
Your position is that even if they're rights and property, they weren't taken in violation of international law, right?

[00:31:26] Speaker 03:
No, I think part of the problem here is those two phrases cannot be unpackaged.

[00:31:33] Speaker 03:
Rights and property taken in violation of international law has to be looked at as one unified concept because

[00:31:41] Speaker 03:
If the court determines that under a broad, let's say a broad Article III standing argument that a shareholder, yes, shareholder has a property interest in the assets of the corporation, right, for Article III purposes.

[00:31:58] Speaker 03:
That then cannot inform whether or not under international law the same thing is true and whether or not a U.S.

[00:32:08] Speaker 03:
shareholder can assert a right and property taken in violation of international law when the property that's subsidiary has been taken.

[00:32:15] Speaker 03:
So the concepts are married in that respect.

[00:32:20] Speaker 02:
You argue with respect to HPV that HPV can't

[00:32:25] Speaker 02:
proceed because it's a domestic corporation.

[00:32:33] Speaker 02:
The domestic taking provision prevents HPV from proceeding, right?

[00:32:40] Speaker 02:
Isn't that your position?

[00:32:40] Speaker 02:
Yeah, sure.

[00:32:41] Speaker 02:
OK.

[00:32:42] Speaker 02:
So if the property was not seized in violation of international law,

[00:32:49] Speaker 02:
with respect to HPV, then what difference does it make whether HPIDC has rights and property and wasn't taken in violation of international law?

[00:33:01] Speaker 02:
Why isn't that your argument?

[00:33:03] Speaker 03:
The argument, maybe I'm not following your honor, perhaps we're saying the same thing.

[00:33:08] Speaker 03:
The argument that we are making is that H&P's rights

[00:33:13] Speaker 03:
which are in the shares of the company.

[00:33:17] Speaker 03:
HPIDC.

[00:33:18] Speaker 03:
I'm sorry, HPIDC.

[00:33:20] Speaker 03:
HPIDC.

[00:33:20] Speaker 02:
I was asking you, I was asking whether if we resolve the HPV issue in your favor, that is, that its property was not taken in violation of international law because it's a domestic corporation, right?

[00:33:35] Speaker 02:
That's your argument, isn't it?

[00:33:36] Speaker 02:
Yes, yes.

[00:33:39] Speaker 02:
Okay.

[00:33:39] Speaker 02:
Why aren't you arguing that that resolves this issue?

[00:33:43] Speaker 02:
That is, even if the property was taken in violation of, quote, rights and properties, it wasn't taken in violation of international law.

[00:33:52] Speaker 03:
That's essentially, I think you may have cast it more artfully than we did, but that's exactly what we are arguing.

[00:33:59] Speaker 02:
Oh, because that's not the way you answered Chief Judge Garland's question.

[00:34:04] Speaker 02:
You told us that these are, you can't unpack these phrases.

[00:34:08] Speaker 02:
I didn't understand what you meant.

[00:34:11] Speaker 02:
It says, rights in property taken in violation of international law.

[00:34:18] Speaker 02:
So we have to decide two questions.

[00:34:20] Speaker 02:
Does HPIDC have rights in property, and if so, was it taken in violation of international law, right?

[00:34:27] Speaker 03:
Your Honor's correct.

[00:34:29] Speaker 03:
The assertion by the plaintiffs is that they do have those rights.

[00:34:33] Speaker 03:
Those rights were taken because that property was a significant part of the going.

[00:34:39] Speaker 02:
I understand all that.

[00:34:40] Speaker 02:
I was simply following up on Chief Judge Garland's question to you, whether we can resolve this case

[00:34:47] Speaker 02:
uh... now

[00:34:52] Speaker 02:
And I thought you said to him, we couldn't, because whether it was taken in violation of international law was not before us.

[00:35:00] Speaker 02:
No, no, no.

[00:35:00] Speaker 02:
I'm sorry, Your Honor.

[00:35:01] Speaker 02:
I didn't mean to say that.

[00:35:02] Speaker 03:
So I misunderstood you.

[00:35:03] Speaker 03:
I did not mean to say that.

[00:35:04] Speaker 03:
The point that I was making, which is not before the court, the factual issue, is whether or not the property is now being operated by an agency, or it's the mentality of the foreign state that does business in the United States.

[00:35:14] Speaker 03:
OK.

[00:35:14] Speaker 03:
All right.

[00:35:15] Speaker 03:
But Your Honor, I'm not saying you're exactly, that's exactly correct.

[00:35:20] Speaker 01:
So just to be clear on this unpacking thing, your view is that if it is correct that IDC has rights and property, then the taking would be in violation of international law.

[00:35:37] Speaker 01:
That is, assume you lost the first part, assume we agreed, assume we held that they do have rights and property.

[00:35:44] Speaker 01:
IDC did, okay?

[00:35:46] Speaker 01:
Then, is there anything left to the question of whether the taking was a violation of international law?

[00:35:51] Speaker 03:
I think there is, Your Honor, because what's left is whether or not the act of Venezuela in expropriating the property of its assets owned by its national, and that's not in dispute.

[00:36:03] Speaker 03:
whether that can ever constitute a violation of international law, and we submit that it cannot.

[00:36:09] Speaker 04:
So that is a bright-line argument of law that could be decided at this stage?

[00:36:14] Speaker 03:
Yes, Your Honor.

[00:36:16] Speaker 01:
Did the District Court decide that?

[00:36:19] Speaker 03:
The District Court decided that H&P Venezuela had no claim because there was no violation of international law and the taking of its assets.

[00:36:27] Speaker 03:
However, it held that the case nevertheless came within that narrow group of cases like the Siderman case and a couple of others where the courts have said that where the entire entity and in fairness really the shares of the entity are taken, then the shareholder has standing.

[00:36:47] Speaker 03:
That's the rights and property part.

[00:36:50] Speaker 01:
Let me give you a different hypothetical.

[00:36:53] Speaker 01:
Imagine that they own the stock and that the stock was taken.

[00:36:58] Speaker 01:
Yes.

[00:36:59] Speaker 01:
Then they have rights and property, right?

[00:37:01] Speaker 01:
Yes, sir.

[00:37:02] Speaker 01:
Let's say Venezuela did that rather than just took the assets.

[00:37:06] Speaker 01:
Would that constitute a violation of international law?

[00:37:08] Speaker 03:
It could if there was not prompt adequate and effective compensation.

[00:37:10] Speaker 01:
Yes.

[00:37:11] Speaker 01:
Now, is the question about prompt adequate and effective compensation a law question or a fact question?

[00:37:19] Speaker 03:
I think it's a mixed question, Your Honor.

[00:37:21] Speaker 03:
It depends on what actually happens and whether what happens satisfies the standards.

[00:37:25] Speaker 01:
So it's not one that can be decided on the pleadings, is basically what I'm saying.

[00:37:28] Speaker 01:
Am I not answering?

[00:37:30] Speaker 02:
Well, I don't think so.

[00:37:31] Speaker 02:
All right.

[00:37:32] Speaker 02:
I'm sorry.

[00:37:32] Speaker 02:
Are you done with that?

[00:37:33] Speaker 02:
Yes.

[00:37:34] Speaker 02:
OK.

[00:37:34] Speaker 02:
So that I completely understand your position, let's assume that we agree with the district court that as to HPV,

[00:37:49] Speaker 02:
There's no jurisdiction because the property wasn't taken in violation of international law because it's a domestic corporation, OK?

[00:37:55] Speaker 03:
Yes, sir.

[00:37:55] Speaker 03:
All right.

[00:37:56] Speaker 02:
Is it your position that that holding by us, if we agree, also resolves HPIDC's case?

[00:38:08] Speaker 03:
We believe that it can, yes, Your Honor.

[00:38:10] Speaker 03:
Can or does?

[00:38:11] Speaker 03:
It does.

[00:38:12] Speaker ?:
OK.

[00:38:14] Speaker 03:
Okay.

[00:38:15] Speaker 01:
Now we've stopped you from arguing.

[00:38:16] Speaker 01:
The main thing you've got up to is to argue, so please go ahead.

[00:38:20] Speaker 03:
Thank you, Your Honor.

[00:38:21] Speaker 03:
In the time you don't have remaining.

[00:38:25] Speaker 03:
Frankly, I'm lost on the time.

[00:38:27] Speaker 03:
It was direct effects, if you want to know what the summary was.

[00:38:32] Speaker 03:
Just to put this in context, the contracts that are at issue here are contracts that were, according to the complaint, negotiated in their entirety in Venezuela, between two Venezuelan corporations.

[00:38:44] Speaker 03:
They were executed in Venezuela.

[00:38:46] Speaker 03:
They were governed by Venezuelan law.

[00:38:47] Speaker 03:
The original of the contract is in Spanish.

[00:38:49] Speaker 03:
They had Venezuelan choice of foreign clauses in them.

[00:38:53] Speaker 03:
And the performance obligation, which is alleged to have been breached, is a payment obligation, which each and every contract placed solely within the discretion of Paveza Petroleum as to where that obligation would be discharged.

[00:39:05] Speaker 03:
If the obligation was discharged in dollars, payment was to be made in a bank account in Tulsa.

[00:39:11] Speaker 03:
If the obligation was to be discharged in bolivars, it was to be made into a bank account in Caracas, Venezuela.

[00:39:18] Speaker 03:
And every contract makes it clear that in the sole discretion of PDVSA as to whether or not it would pay in bolivars or whether or not it would pay in dollars.

[00:39:28] Speaker 03:
the contracts have an Exhibit A. Exhibit A are the specs of these rigs, which are, as I understand it, fairly involved, complex pieces of machinery.

[00:39:40] Speaker 03:
And in the listing of the specs, there are statements as to certain pieces and

[00:39:48] Speaker 03:
Not even where it says nothing about where they're manufactured, it says GE, for example, in one spot.

[00:39:54] Speaker 03:
And it says Vapor, which I understand is a U.S.

[00:39:56] Speaker 03:
company in another spot, with respect to certain components of the rigs that were the subject of the lease.

[00:40:01] Speaker 03:
There is nothing in the contract which requires that H&P Venezuela purchase anything from a U.S.

[00:40:08] Speaker 03:
company or purchase anything in the United States.

[00:40:11] Speaker 03:
And there's no allegation in the complaint that there is

[00:40:15] Speaker 03:
And the closest that any assertion in that respect is made in one of the briefs that was submitted.

[00:40:23] Speaker 01:
Can I ask, so given that the Supreme Court has said that foreseeability isn't the issue, imagine that the facts were that the only place they could be, they specified a particular GE part.

[00:40:37] Speaker 01:
I'm taking that as given for the purposes of this question.

[00:40:41] Speaker 01:
And the facts are that the only place it could be purchased is in the United States.

[00:40:47] Speaker 01:
What happens then to your argument?

[00:40:50] Speaker 01:
We agree that the contract doesn't have to say you must purchase it in the United States, right?

[00:40:54] Speaker 01:
That would be a foreseeability problem.

[00:40:56] Speaker 03:
I agree with Your Honor, and I don't think it's a foreseeability issue.

[00:40:59] Speaker 03:
I think it's the difference between laying at the door of the defendant or laying at the door of the plaintiff the decision to

[00:41:09] Speaker 03:
perform some significant obligation in the United States.

[00:41:12] Speaker 03:
That's the test this court laid down in Disaple, and it was just recently reiterated in the Odiamo case.

[00:41:19] Speaker 03:
Where you have a direct effects analysis in a breach of contract case, the wish pin of the analysis has to be, where was the performance to be made?

[00:41:29] Speaker 02:
I thought your argument was that these third-party contracts were not breached.

[00:41:35] Speaker 02:
And they were not breached.

[00:41:36] Speaker 02:
That's another, yes, Your Honor.

[00:41:39] Speaker 02:
So if that's right, it sort of doesn't make any difference under your theory, right, whether or not the contracts required or implied the need to buy parts in the United States.

[00:41:51] Speaker 02:
Your point, I thought, was those contracts were completed, right?

[00:41:57] Speaker 02:
There's no reach of that.

[00:41:58] Speaker 03:
Am I wrong about that?

[00:42:00] Speaker 03:
No, you're not wrong.

[00:42:00] Speaker 03:
It's both points.

[00:42:01] Speaker 03:
And the reason for making those points is because the district court's decision was he believed he was governed by this court's decision, cruise connections, and never got to the place of payment, place of performance argument.

[00:42:16] Speaker 03:
The key distinction between this case, these contracts, and the situation of cruise connections is that in cruise connections, in fact, the contract did require that the plaintiff

[00:42:27] Speaker 03:
enter into contracts with US companies in order to perform its obligations, and the recudiation of the contract by the Royal Canadian Mounted Police led inexorably directly to the loss of those contracts, the inability of the plaintiff to perform those contracts and the loss of revenue on those contracts.

[00:42:46] Speaker 03:
So there was both a contractual obligation, which was something that was in the contract, and there was a direct

[00:42:52] Speaker 03:
effect, if you will, on those contracts because of the action of the defendant.

[00:42:57] Speaker 03:
Here, it's two things.

[00:42:59] Speaker 03:
One, distinguishable because the contract in our case is not anywhere near what the contract was in cruise connections in requiring the plaintiff to

[00:43:09] Speaker 03:
enter into third-party agreements in the United States.

[00:43:11] Speaker 03:
And secondly, there were no breaches of those third-party contracts that resulted from the failure to pay.

[00:43:18] Speaker 03:
They've said that.

[00:43:19] Speaker 03:
This is alleged throughout the complaint.

[00:43:21] Speaker 02:
Suppose you're wrong about the first part of that.

[00:43:23] Speaker 02:
I'm sorry.

[00:43:24] Speaker 02:
Suppose you're wrong about the first part.

[00:43:25] Speaker 02:
I mean, it looked to me like

[00:43:27] Speaker 02:
like at least much of the equipment that was purchased in the United States had to be purchased in the United States.

[00:43:33] Speaker 02:
There's no allegation of that, Your Honor.

[00:43:35] Speaker 02:
But does that make any difference to your case, to your position?

[00:43:38] Speaker 03:
Why do you keep arguing this?

[00:43:40] Speaker 03:
At the end of the day, at the end of the day, Your Honor, is absolutely correct.

[00:43:43] Speaker 02:
I mean, you keep arguing, which makes me wonder whether or not I should worry about your argument that there's been no breach.

[00:43:49] Speaker 02:
of the third-party contracts.

[00:43:51] Speaker 03:
Your Honor, I can point the court to, I think, several parts of the complaint where the allegation is specifically made that the third-party contracts were never breached.

[00:44:04] Speaker 03:
Were what?

[00:44:05] Speaker 03:
That the third-party contracts were never breached.

[00:44:08] Speaker 02:
You know, I hear you, but given your continued focus on

[00:44:18] Speaker 02:
Given that, is that, in your view, dispositive of the direct effects issue?

[00:44:24] Speaker 02:
In other words, let's assume that the contract expressly required that certain types of drills be purchased from certain manufacturers in the United States, okay?

[00:44:37] Speaker 02:
Let's assume it was right in the contract.

[00:44:40] Speaker 02:
And let's assume that those had all been purchased and it was over and there's no breach.

[00:44:46] Speaker 02:
No direct effect.

[00:44:47] Speaker 02:
Okay, so then what difference does it make what the contracts say?

[00:44:50] Speaker 03:
Your Honor, I'll focus my argument on the fact that the contracts, third-party contracts, were fully performed, and therefore no economic effect in the United States.

[00:45:00] Speaker 01:
Can I just interject a question about that, though?

[00:45:04] Speaker 01:
The first prong of this

[00:45:07] Speaker 01:
isn't the direct effect of the prong.

[00:45:09] Speaker 01:
That's a separate prong.

[00:45:10] Speaker 01:
The first prong is based upon a commercial activity carried out in the United States by the foreign state.

[00:45:16] Speaker 01:
Does that also have to have a direct effect, that prong?

[00:45:19] Speaker 03:
No, Your Honor, but they are not relying on that.

[00:45:22] Speaker 03:
They've never argued that that prong of 610582 applies.

[00:45:26] Speaker 04:
Is there any factual allegation carrying on in the ministry?

[00:45:30] Speaker 04:
I'm sorry, Your Honor.

[00:45:31] Speaker 04:
Is there any factual allegation that comes within the term?

[00:45:34] Speaker 03:
No, Your Honor, not anywhere in the complaint.

[00:45:37] Speaker 01:
So they're not arguing then, and I'm sure they'll let us know, but they're not arguing then that the formation of the contract

[00:45:46] Speaker 01:
with the third-party provisions in it was itself a commercial activity carried out in the United States?

[00:45:52] Speaker 03:
No, Your Honor, it's interesting, and it's a point that they make, but what they do is they use the contract formation argument in

[00:46:04] Speaker 03:
and in isolation of the based upon language in the statute.

[00:46:07] Speaker 03:
So this court's decision in Perpom and the Supreme Court's decision in Nelson is that where you proceed under the first prom, where your claim is based upon commercial activity carried out in the United States,

[00:46:19] Speaker 03:
that a essential element of the claim that occurs in the United States is sufficient.

[00:46:25] Speaker 03:
So in Perpom, it was the sale of airline tickets by Air France in the United States.

[00:46:30] Speaker 03:
In Nelson, it was wherever the contract was entered into.

[00:46:35] Speaker 03:
If, Your Honor, this was a case where the contract had been entered into in the United States, contract formation was in the United States, and everything else is as it is,

[00:46:46] Speaker 03:
performance in Venezuela, all the other things I said.

[00:46:49] Speaker 03:
Then I think they would have an argument.

[00:46:51] Speaker 03:
Then they would be able to say that their claim was based upon commercial activity carried out in the United States because contract formation would be an essential element of the claim.

[00:46:58] Speaker 03:
And that's consistent with all of the jurisprudence on long-arm jurisdiction and due process, which are concepts that Congress specifically said it had in mind when it drafted the FSIA.

[00:47:09] Speaker 03:
So there's nothing remarkable about that.

[00:47:11] Speaker 03:
But when you try to conflate that with direct effect,

[00:47:16] Speaker 03:
Their argument is an element of our claim is contract formation.

[00:47:21] Speaker 03:
And they go so far as to say, and from there on, it doesn't matter what the contract required or didn't require as long as the plaintiff unilaterally established a stream of commerce in its performance between Venezuela and the United States.

[00:47:36] Speaker 03:
That is the direct effect, and that's sufficient.

[00:47:38] Speaker 03:
So what that analysis does is turn the entire

[00:47:42] Speaker 03:
contractual, or rather, jurisdictional analysis on its head, focuses entirely on the unilateral activities of the plenum.

[00:47:50] Speaker 03:
And the Supreme Court has very recently said in the Walgreens v. Fiori case, you can't do that.

[00:47:56] Speaker 03:
The assertion of jurisdiction has to be premised on the activities of the defendant and not plaintiff's activities.

[00:48:01] Speaker 03:
In fact, that is, was the basis, the linchpin of this Court's decision in Odhiambo, where the Court said that, I believe it was Uganda, couldn't be subjected to jurisdiction here because Odhiambo decided to come to the United States.

[00:48:16] Speaker 03:
You couldn't premise anything based on the relationship that was established unilaterally by the plaintiff.

[00:48:22] Speaker 03:
It had to be on the acts of the defendant.

[00:48:24] Speaker 03:
So Iran's question is a good one, but they're not asserting the first clause.

[00:48:29] Speaker 03:
They're asserting the third clause, but they're making first clause arguments in order to support their third clause assertion for the basis of jurisdiction.

[00:48:44] Speaker 03:
Analysis for a direct effect in a contract case is whether or not the contract required or contemplated or necessitated performance in the United States.

[00:48:56] Speaker 03:
If it does, there's a direct – the failure to perform that obligation is a direct effect.

[00:49:00] Speaker 03:
If it does not, then there is no direct effect.

[00:49:03] Speaker 03:
So the analysis here has to focus

[00:49:08] Speaker 03:
on where the payment obligation was, and the contracts are very clear as to that obligation being within the discretion of PDVSA, could discharge that obligation in Venezuela.

[00:49:19] Speaker 03:
Now, there is an argument that was made that, well, because so many payments had been made in the past in dollars, that establishes some sort of obligation, course of dealing, what have you.

[00:49:31] Speaker 03:
which makes the United States the place of payment.

[00:49:34] Speaker 03:
There's several problems with that.

[00:49:36] Speaker 03:
First of all, there is no case or doctrine, which I am aware, that when the parties have specific written agreements with specific provisions and provisions as these contracts do, that any waiver or change in those provisions has to be in writing.

[00:49:50] Speaker 03:
You can't change the provisions through course of performance arguments.

[00:49:53] Speaker 03:
That's number one.

[00:49:54] Speaker 03:
Number two, there's nothing in the contract which suggests that prior notification had to be given by PDBESA before it made a payment in bolivars as opposed to dollars.

[00:50:05] Speaker 03:
And, in fact, when you look at the complaint, and it's paragraph 56 of the complaint, the last payments that were made under these contracts were made in bolivars in Venezuela.

[00:50:19] Speaker 03:
That's where the parties were.

[00:50:22] Speaker 03:
That was the expectation of the parties.

[00:50:25] Speaker 03:
The contract never required Pesadena to do anything in the United States.

[00:50:29] Speaker 03:
It was solely within its discretion.

[00:50:31] Speaker 03:
The fact that prior payments had been made.

[00:50:33] Speaker 03:
If you look at the Goodman case, there were payments that were made out of that account in New York on prior occasions.

[00:50:39] Speaker 03:
The court still said there was no direct effect because payments going forward or

[00:50:43] Speaker 03:
There was no requirement of the contract, and the contract could have been satisfied by payments out of anywhere in the world.

[00:50:49] Speaker 01:
What about the McKesson analysis, the interruption of the constant flow of goods between the two countries?

[00:50:56] Speaker 01:
Yes, Your Honor.

[00:50:56] Speaker 01:
In this case, thinking about it as the flow of capital, at least, or also the buying of the parts and that sort of thing.

[00:51:04] Speaker 03:
Your Honor, in McKesson, an immediate direct consequence of the corporate interference by the government of Iran and the dairy

[00:51:12] Speaker 03:
resulted in Formos Mckesson being ousted from its role and there was an immediate stop of this stream of commerce resulting directly from the interference in the rights of Formos Mckesson by the government in Iran.

[00:51:25] Speaker 03:
That's not alleged here and that's not the case here.

[00:51:27] Speaker 03:
But that there's a stream of commerce going back and forth really isn't the issue.

[00:51:31] Speaker 03:
If interruption alone is sufficient to constitute a direct effect, then that interference has to be the direct result of the action by the defendant.

[00:51:41] Speaker 03:
And here, as they've said, that wasn't the case.

[00:51:45] Speaker 03:
The contracts were all performed, not just the third-party contracts.

[00:51:48] Speaker 03:
These drilling contracts, H&P, Venezuela, finished all their obligations under the drilling contracts.

[00:51:53] Speaker 03:
And then they said, we're not going to renew the contracts.

[00:51:55] Speaker 03:
They have all expired.

[00:51:57] Speaker 03:
They decided they weren't going to renew the contracts until they worked out the payment problems with the government.

[00:52:03] Speaker 01:
So on that theory, it doesn't matter whether you had a choice of dollars or bolivars.

[00:52:08] Speaker 01:
You're saying there was nothing to be paid anyway.

[00:52:11] Speaker 01:
Or is that wrong?

[00:52:13] Speaker 03:
What I'm saying is, Your Honor, I...

[00:52:15] Speaker 01:
Were there still payments to be made regardless of where they were to be made?

[00:52:20] Speaker 03:
Yes.

[00:52:21] Speaker 01:
They were.

[00:52:21] Speaker 03:
Yes, by, by, uh, by the defendant.

[00:52:25] Speaker 04:
And what would be the briefest statement you could give on the difference between this case and the McKesson case?

[00:52:32] Speaker 03:
McKesson was not a breach of contract case and did not... Just on the question of direct effects, what was the difference?

[00:52:44] Speaker 03:
The cessation of the flow of commerce between the United States and Iran was not the result of the decision that Formos McKesson made.

[00:52:53] Speaker 03:
It was the direct result of the wrongful conduct alleged on the part of the government of Iran.

[00:52:57] Speaker 03:
And in this case, that is not what's being alleged.

[00:53:00] Speaker 03:
The allegation is they chose not to renew the contracts.

[00:53:04] Speaker 03:
Now, whether they could have even renewed – the contracts expired.

[00:53:07] Speaker 03:
Whatever cease – whatever flow existed,

[00:53:11] Speaker 03:
may or may not have continued.

[00:53:13] Speaker 03:
Those contracts may or may not have been renewed.

[00:53:15] Speaker 03:
They may or may not have been renewed on the same terms.

[00:53:19] Speaker 03:
You know, looking at this in terms of what the business relationship had degenerated into, it's hard to believe that or to speculate that the parties would have entered into identical contracts with identical provisions with all of the same things we're talking about here.

[00:53:33] Speaker 03:
But whether they would or not, it's pure speculation, and that in and of itself makes this an indirect effect and not a direct effect.

[00:53:41] Speaker 04:
I think you may be saying you can't briefly tell what the difference is.

[00:53:44] Speaker 03:
I wasn't brief enough, Your Honor, I'm sorry.

[00:53:45] Speaker 04:
Well, if nothing happened briefly in the case, I don't remember any of that.

[00:53:51] Speaker 01:
All right, are there further questions on the bench?

[00:53:54] Speaker 01:
No, I'm having them.

[00:53:54] Speaker 01:
Thank you.

[00:53:55] Speaker 01:
We'll hear from the other side.

[00:54:17] Speaker 07:
Good morning, Your Honors.

[00:54:19] Speaker 07:
My name is David Ogden, and I represent the Apolize here, Helmer-Campaign International Drilling Company and its wholly-owned subsidiary, Helmer-Campaign to Venezuela.

[00:54:28] Speaker 07:
I'd like to start by just focusing on the core allegations of the complaint and what this case is fundamentally about to make sure we don't lose sight of it in some of the welter of detail, and then I want to turn to the detail of the legal analysis.

[00:54:44] Speaker 07:
Fundamentally, this is a case in which U.S.

[00:54:46] Speaker 07:
nationals owned and controlled a successful oil and gas drilling company in Venezuela.

[00:54:52] Speaker 07:
For 50 years, that business provided drilling services there for the last two decades, exclusively to Venezuela's state-owned oil companies who were the defendants here.

[00:55:03] Speaker 07:
Under that arrangement, a series of short-term contracts between the parties

[00:55:10] Speaker 07:
work would be carried out, performed, and be renewed.

[00:55:14] Speaker 07:
And at paragraph 34 of our complaint, the Joint Appendix 24, we squarely allege that the parties anticipated that all of the contracts would be extended beyond their original terms, as had occurred with prior contracts for many years prior to the breaches and the confiscations here.

[00:55:33] Speaker 07:
Hence, the contracts contained renewal or extensive

[00:55:35] Speaker 07:
extension provisions which were routinely exercised by the parties for 20 years.

[00:55:40] Speaker 07:
The way this course of business, the McKesson-style course of business, was carried on was through a series of short-term contracts that the parties expected to renew and did with the same terms carrying over from contract to contract.

[00:55:55] Speaker 07:
So this cycle of performance and renewal is essential to understand the way that the commerce in this case proceeded

[00:56:01] Speaker 07:
and the allegations of our complaint and all of the direct effects analysis that the Your Honor were asking for.

[00:56:06] Speaker 01:
Do your arguments depend on there being some kind of violation of international law and refusing to re-up contracts?

[00:56:16] Speaker 07:
With respect to our contract arguments, Your Honor, those are just straight, that's a straight commercial law dispute under which we have jurisdiction under the commercial activities exception with respect.

[00:56:26] Speaker 07:
That's where exactly, Judge Santel, the issue with respect to that is direct effects.

[00:56:33] Speaker 01:
And so on the former issues, the expropriation issues, we need to allege a colorable... But on the renewal of contracts, there's no claim that they had to... Leave aside that they breached the existing contract.

[00:56:46] Speaker 01:
There's no claim that they would have had to have renewed the contracts, even if they're in the course of dealing.

[00:56:51] Speaker 01:
Is that right?

[00:56:53] Speaker 07:
The practice for 20 years, the complain alleges that the practice for 20 years had been that there would be performance followed by renewal.

[00:57:03] Speaker 07:
These were 11 enormous expensive drills that were present.

[00:57:06] Speaker 01:
I understand, but does your breach of contract claim include a breach of the refusal to renew?

[00:57:12] Speaker 07:
No, the breach of contract claim is that they simply stop paying.

[00:57:15] Speaker 01:
Right, so I think Judge Santel started asking the same question.

[00:57:19] Speaker 01:
If the contracts were already performed,

[00:57:22] Speaker 01:
Is anything that might arise out of the failure to continue to renew, to keep the relationship going, can that be counted as a direct effect?

[00:57:35] Speaker 07:
Yes, because what we've alleged is that there was a

[00:57:39] Speaker 07:
understanding of practice, an ongoing practice of performance by both sides, followed by renewal.

[00:57:45] Speaker 04:
This was a critical... We couldn't possibly recover for a breach of the basis of non-renewal.

[00:57:50] Speaker 04:
We had to have the failure to pay.

[00:57:52] Speaker 04:
So don't you have to show a direct effect in the United States of direct effects from the breach of the obligation to pay, without regard to renewal, which is not obligated in this country?

[00:58:03] Speaker 07:
The direct effect from the failure, there were, there are multiple direct effects here.

[00:58:08] Speaker 07:
As we've alleged in the complaint, there are direct effects from contract formation.

[00:58:11] Speaker 07:
What's the first one?

[00:58:12] Speaker 07:
There are direct effects from contract breach.

[00:58:15] Speaker 07:
What's your first one?

[00:58:16] Speaker 07:
The first direct effect.

[00:58:17] Speaker 07:
The first direct effect, well, I don't know how it flows in time, but contract.

[00:58:23] Speaker 04:
The first one you want to tell us about.

[00:58:24] Speaker 07:
Let me tell you about contract, the direct effects of contract formation.

[00:58:27] Speaker 07:
Under the, under Kirkham,

[00:58:29] Speaker 07:
It's clear that the acts by the defendant that give rise to the duty that is alleged.

[00:58:37] Speaker 02:
But isn't Kirkham, didn't Kirkham involve a different section of, it involved, it involved

[00:58:47] Speaker 02:
it involved the sentence that's about an act performed in the U.S.

[00:58:54] Speaker 02:
in connection.

[00:58:55] Speaker 02:
This is a different provision, isn't it?

[00:58:57] Speaker 07:
It's the same based.

[00:58:59] Speaker 07:
It's the same what?

[00:59:01] Speaker 07:
It's the same statute in the same statutory section.

[00:59:04] Speaker 07:
There are three clauses of that section.

[00:59:07] Speaker 02:
Right, but this one is in connection with

[00:59:14] Speaker 02:
a commercial activity of the foreign state elsewhere, and that causes a direct effect in the United States.

[00:59:22] Speaker 02:
Isn't that what this one's based on?

[00:59:23] Speaker 02:
Yes, but... Okay, so it doesn't make any difference.

[00:59:26] Speaker 02:
That's all we have to look at, right?

[00:59:27] Speaker 02:
Is there a direct effect?

[00:59:30] Speaker 02:
The question is, is there a direct effect of... So Kirkham has nothing to do with this.

[00:59:33] Speaker 07:
No, Your Honor, Kirkham has everything to do with this question.

[00:59:38] Speaker 07:
Kirkham, the question that this court answered in Kirkham was what act was Ms.

[00:59:43] Speaker 07:
Kirkham's claim based upon?

[00:59:46] Speaker 07:
That was the question.

[00:59:47] Speaker 07:
The same base, the word based, applies to all three clauses of section 1605A2.

[00:59:53] Speaker 07:
All three clauses have the same base.

[00:59:57] Speaker 07:
So a claim under any one of the three clauses, the analysis as to whether what act it's based upon is the same.

[01:00:04] Speaker 07:
The act here is fair play.

[01:00:06] Speaker 07:
You said that.

[01:00:08] Speaker 07:
Under Kirkman Nelson, a claim is based upon any fact that the plaintiff needs to prove to prevail.

[01:00:20] Speaker 07:
We need to prove two core things.

[01:00:23] Speaker 07:
One, that they undertook an obligation, they took acts that undertook an obligation to make payments.

[01:00:34] Speaker 04:
You've already admitted, if you continue to mention, that the breach of the obligation to pay is what you're suing them for, right?

[01:00:41] Speaker 04:
You don't need Perf and you don't need anything else to say that you're suing them because they breached the obligation to pay, right?

[01:00:47] Speaker 07:
Let me answer the question as to what the direct effects of the breach are.

[01:00:52] Speaker 07:
And then I'll come back.

[01:00:54] Speaker 07:
We are suing on the breach of an obligation, and there are direct to pay.

[01:00:58] Speaker 07:
Now what's the direct effect?

[01:01:00] Speaker 07:
The direct effects of the breach were, number one, the inexorable result, as in cruise connections, the inexorable result of the breach was to interfere with decisions by the plaintiff and third parties

[01:01:14] Speaker 07:
to enter into necessary commercial transactions to carry out the ongoing course of conduct.

[01:01:20] Speaker 02:
Okay, but in cruise connection

[01:01:22] Speaker 02:
The contract was with a – with U.S.

[01:01:29] Speaker 02:
– the contract required that they subcontract with U.S.

[01:01:34] Speaker 02:
ships, and those contracts were breached, whereas you seem to concede here that the third-party contracts were not breached, that the direct effect is the fact that there weren't future third-party contracts.

[01:01:49] Speaker 07:
The direct effect is that because of the natural result of failing to perform broke the cycle of performance and renewal.

[01:01:57] Speaker 07:
The obligations under these contracts that were routinely renewed were no longer performed.

[01:02:02] Speaker 02:
Okay, but do you agree that under cruise connection we specifically said the contract required that they contract with U.S.

[01:02:09] Speaker 02:
ships?

[01:02:11] Speaker 02:
And the comparable contracts here with third parties have not been breached.

[01:02:17] Speaker 02:
Correct?

[01:02:19] Speaker 02:
Your whole point, I thought, was that there's this decades-long pattern.

[01:02:25] Speaker 02:
of renewing contracts, correct?

[01:02:28] Speaker 02:
Yes.

[01:02:28] Speaker 02:
And the direct effect is that that pattern has been interrupted, correct?

[01:02:32] Speaker 02:
Correct, yes.

[01:02:33] Speaker 02:
Okay.

[01:02:34] Speaker 02:
So cruise connection doesn't help you because cruise connection was an actual breach of the contract.

[01:02:40] Speaker 02:
In other words, this case would be like cruise connection if one of the contracts to purchase oil equipment in the United States had been breached.

[01:02:51] Speaker 02:
Then you'd have a cruise connection case.

[01:02:53] Speaker 07:
Cruz-Connection, I believe, Your Honor, was a case in which there was an actual breach, alleged to be an actual breach by the RCMP that caused other parties to back out of contracts that had not been formalized.

[01:03:05] Speaker 07:
So contracts that had not been formalized.

[01:03:08] Speaker 02:
But the contract required that they hire U.S.

[01:03:12] Speaker 02:
That's what I'm saying.

[01:03:15] Speaker 02:
The contracts were similar in the sense that in your case,

[01:03:21] Speaker 02:
Your point is, the contracts required purchasing from U.S.

[01:03:28] Speaker 07:
sources, right?

[01:03:29] Speaker 07:
Correct.

[01:03:29] Speaker 07:
Yes, sir.

[01:03:30] Speaker 07:
Yes, Your Honor.

[01:03:31] Speaker 02:
That's true also in cruise connection.

[01:03:33] Speaker 07:
Yes, Your Honor.

[01:03:34] Speaker 02:
The difference is that in cruise connection, that contract was breached.

[01:03:39] Speaker 02:
In this case, it wasn't.

[01:03:40] Speaker 07:
No, Your Honor.

[01:03:41] Speaker 07:
I think in cruise connection, there was a contract that was breached, but there were also two contracts that had not been entered into.

[01:03:47] Speaker 07:
And the problem was that when the assurances of tax treatment were not provided by the Royal Canadian Mounted Police, the folks who wanted those assurances backed out of entering into deals that would otherwise have occurred.

[01:03:59] Speaker 07:
So there wasn't a breach of those.

[01:04:01] Speaker 02:
That would have occurred under the contract.

[01:04:03] Speaker 02:
Your current contracts don't require future contracts.

[01:04:07] Speaker 02:
Your whole argument is as a pattern.

[01:04:10] Speaker 07:
As in McKesson.

[01:04:11] Speaker 02:
So here... Well, okay, so we're now away from cruise connections.

[01:04:14] Speaker 07:
No, but the point of cruise connections is that the type of effect that was caused here is like the type of effect in cruise connections.

[01:04:21] Speaker 07:
It is a backing out of contractual arrangements, a non-fulfillment of U.S.-based contractual arrangements that would have occurred had there not been a breach.

[01:04:30] Speaker 02:
Wait, what contractual relations are they backing out of here?

[01:04:33] Speaker 07:
Here, we are not going to be continuing to purchase these parts.

[01:04:38] Speaker 02:
It's not backing out of a contractual relationship.

[01:04:42] Speaker 02:
It's not engaging in future contractual relationships.

[01:04:45] Speaker 02:
And that's the direct effect, Your Honor, of the breaking of the ongoing... And your best case for that is cruise connection?

[01:04:51] Speaker 07:
Cruz connection points to the type of effect.

[01:04:53] Speaker 02:
Do you have any other case?

[01:04:55] Speaker 07:
The McKesson case is about acts of the defendant that inexorably cause a breakdown in an ongoing and well-established pattern of dealing.

[01:05:07] Speaker 07:
And here, those are direct results.

[01:05:10] Speaker 07:
Let me turn now to the payments themselves.

[01:05:12] Speaker 01:
Before you do that, let me just ask one more hypothetical with respect to this.

[01:05:16] Speaker 01:
Imagine that there had been no expropriation at all.

[01:05:20] Speaker 01:
All that happened is Venezuela said, we're not going to deal with you anymore.

[01:05:28] Speaker 01:
Sorry, we're going to deal with the Russians or some other entity that doesn't buy in the United States.

[01:05:35] Speaker 01:
Would that, would you have a claim then?

[01:05:37] Speaker 01:
Would you have a direct effect on the United States then?

[01:05:40] Speaker 07:
Well, we would on two other grounds, Your Honor.

[01:05:44] Speaker 07:
I don't think we... I think our argument on the one on... I think the one we've been talking about would be harder because in that circumstance, the breach would be accompanied by a termination of the ongoing... some other factors which might complicate the claim that this was an ongoing arrangement that there was an expectation would continue.

[01:06:02] Speaker 01:
We alleged that... Well, assume there was an expectation that everything would continue.

[01:06:07] Speaker 01:
But not a written expectation, and there's nothing in the contract that provided that re-upping was required, which I assume is the case here.

[01:06:15] Speaker 01:
There was nothing requiring, right?

[01:06:17] Speaker 01:
That's correct.

[01:06:18] Speaker 01:
OK, so what if Venezuela just decided, Russia has agreed to put in rigs.

[01:06:25] Speaker 01:
We're just not going to use you anymore.

[01:06:27] Speaker 01:
Sorry.

[01:06:28] Speaker 01:
Then you couldn't say that this was a direct effect of

[01:06:35] Speaker 01:
of anything that violated international law, right?

[01:06:38] Speaker 07:
And again, it would violate the contract to fail to pay.

[01:06:43] Speaker 01:
So what we have here is... But the paying doesn't affect anything in the United States other than the receipt of capital in the United States, right?

[01:06:49] Speaker 01:
It doesn't involve these third-party parts suppliers at all, right?

[01:06:53] Speaker 07:
It involves it because it is the inexorable, direct, unmediated result of that failure to pay that this long relationship like the commerce at issue with McKesson stopped.

[01:07:05] Speaker 07:
When one party

[01:07:06] Speaker 07:
fails to perform and stops paying for services, those services won't be provided anymore.

[01:07:11] Speaker 07:
And the provision of those services necessarily involve commerce in the United States.

[01:07:16] Speaker 07:
Let me turn, in your hypothetical or in our circumstance, it's also the case that there was, in fact, an expectation of payment in the United States.

[01:07:26] Speaker 07:
These payments were supposed to be made here.

[01:07:29] Speaker 07:
Under the IT consultants case,

[01:07:31] Speaker 07:
This Court credited, as it should here, the allegations of the complaint with respect to the obligation to pay in the United States.

[01:07:41] Speaker 07:
Here, we've, and essentially, in IT consultants, the Court said that it credited the allegations of the complaint that there was an obligation to pay in the U.S.

[01:07:53] Speaker 02:
In this case, doesn't, don't you, I thought you conceded that

[01:07:59] Speaker 02:
Venezuela always retained the right to pay in boulevards in Venezuela.

[01:08:07] Speaker 07:
We don't concede that, Your Honor.

[01:08:08] Speaker 07:
And what we allege in the complaint, there are provisions in the contract that say that.

[01:08:14] Speaker 02:
There are provisions in... What about

[01:08:27] Speaker 02:
Page 67 of your brief, footnote 27, you concede.

[01:08:34] Speaker 02:
The way I read this, you concede that, quote, defendants could elect the option to pay in boulevards.

[01:08:44] Speaker 07:
Just looking at the footnote, Your Honor.

[01:08:47] Speaker 02:
I thought that that.

[01:08:49] Speaker 07:
No, there is language in the contracts that affords that.

[01:08:55] Speaker 07:
There's also language in the contracts which we explain in our briefs that restrict their ability and right to exercise those options.

[01:09:02] Speaker 07:
They're only permitted to do so if they make, for example, if they make a good faith judgment that bolivars have become convertible.

[01:09:09] Speaker 07:
And we allege that there was no period during the timeframe

[01:09:13] Speaker 02:
What about this kind of language that they quote?

[01:09:16] Speaker 02:
It says the Venezuelan company shall always have the right, at its exclusive discretion, to pay the portion establishing dollars or in bolivars.

[01:09:31] Speaker 02:
It retains that.

[01:09:32] Speaker 02:
Retains shall always have the right at its exclusive discretion.

[01:09:39] Speaker 07:
There is language in the contract that makes clear, we believe.

[01:09:43] Speaker 07:
The contracts have a lot of provisions in them.

[01:09:45] Speaker 07:
We allege that the contracts, the course of conduct, the documents that are contemporaneous, there are specific statements that payments will be made in banks in the United States.

[01:09:54] Speaker 07:
What's the best?

[01:09:55] Speaker 01:
I have the same documents that Judge Tatel does seem to cut against you.

[01:10:00] Speaker 01:
What would you point us to?

[01:10:02] Speaker 01:
What page of the appendix will give the best argument that it's not in the discretion of Venezuela?

[01:10:14] Speaker 01:
I'm sorry, I'm going to put you on the spot, but take a minute and find it, because I think that's what we're trying to focus on.

[01:10:24] Speaker 06:
The key line, do you have the joint appendix site for that?

[01:10:36] Speaker 07:
So joint appendix 185 and 469.

[01:10:39] Speaker 07:
All right, let's do one at a time.

[01:10:41] Speaker 07:
185.

[01:10:41] Speaker 01:
Joint appendix 185.

[01:10:56] Speaker 01:
Where are we?

[01:11:17] Speaker 01:
I'm sorry, Your Honor.

[01:11:19] Speaker 01:
I'm concerned about... I'll tell you what, while we continue to ask the questions, your colleague can look for that.

[01:11:25] Speaker 07:
All right.

[01:11:25] Speaker 07:
So I guess this is now on apologies.

[01:11:28] Speaker 07:
I'm looking at Joint Appendix 742, which are these minutes from the June 2, 2008 meeting that amends the contract.

[01:11:39] Speaker 01:
Yes.

[01:11:39] Speaker 01:
Yes.

[01:11:40] Speaker 01:
So I'm looking at the fifth paragraph, which says, without prejudice to all that is set forth above, the present agreement regarding partial payment shall cease to be in effect when PDVSA deems it discretionarily appropriate

[01:11:54] Speaker 01:
in accordance with its interests and considering changes in its policies and internal rules.

[01:12:00] Speaker 07:
And we've alleged that defendants never made such a decision, that the invoices were issued and approved by the defendants, many of them, to pay in the United States, never having made such a decision, and we're now five years downstream.

[01:12:14] Speaker 04:
Is it incorrect then that the last payments were made in Bolivars?

[01:12:18] Speaker 07:
There were certain payments made in Bolivars, Your Honor, but it's not in the record whether those were payments of the U.S.

[01:12:23] Speaker 07:
dollar invoiced amounts.

[01:12:25] Speaker 07:
There were invoices issued in dollars and invoices issued in Bolivars under the

[01:12:32] Speaker 07:
agreements, and it's not, there remain invoices issued in dollars that were approved in dollars by the defendants, according to the allegations, that have not been paid.

[01:12:45] Speaker 07:
They were under this particular agreement.

[01:12:50] Speaker 07:
They needed to exercise that discretion and terminate the agreement that would have a broad effect.

[01:12:56] Speaker 07:
They never did that, and so their obligations remain.

[01:12:59] Speaker 01:
Why do they have to terminate?

[01:13:00] Speaker 01:
Why did that determinate the agreement?

[01:13:03] Speaker 07:
It says that without prejudice all is set a fourth above, the present agreement shall cease to be in effect.

[01:13:12] Speaker 01:
And is that agreement?

[01:13:15] Speaker 07:
That's just the payment agreement, not the... Our position is that they had to abrogate the agreement, not the agreement.

[01:13:22] Speaker 01:
Which agreement are we talking about now?

[01:13:24] Speaker 01:
Which agreement do you think they had to abrogate?

[01:13:27] Speaker 07:
I think it's somewhat ambiguous, but even if it applies only to this one, even if it applies only to this specific agreement to pay 6139.

[01:13:34] Speaker 01:
Yes, because it sounds like it, because it's in a paragraph that begins with the following sentence, in accordance with the foregoing, this payment agreement is made under the following terms.

[01:13:46] Speaker 01:
And then number five, which refers to

[01:13:49] Speaker 01:
that present agreement.

[01:13:51] Speaker 01:
It certainly sounds like it's the payment agreement, doesn't it?

[01:13:53] Speaker 07:
And what it would require them to do is to terminate the agreement of 6139 altogether, which they never did.

[01:14:00] Speaker 07:
And the reason they never did that, Your Honor, if I may, is that to do so would have basically been the end of this arrangement.

[01:14:08] Speaker 07:
They would have, because they had to make payments in dollars.

[01:14:12] Speaker 07:
Everyone understood it, and we've alleged that they understood it, and everyone knew it.

[01:14:18] Speaker 07:
It was expected they would make some payments in bolivars and other payments in dollars.

[01:14:25] Speaker 07:
That was the arrangement.

[01:14:26] Speaker 07:
That there would be payments made in bolivars in Venezuela.

[01:14:30] Speaker 07:
There would be payments made in dollars in the United States.

[01:14:33] Speaker 07:
All dollar payments had to be made in the United States.

[01:14:35] Speaker 07:
They made $65 million worth of such payments in the United States as a result of these contracts over the years.

[01:14:44] Speaker 07:
And the fact of the matter is that the fact they paid some in Bolivar doesn't mean they had elected to pay the dollar invoices.

[01:14:52] Speaker 04:
If you needed a formal election and a formal termination, would you not have said so more expressively than what the language that we just read said?

[01:15:04] Speaker 07:
I think, Your Honor, that if you gave a complete reading to this document, you'd have to say that either party could have clarified the rights better than they did, but these are the contracts that we have.

[01:15:15] Speaker 04:
Yeah, and they're the ones we have.

[01:15:16] Speaker 04:
And that you have.

[01:15:17] Speaker 07:
Yeah, and they're the ones we have.

[01:15:18] Speaker 07:
And what we allege, and I think a fair reading of the contracts should allow us to prove this below, that the contracts, the course of conduct, and the contemporaneous documents, including these minutes,

[01:15:29] Speaker 07:
created an obligation.

[01:15:31] Speaker 07:
And under IT consultants, a far flimsier set of factual allegations were deemed sufficient to allow a complaint to go forward.

[01:15:39] Speaker 07:
There, the court credited the allegations and said, OK, this is enough.

[01:15:44] Speaker 07:
You can go back and prove it.

[01:15:45] Speaker 07:
We believe we can prove that there was an obligation.

[01:15:47] Speaker 07:
But beyond an obligation, under Odeonbo, this court has said that it's either a requirement or a necessary contemplation

[01:15:58] Speaker 07:
of the contract that there be payments in the United States, that they were either be required or necessarily contemplated.

[01:16:04] Speaker 07:
And if there were not dollar payments made under these contracts, there would be no relationship because the Bolivar Fuerte is an inconvertible currency, no U.S.

[01:16:14] Speaker 07:
entity as this is.

[01:16:16] Speaker 07:
would have continued to do business with a company that wasn't paying it in dollars.

[01:16:21] Speaker 07:
It had to buy parts in dollars in the United States, as we've discussed.

[01:16:24] Speaker 07:
It had to make a profit.

[01:16:25] Speaker 07:
Bolivar Fuerte are useful only in Venezuela.

[01:16:29] Speaker 07:
So it was necessarily contemplated that some payments would be made in dollars, and as they were for 20 years under the agreements.

[01:16:39] Speaker 07:
Finally, on the direct effects point, Your Honors, if I may,

[01:16:42] Speaker 07:
I do think it's important.

[01:16:44] Speaker 07:
I don't want to walk away from the Kirkland point.

[01:16:48] Speaker 07:
I do think it's important that under Nelson,

[01:16:53] Speaker 07:
And under Kirkham, a claim under any of the three prongs of the statute is based upon any fact the plaintiff finds necessary, that is necessary for the plaintiff to prove its claim.

[01:17:07] Speaker 07:
That's what based upon means.

[01:17:08] Speaker 07:
The word based appears once in the statute.

[01:17:11] Speaker 07:
It has to mean the same thing for all three prongs of the statute.

[01:17:17] Speaker 07:
And in Kirkham, this court said, and it's entirely consistent with Nelson,

[01:17:21] Speaker 07:
that a claim is based upon acts that give rise to the duty that was breached.

[01:17:27] Speaker 07:
In Kirkham, the claim there was based upon the purchase of a ticket because the ticket created a duty that was later

[01:17:35] Speaker 07:
our claims are based upon formation of the contracts because the contracts give rise to the duty that was later breached, the duty to pay.

[01:17:44] Speaker 07:
It's exactly like, it's based on the contract in the same way the Corcum claim is based on the ticket.

[01:17:50] Speaker 07:
And that is a critical, that's critical here because all of these other questions that we've been discussing become irrelevant once that's focused on because they paid $65 million

[01:18:01] Speaker 07:
as an inexorable necessary result of the contract in the United States.

[01:18:08] Speaker 07:
Many, many products were purchased and acquired in the United States as required by the contract as a direct inexorable result of contract formation.

[01:18:19] Speaker 07:
So because this claim is based upon

[01:18:23] Speaker 07:
The contract formation, in the same way the Curriculum claim is based upon the ticket, these direct effect issues are varied.

[01:18:30] Speaker 02:
Can I ask you to go on to the expropriation side of the case?

[01:18:35] Speaker 07:
Yes, thank you.

[01:18:36] Speaker 07:
I'd like to do that.

[01:18:37] Speaker 07:
I just didn't want to make that.

[01:18:38] Speaker 02:
No, no.

[01:18:38] Speaker 02:
You covered all the points.

[01:18:39] Speaker 02:
Let's get back to it.

[01:18:41] Speaker 02:
I didn't want to make that.

[01:18:42] Speaker 02:
Could you start with HP Venezuela's claim?

[01:18:49] Speaker 02:
and explain to us why that isn't barred by the domestic taking rule?

[01:18:55] Speaker 02:
Why that's not barred by the domestic taking rule?

[01:18:58] Speaker 02:
Why, since it's a Venezuelan corporation, why it's a taking violation of international law?

[01:19:05] Speaker 07:
Well, under the Sabatino and FAR,

[01:19:09] Speaker 07:
approach?

[01:19:11] Speaker 02:
Suppose we don't think Sabatino is either any longer very helpful or that it's just dramatically different because in Sabatino there was evidence in the official documents that it was aimed at Americans, whereas here I didn't see any of that.

[01:19:29] Speaker 02:
Just assume for a minute that we don't think that gets you anywhere.

[01:19:34] Speaker 02:
Or does your whole case depend on that?

[01:19:37] Speaker 07:
Well, our whole case depends on the proposition that this was a discriminatory taking.

[01:19:41] Speaker 07:
And we squarely alleged it.

[01:19:42] Speaker 07:
And we have not only a conclusory allegation to that effect, the record is replete with expressions directed at this expropriation explaining that this was done because this is an American company.

[01:19:56] Speaker 02:
But isn't it true that in Sabatino, the official documents referred to these being American companies, whereas

[01:20:03] Speaker 02:
and that it was anti-American.

[01:20:07] Speaker 02:
What's the best evidence in the record, official evidence in the record that indicates this was anti-American as opposed to what Venezuela says, which is they just wanted the rigs?

[01:20:21] Speaker 07:
Well, there's extensive evidence in the complaint, Joint Appendix 14, Joint Appendix 38 to 43.

[01:20:27] Speaker 02:
Of anti-American sentiment.

[01:20:29] Speaker 07:
Directed at this specific here.

[01:20:31] Speaker 07:
Now, the Minister of Oil of Venezuela is the same man as the head of VESA.

[01:20:36] Speaker 07:
PDVSA is an instrumentality of Venezuela.

[01:20:41] Speaker 07:
The government, the minister, the president, and the company said the following.

[01:20:48] Speaker 07:
They publicly condemned the subsidiary as the U.S.

[01:20:51] Speaker 07:
transnational firm, a U.S.A.

[01:20:53] Speaker 07:
company contractor.

[01:20:54] Speaker 07:
said its employees would no longer be exploited by this American company because of this taking, and they and the drills would now work for Petavesa, a company of all Venezuelans.

[01:21:03] Speaker 07:
That is a pretty clear statement in connection with this taking, that it is targeted at a U.S.

[01:21:09] Speaker 07:
transnational firm in order to transfer its operations to a company of all Venezuelans.

[01:21:14] Speaker 01:
Isn't that a standard?

[01:21:17] Speaker 01:
Is this a fact question?

[01:21:19] Speaker 01:
whether the taking was discriminatory.

[01:21:21] Speaker 07:
I think right now it's simply a question as to whether we've made colorable allegations.

[01:21:25] Speaker 01:
Yes, that's what I was trying to get at.

[01:21:27] Speaker 01:
So if there is a factual dispute, then that's for a later date I take it.

[01:21:32] Speaker 01:
But right now the only question is whether it's colorable.

[01:21:35] Speaker 07:
Correct, Your Honor.

[01:21:35] Speaker 07:
That's right.

[01:21:36] Speaker 07:
Under Chabad, that's correct.

[01:21:38] Speaker 07:
That's the only question now.

[01:21:39] Speaker 01:
Well, the Chabad question is whether the legal issue is colorable.

[01:21:43] Speaker 01:
This is a little bit more like a Twombly question, whether you've

[01:21:47] Speaker 01:
well-pleaded facts plausibly could be read this way, right?

[01:22:00] Speaker 07:
Yes, we have several pages of remarkably clear statements of discriminatory intent that we rely on, and I could read more of them, but they're in our papers.

[01:22:11] Speaker 07:
I mean, it's as jingoistic and as anti-American or rhetoric as one could lamentably

[01:22:18] Speaker 07:
imagine, that denounce those opposing the nationalization as acting in accordance with the instructions of the U.S.

[01:22:24] Speaker 07:
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.

[01:22:33] Speaker 07:
These are the kinds of things that were said to justify this taking by officials of Venezuela.

[01:22:36] Speaker 01:
So then the long question is whether Sabatino and Farr are enough, right?

[01:22:40] Speaker 07:
does it give us a colorable basis?

[01:22:42] Speaker 07:
And I'd like to turn to what I think are just completely incorrect statements about what Barcellin, Attraction and Diallo hold.

[01:22:49] Speaker 07:
First of all, those cases are not about this question.

[01:22:53] Speaker 07:
They don't involve discriminatory takings and they don't even address

[01:22:57] Speaker 07:
the rights of a company to assert its own rights.

[01:22:59] Speaker 07:
They are about espousal questions.

[01:23:01] Speaker 07:
Which nation may espouse the rights of a particular entity?

[01:23:05] Speaker 07:
And neither of them considers or forecloses the rule of Sabatino that was emphatically re-adopted in FAR.

[01:23:16] Speaker 07:
Barcelona Traction wasn't even about a claim against the nation of incorporation.

[01:23:20] Speaker 07:
It simply involved which third country could espouse the rights of a corporation against

[01:23:25] Speaker 07:
against the state.

[01:23:28] Speaker 07:
Another, and indeed it was incorporated in one state, shareholders in the other third state.

[01:23:35] Speaker 07:
Barcelona Attraction expressly leaves open the question as to whether there are equitable exceptions, even in that, in a very different context.

[01:23:46] Speaker 07:
The Restatement 3rd specifically says that at Section 213, Reporters Note 3, that Barcelona Attraction does not preclude representation of the company by a state with significant links to the company against the state of incorporation itself.

[01:24:00] Speaker 07:
That's the Restatement on Barcelona Attraction.

[01:24:02] Speaker 07:
It just doesn't have any traction, if you will,

[01:24:05] Speaker 07:
this setting.

[01:24:08] Speaker 07:
Thank you.

[01:24:10] Speaker 07:
It's been a long morning.

[01:24:11] Speaker 07:
I'm doing my best to keep it light.

[01:24:15] Speaker 07:
The Diallo decision doesn't either.

[01:24:18] Speaker 07:
It's not a discrimination case.

[01:24:19] Speaker 07:
No allegations of discrimination in that case, and it expressly leaves open the possibility that customary international law contains a more limited rule of protection by substitution.

[01:24:29] Speaker 07:
Again, in this very different context of

[01:24:32] Speaker 07:
which country can espouse the claims.

[01:24:35] Speaker 07:
So none of those cases, and no international source that Mr. Pezzurro referred to, forecloses the common-sense rule of Sabatino.

[01:24:43] Speaker 07:
And that rule flows – it does not come out of thin air.

[01:24:47] Speaker 07:
It is a black-letter proposition of international law.

[01:24:51] Speaker 01:
Why did the restatement third cut out the black-letter part that really helped you a lot?

[01:24:56] Speaker 07:
Well, I think that the restatement third reorganized in many ways and certain things that were sort of principles got moved to comments.

[01:25:08] Speaker 07:
But here the restatement third, as Judge Tatel observed, specifically preserves the concept.

[01:25:18] Speaker 02:
But very much limited to the facts of that case.

[01:25:21] Speaker 07:
It says it recognizes the practice of the United States and others to make claims as the states of nationality of the parent corporation when a local subsidiary is expropriated on the basis that the expropriation was aimed at the parent company or at the state of the parent's nationality.

[01:25:33] Speaker 07:
That's quoted from the restatement third.

[01:25:37] Speaker 07:
And that's our situation.

[01:25:40] Speaker 07:
Sabatino, again, involved a discriminatory taking.

[01:25:44] Speaker 07:
And that is black letter law.

[01:25:46] Speaker 07:
The prohibition against discriminatory takings

[01:25:51] Speaker 07:
is a prohibition that's found in the restatement squarely.

[01:25:55] Speaker 07:
It's found in the House report.

[01:25:58] Speaker 07:
Where is that?

[01:25:59] Speaker 07:
The Restatement 3rd of Foreign Relations Law at Section 712 says a state is responsible under international law for injury resulting from a taking

[01:26:11] Speaker 07:
by the property of a national of another state that is discriminatory.

[01:26:16] Speaker 07:
That's of a national of another state.

[01:26:20] Speaker 07:
And so the issue here is, does the Sabatino rationale come within that approach?

[01:26:27] Speaker 07:
And in the comment, the restatement leaves that proposition open.

[01:26:32] Speaker 01:
To 712?

[01:26:33] Speaker 01:
The comment is to 713.

[01:26:37] Speaker 01:
Which is a remedies section.

[01:26:42] Speaker 01:
I'm not saying you're wrong.

[01:26:43] Speaker 01:
When you say black letter, I'm looking for the black letters.

[01:26:47] Speaker 01:
It's not quite that clear, right?

[01:26:50] Speaker 07:
I'm making a limited black letter point, which is that discriminatory takings are clearly violative of international law.

[01:26:57] Speaker 07:
The question is, what is a discriminatory taking?

[01:26:59] Speaker 07:
And we would submit that Sabatino

[01:27:02] Speaker 07:
certainly identified a colorable idea of a discriminatory taking where a company like this one set up by an American entity to carry out that is entirely a creature that is 100% owned

[01:27:18] Speaker 07:
as we allege, was controlled and all of its operations managed by that entity is, and when it is treated as a foreign entity by that government, given lesser rights because of its foreign ownership by that government and then expropriated because of that foreign ownership, that that is a discriminatory

[01:27:37] Speaker 07:
taking, and that underlies our claim, and we don't think any international authority contradicts that.

[01:27:43] Speaker 02:
Do you want to say something about IDC?

[01:27:45] Speaker 02:
I very much do.

[01:27:46] Speaker 07:
Thank you, Your Honor.

[01:27:47] Speaker 07:
Okay.

[01:27:48] Speaker 02:
And maybe you could answer, can I ask you a question to start with?

[01:27:51] Speaker 02:
Please.

[01:27:52] Speaker 02:
So assume we don't agree with you about HP then as a whale.

[01:27:58] Speaker 02:
Let's assume we think, it's just hypothetical, that we think the district court was right

[01:28:03] Speaker 02:
and that the seizure of the extorporation of HPV was not.

[01:28:10] Speaker 02:
a violation of international law, because it's a domestic corporation.

[01:28:12] Speaker 02:
Just assume that, OK?

[01:28:14] Speaker 07:
Yes.

[01:28:15] Speaker 02:
Even if you're right with respect to IDC that it has rights and property, it seems to me, I thought that part of your brief was persuasive, that rights and property are different from ownership.

[01:28:28] Speaker 02:
Even if that's right, how can you prevail, given that it has to be rights in property taken in violation of international law?

[01:28:38] Speaker 02:
And it wasn't taken in violation of international law if IPV seizure was not in violation of international law.

[01:28:51] Speaker 07:
Under the restatement third of foreign relations law, Your Honor, as I mentioned, a state is responsible under international law for injury resulting from the taking by the state of the property of a national of another state that is discriminatory or is... Yeah, but what about my question?

[01:29:03] Speaker 02:
I was just asking the question about the language in the statute.

[01:29:06] Speaker 02:
It says rights and property taken in violation of international law.

[01:29:11] Speaker 02:
I'm simply asking that even if we agree with you that IDC has rights and property here,

[01:29:18] Speaker 02:
How can you prevail if we also think that the subsidiary's expropriation was not in violation of international law?

[01:29:27] Speaker 07:
Because the taking is of the distinct direct rights of the parent and in violation of the principles of international law.

[01:29:34] Speaker 07:
The parent has a... I'm sorry, Ron.

[01:29:36] Speaker 07:
Go ahead.

[01:29:36] Speaker 07:
The parent has a... Under the Ramirez analysis, the parent has an interest and a right in... But they didn't seize the stock here, right?

[01:29:45] Speaker 07:
That's correct, nor did they in Ramirez.

[01:29:46] Speaker 02:
And you argue that the subsidiary is a continuing entity, correct?

[01:29:57] Speaker 07:
It's a shell, basically.

[01:29:58] Speaker 07:
There is stock and no productive assets in it.

[01:30:02] Speaker 07:
We allege that all of the productive assets, including the employees, all of the relationships with employees, have been taken.

[01:30:10] Speaker 07:
And there's nothing left of it as a business.

[01:30:12] Speaker 07:
It's been assumed as a going concern.

[01:30:15] Speaker 02:
OK, so under your view,

[01:30:24] Speaker 02:
IDC can prevail, that is, its rights and properties were seized in violation of the international law, even if we conclude that

[01:30:32] Speaker 02:
HPV was not expropriated in violation of international law.

[01:30:38] Speaker 07:
Absolutely, Your Honor.

[01:30:39] Speaker 07:
Indeed, I think it's more... Well, because IDC has its own rights and property that were taken in violation of international law, that is... Because IDC is a national of another country.

[01:30:47] Speaker 01:
Correct.

[01:30:48] Speaker 01:
And so a different rule about international law taking supplies than the V company, which, for the purposes of this hypothetical, is considered a Venezuelan company.

[01:30:59] Speaker 01:
That's why you can lose a Venezuelan one, but not lose the American one.

[01:31:03] Speaker 07:
That's right.

[01:31:04] Speaker 07:
Because the American company has its own rights that were taken without compensation.

[01:31:08] Speaker 04:
We would have to reach an independent conclusion that there were rights of the American company taken, as opposed to simply the rights that belonged to the subsidiary of the American company.

[01:31:19] Speaker 07:
That's correct, Your Honor.

[01:31:20] Speaker 04:
And let me suggest... Now, is there a reason, and this may be an unfair question, but we get to be honest.

[01:31:27] Speaker 04:
reason why, obviously, he had to operate through a Venezuelan subsidiary.

[01:31:33] Speaker 07:
If there's nothing in the record to suggest that they were compelled to do so, Your Honor, they had for 50 years had subsidiaries long before the Chavez regime had had subsidiaries in Venezuela that were operating and they simply continued to do so.

[01:31:47] Speaker 07:
But I'd like to just, if I may, I realize I'm maybe imposing on you given the time, but make two further points.

[01:31:54] Speaker 07:
In addition to Ramirez, in addition to the statements in Neumerium,

[01:31:57] Speaker 07:
that support our claim that IDC had its own rights at issue.

[01:32:01] Speaker 07:
And there really are two critical points.

[01:32:04] Speaker 07:
The first is that the Restatement 3rd of Foreign Relations Law at 712, Comment G, expressly recognizes that even when left with title or other formalities of ownership, a property owner has a claim under international law when it has been deprived of its property in whole or in part.

[01:32:25] Speaker 07:
when the state, quote, prevents or unreasonably interferes with effective enjoyment of the alien's property or when it deprived an alien of control of its property.

[01:32:35] Speaker 07:
That's a functional takings analysis under section 712, g of the restatement third.

[01:32:42] Speaker 07:
And this is what Ramirez is talking about.

[01:32:44] Speaker 07:
If all of the benefit of the company is taken, all of its operating assets, it's taken in whole and large part to prevent

[01:32:54] Speaker 07:
the parent from exercising control and benefiting from the property, that is a taking, a functional taking, analogous to the similar doctrine in the U.S.

[01:33:04] Speaker 07:
recognized in the Lucas case, a functional taking.

[01:33:07] Speaker 07:
You may still own the property, but if the state has deprived it of value and usurped control over it,

[01:33:13] Speaker 07:
That is a taking that's cognizable under international law as reflected in the restatement, and the restatement cites numerous cases to that effect.

[01:33:20] Speaker 07:
That's why Ramirez holds what it holds.

[01:33:22] Speaker 07:
That's why Neumerian says what it holds.

[01:33:24] Speaker 07:
That principle is an understood principle recognized in international law.

[01:33:29] Speaker 07:
This is, we've alleged, a functional taking of all... Okay, we got that one.

[01:33:32] Speaker 07:
Do you want to second it all?

[01:33:33] Speaker 07:
And the last thing is, I would just refer you to the Fletch Recyclopedia of the Law of Corporations, which Your Honor mentioned, which specifically recognizes under Black Letter corporate law

[01:33:41] Speaker 07:
that there is a big difference between the taking of some assets and the taking of all assets.

[01:33:47] Speaker 07:
A corporate parent has a right to object to block sale of all or substantially all the assets of the subsidiary.

[01:33:54] Speaker 07:
The subsidiary does not control that.

[01:33:56] Speaker 07:
That's black letter along the U.S.

[01:33:57] Speaker 07:
and in Venezuela.

[01:33:58] Speaker 01:
Let me ask you one more question.

[01:33:59] Speaker 01:
I appreciate that you can't concede a valid jurisdiction here, but do you agree with posing counsel on the questions I asked about the

[01:34:08] Speaker 01:
interlocutory appeal here, that is, are the remaining issues, with respect to the expropriation issue, that is, after rights and property, are these all essentially fact questions that can't be resolved on the face?

[01:34:24] Speaker 07:
What we tried to do, and that's my understanding of the situation, what we tried to do in the trial court

[01:34:32] Speaker 07:
was to isolate the issues that they were putting forward in motions to dismiss that raised pure questions of law and to reserve questions on what discovery might be necessary so as to protect their interest in being free from discovery while those rights were adjudicated.

[01:34:46] Speaker 07:
We tried our best to do that.

[01:34:47] Speaker 07:
I don't guarantee we got it right, but that was the theory on which we proceeded.

[01:34:52] Speaker 01:
Okay.

[01:34:52] Speaker 01:
Further questions?

[01:34:53] Speaker 01:
Thank you, Your Honor.

[01:34:53] Speaker 01:
No time left.

[01:34:56] Speaker 01:
We'll give you a few minutes.

[01:34:59] Speaker 01:
Let's make it a few if we can.

[01:35:05] Speaker 08:
I would also like to do rebuttal on the breach of contracts as soon as possible.

[01:35:11] Speaker 08:
Judge Garland, with respect to your jurisdictional question, I think the backstop to all of this, if nothing else, you would have pendant appellate jurisdiction over the IDC issue, given the jurisdiction over HMP Venezuela.

[01:35:23] Speaker 04:
I think Judge Tatel... Now, over what are you saying, pendant jurisdiction?

[01:35:27] Speaker 08:
Pendant jurisdiction over the issue of whether HMP IDC had correctly invoked this Court's jurisdiction, given the

[01:35:37] Speaker 08:
indisputable jurisdiction over the H&P Venezuela issue.

[01:35:40] Speaker 08:
And I think that ties to the point that Judge Tatel you hit on, that if there is no taking in violation of international law, the only property that has really been alleged to be taken in this case, that disposes of both the H&P.

[01:35:54] Speaker 02:
Well, but what about, I mean, Mr. Ogden made the point that the rights and property of HPIDC are different from... He's made that point.

[01:36:03] Speaker 02:
...their interests are different.

[01:36:04] Speaker 08:
I don't know if he's... That's not true?

[01:36:06] Speaker 08:
I think he has made that point.

[01:36:07] Speaker 08:
I don't think he's ever explained what those rights are.

[01:36:10] Speaker 01:
The only question that we're asking is whether these are independent of each other.

[01:36:14] Speaker 01:
And if we were to disagree with you and think that the American company actually has rights and property, the fact that the Venezuelan company can't win doesn't mean that the American company can't win.

[01:36:25] Speaker 08:
I think that's right, but I would reference them loudly.

[01:36:27] Speaker 02:
I thought you just said to me that wasn't right.

[01:36:29] Speaker 08:
Well, that is not—excuse me, if you disagree with me— No, no, I wasn't saying what I thought.

[01:36:35] Speaker 02:
I thought you said to me that if the subsidiary couldn't prevail because it wasn't taken in violation of international law, then IDC couldn't.

[01:36:45] Speaker 02:
That's what you said when you first stood up here.

[01:36:47] Speaker 02:
Yes, and I— But then when Judge Garland asked you the same question, whether they're separate questions, you said they are.

[01:36:53] Speaker 08:
My point was that we disagree that there are independent rights in IDC.

[01:36:58] Speaker 08:
We believe all that IDC has alleged are rights that pass through the corporation, which in a lot of events, this works.

[01:37:05] Speaker 01:
Just to be clear, imagine that you win on the Venezuela point, the Venezuelan subsidiary.

[01:37:15] Speaker 01:
However, we say that

[01:37:20] Speaker 01:
that they have effectively taken control, and we conclude, as a matter of law, that that means rights and property of the American parent have been taken.

[01:37:32] Speaker 08:
Assume that.

[01:37:33] Speaker 01:
Then it is still possible for the American parent to win on a theory of discriminatory taking against an American, not against a Venezuelan, right?

[01:37:42] Speaker 08:
Under that set, yes, Your Honor.

[01:37:44] Speaker 08:
I apologize for the confusion.

[01:37:46] Speaker 08:
With – but again, I'm not sure Dr. – Mr. Ogden has effectively explained what those separate interests are that IDC has.

[01:37:55] Speaker 08:
They seem to be all interests that pass through H&P Venezuela, which in this Court's Lavrovitz case, which we cited in the brief, explains if the entry passes through the corporation, it is not independent.

[01:38:09] Speaker 08:
I apologize.

[01:38:13] Speaker 08:
This was a domestic corporate law case where basically they were saying diminution in value in the investment.

[01:38:19] Speaker 08:
This court says no, that's not an independent right that the corporate parent may assert.

[01:38:25] Speaker 08:
Briefly with respect to the discrimination claim,

[01:38:29] Speaker 08:
We don't believe – well, first of all, as you pointed out, the restatement allows discriminatory takings when the taking is from a national of another country, which is the problem here.

[01:38:40] Speaker 08:
That is not the case.

[01:38:42] Speaker 08:
Sabatino, I think, in addition to being before the Foreign Sovereign Immunity Act, was holding on the merits under international law.

[01:38:51] Speaker 08:
And at the time, the court believed it was an

[01:38:56] Speaker 08:
international law.

[01:38:56] Speaker 08:
And after so-so, we know that is really not the court's role with respect to international law.

[01:39:01] Speaker 01:
So for that reason, in addition, we would say... Is there any American case after Sabatino and Farr that goes your way?

[01:39:08] Speaker 08:
That is... Siderman de Blake.

[01:39:10] Speaker 01:
Well, I've read Siderman.

[01:39:12] Speaker 01:
I don't see it as holding this.

[01:39:14] Speaker 01:
The question we're asking is whether discrimination against a domestic company

[01:39:25] Speaker 01:
motivated by the foreign nationality of the corporation's shareholders?

[01:39:30] Speaker 01:
Assume that it is motivated, that the president of the country says, we are doing this solely and only because we hate Americans, and we know this company ultimately is owned by Americans.

[01:39:42] Speaker 01:
Is there any case that is set under those circumstances that doesn't violate international law?

[01:39:48] Speaker 08:
I don't believe under that particular flavor of discrimination.

[01:39:52] Speaker 08:
Discrimination more generally, certainly that was the Siderman case.

[01:39:57] Speaker 08:
And for example, the Holocaust cases where the courts have gone to great lengths to note the genocide component of the cases explaining why there's been a violation of international law would have presumably come down quite differently if there was this still existing general discrimination exception.

[01:40:13] Speaker 08:
We don't believe that there is still

[01:40:16] Speaker 08:
I'm not sure I'm following that one.

[01:40:20] Speaker 01:
That one was against nationals of the country discrimination based on their religion, right?

[01:40:26] Speaker 08:
Yeah, and I'm talking more generally about a discrimination exception.

[01:40:30] Speaker 01:
But that's not what they're, they're not arguing about a general discrimination.

[01:40:33] Speaker 01:
They're arguing about a nationality based discrimination.

[01:40:36] Speaker 08:
And it's still, I'm not sure, I think that's a distinction without a difference, because you're still talking about an offensive discrimination, whether that and... The question is whether it's offensive enough for international law, not whether we find it offensive.

[01:40:49] Speaker 08:
And I believe that's correct, and I don't think any well-established norm of international law reaches that level.

[01:40:57] Speaker 01:
In Siderman, they let the American shareholder invoke the international takings exception.

[01:41:02] Speaker 08:
Yes, specifically because it was not a national, Argentina.

[01:41:07] Speaker 01:
But she was a shareholder, right?

[01:41:08] Speaker 01:
Yes.

[01:41:09] Speaker 01:
Well?

[01:41:09] Speaker 08:
And in that case, again, the entire, that was the case where the entire corporation was taken as, in fact, a defendant in that case.

[01:41:16] Speaker 01:
So now you're relying on the take, and we're back to the question of whether it's the entire corporation.

[01:41:21] Speaker 08:
Yes.

[01:41:22] Speaker 08:
And I don't believe you can find a single case where, when the corporation still exists and is a plaintiff in the lawsuit, that both the parent and the six-year-old can start the same injury.

[01:41:33] Speaker 01:
Any further questions from the bench?

[01:41:35] Speaker 01:
No.

[01:41:35] Speaker 08:
Thank you, Your Honor.

[01:41:44] Speaker 03:
Thank you, Your Honors.

[01:41:44] Speaker 03:
I will be very brief.

[01:41:48] Speaker 03:
On the point of the subsidiary, I'd like to make the point that HMP Venezuela, in fact, is a plaintiff in actions that are ongoing in Venezuela.

[01:41:56] Speaker 03:
So it is protecting its rights in Venezuela, as well as appearing as a plaintiff in this case.

[01:42:01] Speaker 03:
And as far as the record is concerned, and I believe this to be the case, retains all of the benefits and privileges under Venezuelan law that any other corporation does.

[01:42:09] Speaker 03:
For example, it still retains the limited liability.

[01:42:12] Speaker 03:
There were claims by former employees, by people who had been on their property in Venezuela.

[01:42:18] Speaker 03:
The limited liability of an SA under Venezuelan law, which is in the record, is retained by HMP Venezuela.

[01:42:25] Speaker 01:
I take it it can't carry out its business anymore.

[01:42:28] Speaker 03:
It can't carry out its drilling business.

[01:42:29] Speaker 03:
It can carry out other business.

[01:42:31] Speaker 01:
But it was formed for the purposes of a drilling business.

[01:42:34] Speaker 03:
And what it's doing, Your Honor, is trying to get those drills back.

[01:42:37] Speaker 03:
And it's doing it here, and it's doing it in Venezuela.

[01:42:40] Speaker 03:
And if it gets its drills back, HMPIDC has identified no injury at all that is different from the injury to its subsidiary and no recovery to which it is entitled at all in excess of the value of those risks.

[01:42:55] Speaker 03:
So it is entirely derivative of HMPDV's rights.

[01:43:00] Speaker 03:
It has no interest of its own, but it has the ability to assert under very well established principles.

[01:43:07] Speaker 03:
The question of whether...

[01:43:11] Speaker 02:
Even if rights in property is different from share ownership?

[01:43:19] Speaker 02:
In other words, is your argument dependent on us accepting your position that Dole controls how you think about this?

[01:43:27] Speaker 03:
Your Honor, I think that the... Suppose we don't agree with that.

[01:43:30] Speaker 02:
In other words, we think that you're wrong about that, that rights and ownership, rights and property is different from ownership.

[01:43:36] Speaker 02:
We're not taking an international law, a violation of international law.

[01:43:39] Speaker 02:
That's... Your position is still the same, that is, that there is no light between here, between the two.

[01:43:48] Speaker 03:
Yes, that's correct.

[01:43:52] Speaker 03:
On the contract point, very quickly, I would like to, there was a question.

[01:43:56] Speaker 03:
Judge Santel, I believe, regarding the assertion that I had made that the final payments under this agreement had been in boulevards.

[01:44:04] Speaker 03:
I refer the court to paragraph 56 of the complaint, which is at Joint Appendix, page 29, and the allegation is, the Peta-Vesa defendants have not remitted any payments to HMPV in the United States since March 2010.

[01:44:18] Speaker 03:
And they have not remitted any payments to HMPV in Venezuela since May 2010.

[01:44:23] Speaker 03:
Clearly, they have alleged that the payments, final payments made under this agreement were made in boulevards.

[01:44:29] Speaker 03:
And there is no allegation that those payments were rejected.

[01:44:32] Speaker 03:
There's no allegation that those payments breached some obligation.

[01:44:35] Speaker 03:
There's no allegation that Patronio had to invoke some formality of notice or termination.

[01:44:44] Speaker 03:
of the existing agreements that gave it the absolute discretion.

[01:44:46] Speaker 03:
In fact, what they've alleged is that Petrolio exercised the absolute discretion that it had.

[01:44:50] Speaker 01:
Is it a matter that our case talks about a place of performance rather than the place of performance?

[01:44:55] Speaker 03:
I think, Your Honor, that when you look at the cases, I don't think it makes any difference.

[01:44:58] Speaker 03:
So for example, the case that addresses that, I think, would be Goodman, because in that case, there were payments that were made from the U.S.

[01:45:07] Speaker 03:
accounts.

[01:45:08] Speaker 03:
Those payments could have been made from U.S.

[01:45:10] Speaker 03:
accounts.

[01:45:10] Speaker 03:
They weren't required to be made, and in fact, were not made, and the court rejected that there was a direct effect.

[01:45:15] Speaker 03:
So I don't think that there is any difference in that article.

[01:45:19] Speaker 03:
And finally, there are these arguments about

[01:45:22] Speaker 03:
that it was the expectation of the parties because of the Bolivarian currency and the risk and no one would do any business with these folks if that's what the contract said.

[01:45:33] Speaker 03:
Well, that is what the contract said.

[01:45:36] Speaker 03:
They did choose to do business.

[01:45:38] Speaker 03:
uh... in venezuela with that provision and if there was a currency risk which by the way in 2007-2008 when the contracts were entered into is not the same state of affairs as today but if there was a currency risk they took it on contractually they can't come here now and say the expectation of the parties was different that all actually all the payments would be made in dollars because the economics would have made it untenable to continue that way we never would have done business with them if that was the case they did do business with us that was what they agreed to

[01:46:07] Speaker 01:
We'll take the matter under submission.

[01:46:10] Speaker 01:
We'll take a brief break.