[00:00:06] Speaker 00:
national drilling code, and Hemric and Payne D. Venezuela, C.A.

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versus Bolivarian Republic of Venezuela, Petrolios D. Venezuela, S.A.

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and P.V.S.A.

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Petrolio S.A.

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Appellants.

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Ms.

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Sesson for the Appellants, Ms.

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Carroll for the Appellees.

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Good morning, Your Honors.

[00:00:25] Speaker 02:
May it please the Court?

[00:00:26] Speaker 02:
My name is Kate Stetson.

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I represent the defendants, the Republic of Venezuela, and the Petrolios entities.

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We are here on remand in this FSIA appeal, and we are the appellants as to the expropriation claims brought by the parent company, which is H&P IDC.

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So as to those,

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I think there are two governing principles, perhaps, to start.

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One of them is the Supreme Court's instruction that a court may take jurisdiction over an expropriation claim only if it finds that the plaintiff has made out a legally valid claim that there are certain rights at issue, namely rights and property,

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and that those rights were taken in a certain way, namely taken in violation of international law.

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That's what the court said repeatedly throughout its decision.

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That's point one.

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Point two is everyone now agrees also that for HNPIDC, the parent to state an expropriation claim, it has to show that its direct rights are at issue.

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not issued not not claims that it's subsidiary could press those rights have to be independent of HMP Venezuela's claims.

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So as to those direct rights HMP IDC now identifies to the first is

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It claims it has a right, and I'm quoting here, to beneficial ownership and control in the assets of H&PV.

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That's its first direct right, and that's pages 27 to 29 of its first brief.

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The second direct right is that it has a right to the economically productive use of its shares in H&PV.

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The first right is not remediable under the FSIA because the assets of H&P v were not taken in violation of international law.

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The second right is not remediable under the act because, as counsel for H&P conceded in the first oral argument, its shares were not taken.

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So under either of those direct rights, H&P IDC has no expropriation claim.

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The question about expropriation as to HMPV falls under the domestic takings rule.

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And that rule, of course, is the rule.

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Can we stick to the parent just for a second?

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So what do you say about the restatement?

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I know it's in the brief, but I want to talk a little bit more about the restatement second.

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And that'd be section 192.

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Conduct attributable to a state that is intended to and does effectively deprive an alien of substantially all of the benefits of his interest in property constitutes a taking of the property.

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What about that?

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So that's section 192 of the second restatement, which of course is 1965, superseded by the third restatement.

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And to our knowledge, 192 since the third restatement issued has never been cited by a court.

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In fact, the second restatement's provisions are cited these days only very rarely, included by this court in Simon, and largely for historical propositions.

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And what about the statements in the third?

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restatement cited by your opponents saying that we didn't mean to make any changes between the second and the third.

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Well, I think the preface to the third restatement suggests otherwise.

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It suggests that there have been wholesale revisions to international law.

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between 1965 and the late 1980s and of course those revisions include among other things the Barcelona Traction case from 1970 and they were succeeded by among other things the Diallo case from 2007 and 2010 both of which came

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out of the International Court of Justice, and both of which I think bear on both parties' claims here.

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So with respect to the second restatement, we would suggest that there is very little left of it at all, and what is left of it appears only to be of historical significance, not current significance.

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Okay.

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And then with respect to Section 712 of the third

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which was after Barcelona, comments G.

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Yes.

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So with respect to Section 12 to begin with, I think.

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712.

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712.

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Your Honor, I think made this point at the first argument.

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The black letter law of Section 712 makes it very clear that when they talk in terms of a taking of an alien's property, you are talking about the taking of a property of a national of another state.

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So with respect to comment G,

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All of the work that those comments do has to be read in light of that particular black letter restatement provision.

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There is nothing inserted in one of these comments that is going to expand the principles of international law that are otherwise applicable here.

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There's nothing in comment G that gives HNPIDC the parent any greater right

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in its subsidiary than international law gives it, and it cannot claim as to its, for example, its productive use of shares, that it has any right that international law conveys to it.

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You'll notice in HNP-IDC's brief in its discussion, it relies very, very heavily on bilateral investment treaties or BITS.

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The reason that HNP relies on the BITS is because

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those treaties give parent companies and shareholders different rights.

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They give them... Can I hold for a second before we get... I understand that argument.

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I'm just focusing a little more on G. So the alien clearly has a right in his shares, right?

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There's no doubt about that.

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The shares are the property of the alien.

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Yes.

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So the question is whether G, which says

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Other action that is confiscatory or that prevents unreasonable interference or unduly delays effective enjoyment of aliens' property.

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So if you totally eliminate the value of the shares by taking the underlying asset, why isn't that covered by G?

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But that is exactly what Barcelona Attraction and Diallo say.

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You cannot ascribe that interest to the shareholder.

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Diallo says this.

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Are you saying that Diallo is inconsistent with the third restatement?

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I'm saying that Diallo and Barcelona Attraction are both consistent with the third restatement to the extent that the third restatement speaks in terms of confiscation of the alien's property.

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It does not speak in terms of the confiscation of or the impact on an interest that a shareholder has in another's property.

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It talks about the effect of enjoyment of an alien's property.

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Yes, but again, that is exactly what Barcellon Attraction and Diallo talk about.

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Diallo and the plaintiff in Barcellon Attraction both made out very strong cases for the fact that their enjoyment of their property or their shares had been completely undone by the actions of the defendant's state in those circumstances.

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And what both of them said is

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The impact on an interest is not enough.

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You have to show that there is a right affected.

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The Supreme – the United States said the same thing in its briefing here.

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You cannot show simply that there is an impact to an interest.

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You have to show that there is a right.

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And nothing in that restatement or in comment G gives HNPIDC, the parent, a right in its subsidiary's assets or its shares.

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not quite completely there, and I can't tell whether it's intentional or not intentional, probably intentional.

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It says, rights generally are not implicated by state action that depreciates the value of the corporation shares even severely.

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But it doesn't say even totally.

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That would come completely to your position, right?

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It would have to say totally.

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No, I think, again, I would refer back to Diallo and Barcelona Attraction.

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Diallo and Barcelona Attraction both talk in terms of rendering an entity practically defunct, virtually bankrupt.

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Here, of course, you still have the entity.

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And that's the point that the Barcelona Traction Court made.

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And it's also the point that the U.S.

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has made in some of its other submissions, including Thunderbird and GAMI investments.

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As long as that entity remains,

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That entity has a right of course to press its own claims and in fact H&PV, which is here as a plaintiff, is continuing and has pressed its claims in arbitrations against other entities and has assets in the bank as a result of that.

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It is only when the entire company is taken

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And each of you on the panel acknowledged at the last argument that the entire company has not been taken here.

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And Mr. Ogden, who was arguing for H&P at that time, acknowledged that the shares of the company were not taken.

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So in your view, all the assets can be taken though, is that right?

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the assets can be taken and the company can still remain extant.

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As long as it's a corporate shell, it's sufficient.

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I don't mean shell in a derogatory way, just as long as the legal entity remains.

[00:10:13] Speaker 02:
Yes, that's exactly right, because the entity can still press its claims.

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Now, what the United States has said, not just in this brief, but in other submissions, is this is what the US has called a common situation without a remedy.

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where a shareholder in a company has the company's assets taken by a state, for example, that doesn't have a bilateral treaty with the shareholder state.

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And in those circumstances, there is no remedy available under international law for that shareholder.

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That's exactly why the bilateral investment treaties exist.

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and it's why NAFTA section 1110 and 1117 exist, because those are the provisions that locate that kind of right, an indirect right that a shareholder in a company might otherwise have.

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That's not what Diallo says.

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Diallo says that, in Diallo the court said that

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Diallo said there could be a remedy in a situation where, in a situation where there's a violation, I'm just reading, a violation by the respondent state of their direct rights, that's apparent.

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Direct rights that are defined by the domestic law of that state.

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They said that would be a violation of international law.

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Yes, and I think that comports Judge Tatel with one of the points that I led off with, which is that to the extent that HNPV or HNPIDC is asserting its direct rights, those again, according to IDC's own description, fall into two categories.

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One of them is rights in HNPV's assets.

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Yeah.

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But as to those, if the assets... But what about the other, namely the right to... Right.

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...its residual rights to manage the corporation?

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Which they claim are protected by the commercial code.

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No, I think the second right that they claim is that right to productive use and enjoyment of the shares.

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But that is exactly what Diallo says you can't press because that's not considered to be a direct claim.

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The right to productive use and enjoyment of shares is protected in many ways by many bits

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It is not protected under international law.

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And that, I think, is the impediment to HMPIDC's second direct claim.

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I thought the direct right they were claiming was a direct right described in Barcelona Attraction, namely the residual right of the parent to participate in the major activities, dissolution, sale, change of goals of the subsidiary.

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Yes, but those are rights, Judge Tatel, that are always associated with the ownership of the shares.

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That doesn't confer in HMPIDC, the parent corporation, any rights in HMPV's assets.

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is voting one of the kind of package of rights that comes along with ownership of the shares.

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And again, everybody has conceded that the shares were not taken here.

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Was the company reduced in value, significantly reduced in value?

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But it can't control, it can't use its shares, it can't exercise its right under its shares to influence the operation of the subsidiary now that it's completely under the control of the Venezuelan government.

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Judge Taito, I think to the extent that HMP IDC is arguing that as a practical matter, it was able to control its subsidiary or influence its operations generally, of course, that's not something that's available to them to claim as a direct right either.

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And again, to the extent that they are arguing about how they can use their shares,

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They still hold their shares.

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They can still manage that property which is their shares.

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The company has been reduced in value significantly.

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We acknowledge that.

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The problem is that there's no link between that reduction in value and

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what HMPIDC can claim as its direct right and property, the mere reduction of value, even to the point where the subsidiary is virtually bankrupt, practically defunct, only a shell.

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So then what are the direct rights of the shareholder that Barcelona Traction was talking about?

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The direct rights in the shareholder have to do with, in part, what Your Honor was saying a minute ago, which is the rights that the shareholder has to vote at shares, to receive dividends, to receive payments, to vote on the dissolution of assets.

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And, of course, the assets here, title, in fact, still remains in H&P v.

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the title still remains to those rigs in HMPV.

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Explain to me once more, their argument is yes, the company, the subsidiary still owns the assets, but the shareholders have been deprived of their direct rights as described by Barcelona Traction.

[00:15:18] Speaker 05:
That's their argument.

[00:15:20] Speaker 05:
I still don't understand why

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Because I think they are in error to say that they were deprived of their direct rights.

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There was no deprivation.

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That was the distinction that this court recognized during the argument in 2015, that there is a difference.

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And this is the distinction, by the way, between this case and the Ninth Circuit's decision in Siderman de Blake.

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There is a difference between taking a company

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and taking its shares versus taking a company's assets, even all of the company's assets.

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And it is only when your shares have been impacted that your direct rights and property have been implicated.

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Because the shares concededly were not taken, the... In what case, what's the best case you have for that proposition?

[00:16:10] Speaker 02:
I think the best case is Barcelona Attraction itself.

[00:16:13] Speaker 05:
I think the only debate perhaps that we're having is whether... Well, but in Barcelona Attraction, the cause of action was on behalf of the subsidiary.

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The court made it very clear that it was not considering an argument about the infringement of direct rights.

[00:16:33] Speaker 02:
That is correct, but then the court in Diallo, both Diallos, 2007 and 2010, extended or used the baseline for that opinion in its own judgment, which was, of course, an individual bringing the claim against a state.

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Right, but in Diallo there wasn't even an expropriation.

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The owner had simply been expelled from the company and the court didn't rule against him until it found, as a matter of fact, that he still could control the company.

[00:17:05] Speaker 05:
It made it more difficult from abroad, but he could still control the company.

[00:17:09] Speaker 05:
So in neither of those cases do you have a situation like we have here.

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There was, in fact, I think, at least an expropriation in Diallo in the form of seizing a judgment to which Diallo said he otherwise was entitled.

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But you are correct.

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Diallo involved in expulsion of a person from the DRC, which Diallo maintained made it virtually impossible for him to run his company, and the ICJ said that that wasn't sufficient.

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I think that the bottom line here is that it's not just Diallo 1 or Diallo 2 or Barcelona Attraction or the distinction between Siderman to Blake.

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This is also the United States' consistent position that unless a shareholder can show that its shares

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have been impacted, have been seized or taken, then those direct rights are not viewed as having been impacted.

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That's what the U.S.

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said in this brief.

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That's what the U.S.

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said in the GAMI investments in Thunderbird.

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What's the point of a rule like that if the shares are worth nothing?

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What's the point of saying if you take the shares, it's a violation, but if you reduce the shares to zero, it's not?

[00:18:21] Speaker 02:
I would say that it has something to do with locating who holds the property and where the entity that is a subsidiary still exists, where the company hasn't been taken, where the shares haven't been taken.

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That entity, as here,

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can still press its own claims.

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corporations that own the corporate share.

[00:19:01] Speaker 02:
That's correct.

[00:19:02] Speaker 02:
And actually, Judge Santel, part one of your sentence is Article 201 of the Venezuelan Commercial Code, and part two is Article 208.

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So those are the same principles that are in play here if you look to Venezuela law as the source.

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And one more thing about source of law, the restatement, God bless it, no matter how respected it is, is not a source of law.

[00:19:23] Speaker 04:
It's mostly a very learned treatise by a whole lot of people, but it's not a source of law.

[00:19:28] Speaker 02:
It is, by its title, a restatement, not a source of law.

[00:19:32] Speaker 02:
That's correct.

[00:19:33] Speaker 03:
So there's a reference to this in your opponent's brief about corporation law requiring shareholder in general, citing Fletcher, maybe citing Delaware law, that U.S.

[00:19:53] Speaker 03:
corporation law requires shareholder consent for the sale or transfer of all or substantially all of the sub-assets.

[00:20:01] Speaker 03:
So if that were Venezuelan corporate law, would that be a direct right?

[00:20:08] Speaker 02:
I think, again, the answer is no.

[00:20:11] Speaker 02:
And acknowledging that we are sort of interpolating from Fletcher to Venezuelan law to the question whether it's a direct right.

[00:20:20] Speaker 03:
I'm using this as hypothetical.

[00:20:22] Speaker 03:
Assume that on the list of, I take it you agree that the things in 280

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are direct rights prefaced by the requirement of a vote, right?

[00:20:32] Speaker 03:
Do you think, is Article 280 not a set of direct rights?

[00:20:37] Speaker 02:
Article 280 describes certain voting rights, that's right.

[00:20:42] Speaker 02:
But those rights, again, rest with the shares.

[00:20:45] Speaker 02:
They're not associated with the property itself.

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And for HMP IDC to make out a claim that it has direct rights in HMP V's property,

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It needs to show something different than that it has rights and it shares.

[00:21:00] Speaker 02:
So Article 280, I don't think does any work in that regard at all.

[00:21:04] Speaker 02:
All Article 280 does is, in some respects at least, embody the Fletcher point, which is that a shareholder has certain voting rights when it comes to

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major aspects of the corporation, dissolution, merger, and so forth.

[00:21:18] Speaker 02:
But again, to show that those rights have been impacted, you need to show that that property was taken, not just that the interest has been even severely affected.

[00:21:27] Speaker 03:
That is... Well, in Barcelona and the Isle, they talk about direct, certain direct rights, right?

[00:21:32] Speaker 03:
And one is the right to vote.

[00:21:35] Speaker 03:
Isn't that... That is one of the... What's the other one?

[00:21:38] Speaker 03:
They have examples.

[00:21:40] Speaker 02:
They have the right to vote.

[00:21:42] Speaker 02:
I think they talk about dividends.

[00:21:44] Speaker 03:
That's right, to receive the dividends, the residuals after the dissolution.

[00:21:48] Speaker 03:
Yes.

[00:21:48] Speaker 03:
Right?

[00:21:49] Speaker 03:
Yes.

[00:21:49] Speaker 03:
OK.

[00:21:52] Speaker 03:
So if they were actually deprived of their right to vote on transfer, assuming one of the items is transfer of all or substantially all the assets of the company,

[00:22:08] Speaker 03:
You're saying that being deprived of the right to vote somehow means not counting your vote or stopping you from going to the meeting or something like that, rather than effectively taking away your right to vote by just not paying attention to it.

[00:22:27] Speaker 02:
I think if I understand your question, the answer is yes.

[00:22:30] Speaker 02:
But I want to make sure that we're using Article 280, I think, maybe for two different purposes.

[00:22:35] Speaker 02:
HNPIDC invokes Article 280 as giving it a source of rights in HNPV's assets, directly.

[00:22:43] Speaker 02:
And that, I think, can be used most effectively.

[00:22:45] Speaker 05:
No, I don't think so.

[00:22:46] Speaker 05:
Not in its assets, in its management, in its decision-making.

[00:22:51] Speaker 02:
Yes, but that is the productive use and control in H&PV's assets.

[00:22:56] Speaker 02:
That's how they framed that particular right.

[00:22:58] Speaker 02:
And that is not a direct right because H&PV's assets were not taken in violation of international law.

[00:23:05] Speaker 02:
So it doesn't matter where we look to find a direct right as to those assets.

[00:23:10] Speaker 02:
The separate question then is, Chief Judge Garland, your question about the rights in the shares.

[00:23:17] Speaker 02:
And I think the answer has to be yes.

[00:23:19] Speaker 02:
If you can still vote, even if

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the assets have been seized, if you can still vote your shares, you still have your shares, that property is still yours, they were not taken.

[00:23:31] Speaker 03:
So what I'm asking is, in the list of direct rights, which Barcelona gives as an example of direct rights, and in the list of direct rights that the United States gives with respect to direct rights,

[00:23:55] Speaker 03:
Is it not possible to conceive of – I'm not saying what Venezuela's are.

[00:23:59] Speaker 03:
I assume your position is it doesn't cover.

[00:24:02] Speaker 03:
But if one of the direct rights is a right to consent to the transfer of all or substantially all of the assets – let's say that's the way it's written.

[00:24:16] Speaker 03:
Imagine it's in Delaware and they adopt Delaware's code and Delaware's corporate code says shareholders have the right to consent to the transfer of all or substantially all the assets, which I think is the way these things are generally worked.

[00:24:34] Speaker 03:
And instead the assets are transferred without their consent, which is what happened here.

[00:24:40] Speaker 03:
Is that a violation of direct rights?

[00:24:43] Speaker 03:
And if not, why not?

[00:24:44] Speaker 02:
I think first, the assets were not transferred.

[00:24:49] Speaker 02:
They were expropriated.

[00:24:51] Speaker 02:
And that, I think, puts it into a different category altogether.

[00:24:55] Speaker 04:
There would never be a right to speak against the appropriation unless it was your property.

[00:25:02] Speaker 04:
Correct.

[00:25:03] Speaker 04:
That's where we are on this whole thing is it was not their property which was expropriated.

[00:25:08] Speaker 04:
It was the corporation's, not the property of the shareholder.

[00:25:12] Speaker 02:
That's correct.

[00:25:13] Speaker 02:
So the fact that the assets again were taken means that if HMPV had been a foreign national, it would have an expropriation claim because as everyone including the parent company here concedes,

[00:25:28] Speaker 02:
those were its assets.

[00:25:30] Speaker 03:
So is the problem in my hypothetical use of the passive voice, when I say word transfer, is your understanding then of that kind of corporate law that the corporation can't transfer without the approval of the shareholders, but the corporation didn't do the transferring here, it was

[00:25:48] Speaker 03:
stolen, taken away from them, et cetera.

[00:25:52] Speaker 03:
Is that the difference?

[00:25:53] Speaker 02:
That's correct, yes.

[00:25:55] Speaker 02:
That is the distinction, because the corporation was not the one committing the act.

[00:26:00] Speaker 02:
But more to the point, each of these

[00:26:03] Speaker 02:
examples and hypotheticals, in order to give HMPIDC a claim for taking in violation of international law has to be shown to be a concept that is recognized in international law, not just through a bilateral investment treaty, not just through hypotheticals, but actually generally recognized and accepted and followed by the majority of states.

[00:26:30] Speaker 03:
I thought the government's, the United States' position

[00:26:33] Speaker 03:
and also the International Court of Justice position is if the domestic law of the country, Venezuela, gives a direct right

[00:26:45] Speaker 03:
and that direct right is taken, that's a violation of international law.

[00:26:50] Speaker 02:
Is that right?

[00:26:51] Speaker 02:
No, it's not.

[00:26:53] Speaker 02:
And that's why I began with the Supreme Court's recitation.

[00:26:58] Speaker 02:
Because interestingly, when the government, in its brief, I think it's page 11, talks about that, that is the way the government phrases it.

[00:27:06] Speaker 02:
If you have a right and it's taken, you may have a claim.

[00:27:09] Speaker 02:
That is not the way the Supreme Court repeatedly phrased it in its decision.

[00:27:14] Speaker 02:
Pages 1316, 1319, 1324 of its ruling, every single time it says, you have to establish that the property, the relevant property, was taken in violation of international law.

[00:27:27] Speaker 02:
You ask two questions.

[00:27:29] Speaker 02:
Is there a right in property?

[00:27:31] Speaker 02:
a certain kind of right, was it taken in violation, was the property taken in violation of national law?

[00:27:37] Speaker 03:
I take the point.

[00:27:39] Speaker 03:
I thought that the latter refers to all the elements of an international taking that's national law violation taking, namely without compensation, et cetera, et cetera.

[00:27:53] Speaker 03:
So, but if you have property recognized by the state and it is taken

[00:28:00] Speaker 03:
And then, for that purpose, you list the things that are listed in the further statement.

[00:28:05] Speaker 03:
That's a taking and violation of international law, right?

[00:28:08] Speaker 03:
There aren't some kinds of property given by us, in which you have a right, by domestic law, which can be taken and not violate international law.

[00:28:20] Speaker 02:
If I understand your question, I think the answer is,

[00:28:24] Speaker 02:
Yes.

[00:28:25] Speaker 02:
We're not, I think, here debating, and I don't take HMP IDC to be debating about what the nature of the property is.

[00:28:34] Speaker 02:
The only thing that we are debating is when it claims direct rights in either HMPV's assets

[00:28:40] Speaker 02:
or the rights that attach to its shares were either those assets, HMPVs, or HMPIDC shares taken in violation of international law?

[00:28:51] Speaker 02:
The answer on the first one is no, because the domestic takings rule.

[00:28:55] Speaker 02:
The answer on the second one is no, because the shares weren't taken.

[00:28:58] Speaker 03:
If the shares were taken, that would be a violation?

[00:29:01] Speaker 02:
It would, yes.

[00:29:03] Speaker 02:
But that's exactly what Mr. Ogden conceded in the first argument.

[00:29:06] Speaker 03:
And if they weren't able to vote?

[00:29:08] Speaker 03:
if the right to vote was taken away.

[00:29:11] Speaker 03:
In Diallo's case, it was said he could still vote by appointing a proxy or something else.

[00:29:16] Speaker 03:
What if he were not allowed, what if he were held incommunicado for the rest of his life and could not vote?

[00:29:22] Speaker 03:
Would that not be a violation?

[00:29:23] Speaker 03:
Not forgetting about the arrest burden?

[00:29:25] Speaker 02:
If he was somehow physically precluded from casting a vote, maybe that would be a different case.

[00:29:31] Speaker 02:
But here, the shareholders, the shareholder in this case can still vote its share.

[00:29:36] Speaker 02:
The problem is that the assets that the company has have been substantially diluted, not extinguished, by the way.

[00:29:44] Speaker 02:
As I said, it still has assets in the bank.

[00:29:46] Speaker 03:
What if Venezuela barred the subsidiary from litigating?

[00:29:51] Speaker 02:
If Venezuela barred the subsidiary from litigating?

[00:29:55] Speaker 03:
Yeah.

[00:29:57] Speaker 03:
It's not a complete hypothetical.

[00:29:58] Speaker 03:
There's another case we've had which involved arbitration, which this country did bar the company from litigating.

[00:30:06] Speaker 03:
In fact, it said if you litigate, we will arrest you.

[00:30:11] Speaker 02:
I don't know that there is any provision made in either the ICJ cases, of which I'm familiar, or by the United States and any of its submissions that suggest that if a company still exists but somehow can't litigate itself, then those rights devolve onto the parent company.

[00:30:30] Speaker 03:
I thought you were saying that one of the reasons why their rights weren't taken here is that the company, even though a shell, can still assert its rights.

[00:30:38] Speaker 03:
I'm asking what happens if they can't disservice.

[00:30:40] Speaker 02:
Well, that's not a reason why the shares weren't taken.

[00:30:45] Speaker 02:
It's a demonstration that the shares weren't taken because the subsidiary company is still here and able to press it.

[00:30:54] Speaker 03:
So you really associate nothing with it, right?

[00:30:56] Speaker 03:
That point doesn't matter to you.

[00:30:58] Speaker 03:
Whether they can or can't litigate doesn't matter.

[00:31:01] Speaker 02:
No, I think the only way I think I'm able to answer that hypothetical is with what I know as to this case, which is there is no principle of which I'm familiar that says that where the company's subsidiary still exists,

[00:31:15] Speaker 02:
but is somehow barred from litigating that, at that point, all of its rights devolve onto the company.

[00:31:21] Speaker 02:
In fact, everything that we have in front of us here, I think, including the U.S.'

[00:31:25] Speaker 02:
's submission, talks about the direct rights of a company as being necessarily independent from those that the subsidiary can bring.

[00:31:33] Speaker 02:
That's both in H&P's own brief and in the government's brief, that those rights have to be independently sourced.

[00:31:41] Speaker 03:
still have the ability to litigate actually doesn't matter, right, from your point of view.

[00:31:46] Speaker 03:
It doesn't matter whether they do or they don't.

[00:31:48] Speaker 02:
No, I think the reason I mentioned it was simply to demonstrate that the company was still extant.

[00:31:56] Speaker 02:
The company is still extant whether or not it elected to litigate.

[00:32:00] Speaker 02:
Here, in fact, it is litigating, but it doesn't, again, supply the reason why the share still exists.

[00:32:07] Speaker 02:
It explains that the shares still exist.

[00:32:12] Speaker 05:
Suppose instead of the facts of this case, the involuntary seizing of the supposed subsidiary had completely on its own transferred the oil rigs to a third party in Venezuela without seeking the approval of the parent.

[00:32:37] Speaker 05:
Could the parent sue under Venezuela law, the parent of the subsidiary?

[00:32:42] Speaker 02:
I think that touches much more closely on Judge Santel's comment earlier, that when you have the circumstance where it is the subsidiary itself committing an action that goes against the shareholders' rights, the shareholder presumably has a claim against the subsidiary.

[00:32:59] Speaker 02:
But here, of course, it was not the subsidiary's choice.

[00:33:02] Speaker 02:
for those assets to be taken.

[00:33:05] Speaker 02:
It was an expropriation decree.

[00:33:07] Speaker 05:
But whatever the reason, doesn't it mean that there are some residual rights in the parent if it can sue the subsidiary?

[00:33:14] Speaker 02:
There are, there are, there is no such thing.

[00:33:16] Speaker 05:
Some residual direct rights.

[00:33:18] Speaker 05:
Sorry?

[00:33:19] Speaker 05:
A direct right that the parent has in the corporation.

[00:33:23] Speaker 02:
So there are no residual rights.

[00:33:27] Speaker 02:
I mean, direct rights.

[00:33:28] Speaker 02:
There is a direct right.

[00:33:28] Speaker 02:
That's what I meant, direct right.

[00:33:30] Speaker 02:
There is a direct right, but that right inheres in the shares, the ownership of the shares.

[00:33:35] Speaker 02:
And unless the shares have been taken, those direct rights still exist.

[00:33:39] Speaker 05:
Well, but in the hypothetical I gave you, they still have their shares.

[00:33:42] Speaker 05:
Yes.

[00:33:42] Speaker 05:
Parents still have the shares, but as you said, they could, under Venezuela law, sue the subsidiary for transferring the assets.

[00:33:51] Speaker 02:
I'm assuming that they could sue the subsidiary for transferring assets, yes.

[00:33:56] Speaker 02:
But that is because it is

[00:34:00] Speaker 02:
exercising a right that it has under that shareholder agreement.

[00:34:05] Speaker 02:
It would have no implications for international law, certainly, and it doesn't have any bearing on whether these direct rights are held as to the shares, because the shares were not expropriated.

[00:34:20] Speaker 05:
Just one last question.

[00:34:21] Speaker 05:
What's the, goes beyond the record here, but what's the status of the

[00:34:28] Speaker 05:
What's the status of the eminent domain proceedings in Venezuela?

[00:34:33] Speaker 02:
They are still ongoing.

[00:34:35] Speaker 02:
Venezuela, as you know, is in dire straits.

[00:34:41] Speaker 02:
So I don't think that the litigation is progressing.

[00:34:43] Speaker 02:
But it is still a pending case in Venezuela.

[00:34:48] Speaker 02:
If there are no further questions at this time.

[00:34:51] Speaker 06:
Thank you.

[00:35:04] Speaker 01:
Good morning and may it please the court.

[00:35:06] Speaker 01:
My name is Catherine Carroll.

[00:35:07] Speaker 01:
I represent the Helmer and Payne plaintiffs.

[00:35:09] Speaker 01:
I would like to try to address the claims of both plaintiffs, but I'll begin where the discussion has focused this morning on the claims of the U.S.

[00:35:17] Speaker 01:
parents and sole shareholder, which is H&P IDC.

[00:35:21] Speaker 01:
As to H&P IDC, the court should again affirm the district court's decision because H&P IDC suffered a taking of its own rights and property in violation of international law.

[00:35:32] Speaker 04:
What part of it?

[00:35:34] Speaker 04:
Say that again, I'm sorry.

[00:35:36] Speaker 01:
I said that, excuse me, the court should again affirm the district court's decision as to IDC because the U.S.

[00:35:43] Speaker 01:
parent suffered a taking of its own rights and property

[00:35:46] Speaker 01:
in violation of international law.

[00:35:48] Speaker 04:
Before the taking... What were its own rights in property that it suffered in taking off?

[00:35:53] Speaker 01:
A couple of categories, and I think Ms.

[00:35:55] Speaker 01:
Stetson understood our position accurately, and that it is, number one, undisputed that HMPIDC, as the 100% shareholder, has its shares in the subsidiary.

[00:36:07] Speaker 04:
But its shares were not taken, were they?

[00:36:09] Speaker 01:
We would submit that, as a matter of international law,

[00:36:13] Speaker 01:
even where the formal legal title hasn't been taken.

[00:36:19] Speaker 01:
In the sense of stockholder certificates that somebody could hang on their wall?

[00:36:24] Speaker 01:
No, they weren't taken.

[00:36:25] Speaker 04:
Don't they still have the same share in the corporation?

[00:36:29] Speaker 04:
The Venezuelan corporation that they had before.

[00:36:31] Speaker 04:
International law recognizes... Don't they still have the same share in the Venezuelan corporation?

[00:36:37] Speaker 01:
Your Honor, with respect, they do not.

[00:36:39] Speaker 01:
They own legal title formally to their shares.

[00:36:42] Speaker 04:
That's the way of saying they have the same share in the corporation they had before, isn't it?

[00:36:46] Speaker 04:
Yes, they own their same shares, but international law makes... That may not be worth much, but lots of corporate shares are not worth much.

[00:36:53] Speaker 01:
Your Honor, international law makes crystal clear

[00:36:57] Speaker 01:
that even where an owner has not been deprived of nominal formal legal ownership of shares, when that property has been completely destroyed in value and when the beneficial ownership and control of the investment

[00:37:12] Speaker 01:
has been entirely destroyed, that is a taking.

[00:37:15] Speaker 01:
And I'd like to point to a few sources of law.

[00:37:17] Speaker 04:
What is your best source of law?

[00:37:20] Speaker 01:
I have several, Your Honor.

[00:37:21] Speaker 04:
Whoa, whoa, whoa, wait a minute.

[00:37:23] Speaker 04:
Excuse me.

[00:37:23] Speaker 04:
There's a little lesson you need to learn.

[00:37:25] Speaker 01:
Excuse me.

[00:37:25] Speaker 04:
You listen to the court after the question before you start talking.

[00:37:28] Speaker 04:
What is your best source for the clear statement, crystal clear statement, that the taking of the property of a subsidiary is a taking of the property of the corporate parent?

[00:37:44] Speaker 04:
You're telling me that's really clear in international law?

[00:37:46] Speaker 01:
I just want to be very clear about what we think the role is in international law.

[00:37:50] Speaker 04:
I want to be very clear about what your source is for the statement that's very clear in international law.

[00:37:54] Speaker 01:
International law in the form of, and I would like to touch on, arbitral decisions, the investment treaties, which we will show actually reflect and codify customary... Give me the best one.

[00:38:04] Speaker 04:
Give me the best one.

[00:38:06] Speaker 04:
What's the best source for that being a crystal clear statement of international law?

[00:38:11] Speaker 01:
The restatement provisions that Chief Judge Garland relied on.

[00:38:13] Speaker 04:
The restatement is not a source of law.

[00:38:15] Speaker 04:
The restatement is a treatise.

[00:38:17] Speaker 01:
That is true.

[00:38:18] Speaker 01:
It restates well-understood international law.

[00:38:21] Speaker 01:
The next set of things that I would point to are international arbitral decisions.

[00:38:26] Speaker 01:
And I have a couple that I think are extremely helpful in analyzing this case.

[00:38:31] Speaker 04:
But before I discuss the facts of them, I'd like to- You're taking a long, long time getting to what they are.

[00:38:36] Speaker 04:
What is it?

[00:38:37] Speaker 04:
Give me a citation.

[00:38:38] Speaker 01:
The Tidewater case, the Pope and Talbot case, the United States position in the LC arbitration, and the other bits that are cited in the briefs, for example, the US model bit, the US Honduras bit, and a report that I'll get to from the UN Commission on Trade and Development.

[00:38:55] Speaker 01:
But if I could walk through those, because I think it would help to illustrate why the principle that we rely on is so clearly established.

[00:39:05] Speaker 01:
and is correctly restated in the restatement.

[00:39:09] Speaker 01:
First of all, this suggestion that the bilateral investment treaties somehow derogate from or supplement customary international law is demonstrably incorrect.

[00:39:19] Speaker 01:
And to see this, I would point your honors to a couple of the examples that are cited in the briefs.

[00:39:25] Speaker 01:
First of all, the United States model bit from 2012, which both parties rely on,

[00:39:31] Speaker 01:
includes on Article 6 the proposition that both direct and indirect expropriations are a violation of international law, where an indirect expropriation is understood as one equivalent to direct expropriation, even without transfer of title.

[00:39:47] Speaker 01:
Annex B to that model bit states that the parties confirm their shared understanding that

[00:39:54] Speaker 01:
Article 6, quote, reflects customary international law.

[00:39:58] Speaker 01:
The same recognition appears in the U.S.

[00:40:00] Speaker 01:
Honduras bit that the defendants cite in their brief.

[00:40:04] Speaker 01:
In the transmittal letter when the State Department sent that draft bit to the Senate, the State Department letter explained that the provision prohibiting either direct or indirect expropriation by measures tantamount to expropriation

[00:40:20] Speaker 01:
quote, incorporates into the treaty customary international law standard for expropriation, including direct and indirect.

[00:40:29] Speaker 01:
The United States took exactly that position in its submission to the tribunal in Elsie, which was a case where the United States was bringing a claim on behalf of Bernice that owned an Italian subsidiary.

[00:40:43] Speaker 01:
And the United States position there was, quote,

[00:40:47] Speaker 01:
Direct or indirect takings reflect international law principle, the customary international law principle, that a taking includes unreasonable interference with the use, enjoyment, or disposal of property.

[00:41:00] Speaker 01:
For example, the United States said, it is recognized in international law that measures are a taking when property rights are rendered so useless

[00:41:10] Speaker 01:
that they must be deemed to have been expropriated even though the state does not purport to have expropriated them and the legal title formally remains with the owner.

[00:41:19] Speaker 04:
Is the position you're advancing now consistent with the United States filing in this case?

[00:41:24] Speaker 01:
It's completely consistent, Your Honor, because the United States recognizes that where there has been a direct – a taking of the direct rights, including a taking of the shares,

[00:41:34] Speaker 01:
That can be the basis of a claim and violation of international law.

[00:41:37] Speaker 01:
And what these.

[00:41:38] Speaker 04:
Do you have the United States brief before you there?

[00:41:42] Speaker 01:
I do.

[00:41:46] Speaker 04:
Page 24 at C. Tell me if you're arguing.

[00:41:50] Speaker 01:
I'm sorry.

[00:41:51] Speaker 04:
Look at page 24 and follow me and tell me.

[00:41:54] Speaker 01:
Of the United States brief?

[00:41:55] Speaker 04:
The United States brief, yes.

[00:41:59] Speaker 01:
Page 24.

[00:42:00] Speaker 04:
And maybe I have the wrong brief in front of me.

[00:42:02] Speaker 04:
I'm sorry, counsel.

[00:42:03] Speaker 04:
I've got the wrong brief.

[00:42:07] Speaker 04:
Too many briefs in this case.

[00:42:09] Speaker 01:
Pardon?

[00:42:11] Speaker 01:
Your Honor, I mentioned earlier the Tidewater and Coventalbit international arbitral decisions.

[00:42:18] Speaker 01:
And to start with the Tidewater one, I think it's another good illustration.

[00:42:21] Speaker 03:
I think what Judge Santel is referring to is page 13 of the amicus brief.

[00:42:29] Speaker 03:
Yeah.

[00:42:29] Speaker 04:
Thank you.

[00:42:30] Speaker 04:
Right.

[00:42:30] Speaker 01:
That's where we think we agree with the United States statement of how the analysis of IDC's claim ought to proceed.

[00:42:42] Speaker 01:
And we would note there that the United States recognizes that when the shareholder has suffered a taking of its direct rights, that can be a claim under international law, including when

[00:42:51] Speaker 03:
the shares have been taken, and as these authorities demonstrate... I think the part that he's referring to is... are not implicated by state action that depreciates the value of corporation shares even severely.

[00:43:06] Speaker 01:
Exactly.

[00:43:06] Speaker 01:
That's correct.

[00:43:07] Speaker 01:
We agree that, and the international law sources that I'm relying on recognize that where the value of property has been severely diminished,

[00:43:18] Speaker 01:
That does not amount to an expropriation.

[00:43:21] Speaker 01:
The principle that we are relying on is one where it is not a mere diminishment of value, but in fact, a complete destruction of all economically viable use.

[00:43:30] Speaker 01:
It's akin and somewhat to the line that US law draws.

[00:43:34] Speaker 04:
Is it the case that there is still litigation or arbitration, excuse me, ongoing between the Venezuelan corporation and Venezuelan entities?

[00:43:47] Speaker 01:
There were two eminent domain proceedings commenced in Venezuela by the Peda Vesa defendants.

[00:43:52] Speaker 01:
One of those proceedings has now lapsed, although we still haven't gotten the property back from it.

[00:43:59] Speaker 01:
The other proceeding has been stalled at early stages for several years and there's no, as we've alleged... So it would have pardon to any value, right?

[00:44:07] Speaker 04:
Pardon me?

[00:44:08] Speaker 04:
It would have pardon to any value the right to proceed in that by the Venezuelan corporation.

[00:44:12] Speaker 01:
We do not expect that it would, given the nature of the system down there, and that's why our only real recourse is going to be to come to the courts of the United States.

[00:44:20] Speaker 01:
which, again, relying on the international law principles, we ought to be able to do.

[00:44:27] Speaker 01:
The Tidewater arbitration that we rely on, I think, is very helpful, both because the facts of the case are so similar and because of the tribunal there, again, making clear

[00:44:40] Speaker 01:
that the indirect expropriation standard we rely on and reflected in the treaty underlying that arbitration, quote, reflects a principle that is, quote, well accepted in international law, that expropriations may not involve a taking of legal... You're quoting from what?

[00:44:54] Speaker 01:
I'm sorry?

[00:44:55] Speaker 04:
You said quote, and I'm asking you, you're quoting from what?

[00:44:57] Speaker 01:
Quoting from paragraph 104 of the Tidewater decision in which a Venezuelan subsidiary of a foreign shareholder

[00:45:06] Speaker 01:
had been seized and expropriated by the Peta Vesa defendants.

[00:45:10] Speaker 01:
And the tribunal there recognized that there is an expropriation when measures deprive the investor of the use and benefit of his investment, even though he may retain nominal ownership of the respective rights.

[00:45:24] Speaker 01:
So one other source on this that I'd like to point to, and that is a recent report, I think from 2012, just a general report

[00:45:33] Speaker 01:
written by the United Nations Conference on Trade and Development.

[00:45:38] Speaker 01:
It's a 2012 report just on expropriations generally, and to the extent the Court is looking for further confirmation of the fact that as a matter not just of treaties, but customary international law,

[00:45:52] Speaker 01:
There is a taking, not only when there's a direct expropriation of legal title, but even where formal legal title remains in the owner, where the value of that property has been completely destroyed.

[00:46:07] Speaker 01:
and where the rights of control and management have been completely gutted, as we allege here, that is a taking under international law.

[00:46:15] Speaker 01:
And with respect to the HMPIDC, which is a U.S.

[00:46:18] Speaker 01:
national, that is clearly a taking in violation of international law because there was no provision for adequate prompt and effective compensation.

[00:46:28] Speaker 01:
That's why this court was correct in the prior appeal to find the analogy to the Ramirez decision

[00:46:35] Speaker 01:
especially persuasive.

[00:46:37] Speaker 01:
In Ramirez, the court found it bizarre to posit that the seizure and destruction of a sole shareholder's entire investment was not an injury to the property of the shareholder.

[00:46:52] Speaker 01:
This gets to the point of the shareholder's rights

[00:46:55] Speaker 01:
in the corporate property itself as a sole shareholder, 100% exclusive, beneficial use and control of the property of the corporation.

[00:47:05] Speaker 01:
And this court recognized that shareholders may have rights in corporate property, including the rights of beneficial ownership and control, and that the corporate form of ownership does not deprive the sole beneficial owner

[00:47:18] Speaker 01:
of a property interest.

[00:47:20] Speaker 01:
The court was correct to find that persuasive analogy last time, and it remains persuasive here.

[00:47:25] Speaker 01:
And as we've demonstrated, it is consistent with international law.

[00:47:38] Speaker 05:
The role that the commercial code plays in this, as I understand it, your argument there is that that does provide the shareholder, the sole shareholder, the parent, with a direct right, correct?

[00:47:54] Speaker 05:
That can be recognized under international law.

[00:47:58] Speaker 01:
That's correct.

[00:47:59] Speaker 01:
International law, as Barcelona Traction makes clear, looks to municipal law to determine the direct rights.

[00:48:06] Speaker 01:
That's why in Diallo,

[00:48:08] Speaker 01:
the court went through what were the rights of the shareholder under Congolese law.

[00:48:13] Speaker 01:
Here, looking to Venezuelan law, we think a couple of sources are relevant.

[00:48:17] Speaker 01:
Although it's true that Venezuela recognizes the corporate form, Article 280 identifies certain rights of control, in particular a right of consent or veto over alienation of the assets, which is

[00:48:32] Speaker 01:
a core stick in the bundle of property rights, controlling or negating alienation of assets.

[00:48:38] Speaker 01:
It's clearly a property interest.

[00:48:40] Speaker 05:
What about Ms.

[00:48:41] Speaker 05:
Stetson's argument that that's not implicated here because they still own their shares?

[00:48:46] Speaker 05:
The parent still has its shares.

[00:48:48] Speaker 01:
That's the significance of the international law point that there can be a taking even if you still have nominal legal ownership of shares.

[00:48:58] Speaker 01:
So here there's no question.

[00:49:00] Speaker 05:
Is that supported by all the authorities you went through a few minutes ago?

[00:49:04] Speaker 01:
It is.

[00:49:06] Speaker 01:
The arbitral decisions that we cite, the bit practice that we cite, which again makes polluted that

[00:49:12] Speaker 01:
The principle is a principle of customary international law that is not simply an extra right conferred under the treaties.

[00:49:21] Speaker 01:
Miss Stetson cited some submissions by the United States in a couple of cases.

[00:49:26] Speaker 01:
I think the Thunderbird case was one that she mentioned.

[00:49:28] Speaker 01:
in which the United States discusses certain provisions of NAFTA that we would agree do go beyond customary international law.

[00:49:37] Speaker 01:
But those provisions are very clear.

[00:49:39] Speaker 01:
They are speaking there about a derivative claim that is recognized under NAFTA.

[00:49:46] Speaker 01:
In contrast, those U.S.

[00:49:47] Speaker 01:
submissions recognize that the separate section of NAFTA allowing a direct claim by the shareholder for taking of its own rights

[00:49:57] Speaker 01:
does reflect international law.

[00:49:59] Speaker 01:
It is not a derogation of international law.

[00:50:02] Speaker 01:
So the U.S.

[00:50:02] Speaker 01:
position is very consistent through its submission in ELSI, through its submissions in the sources that Ms.

[00:50:11] Speaker 01:
Setzen has relied on, and in

[00:50:13] Speaker 01:
all of these bits, including the model bit, where the United States has repeatedly expressed the view that international law itself protects the investment of a shareholder, even though the shareholder's formal rights haven't been taken.

[00:50:28] Speaker 05:
So let me just ask you a follow-up question.

[00:50:33] Speaker 05:
So let's assume you're right that

[00:50:35] Speaker 05:
that the commercial code does protect the parents' rights to basic management of the institution and assume for the right that under international law, it doesn't make any difference if the parent still has its shares.

[00:50:59] Speaker 05:
What's the argument that these are, quote, rights in property?

[00:51:06] Speaker 01:
I think this court's prior opinion discussed that a little bit.

[00:51:11] Speaker 01:
If Your Honor will recall, the argument last time we were in this court was that the phrase rights and property as used in the FSIA should be understood in a narrow way to refer only to sort of corporate ownership concepts.

[00:51:26] Speaker 01:
This court I think correctly rejected that reading, recognizing that the phrase rights and property is broader following the Supreme Court's

[00:51:35] Speaker 01:
analysis of similar language in the permanent mission case.

[00:51:39] Speaker 01:
That, in other words, that rights and property is a broad concept that can capture... Well, is this a question of Venezuelan law?

[00:51:45] Speaker 01:
I'm sorry?

[00:51:45] Speaker 05:
Do we look to Venezuelan law to see whether it's... Not last time, because the argument... No, what about this time?

[00:51:51] Speaker 05:
This time, I think we would look to Venezuelan... Because the last case, we weren't talking about direct rights.

[00:51:59] Speaker 01:
We were talking about direct, HMP IDC's position all along has been that its own rights and property were taken.

[00:52:06] Speaker 05:
Yeah, and its rights and assets.

[00:52:08] Speaker 05:
But we're now talking about its Barcelona traction rights for the parent to be involved in major decisions regarding the dissolution or sale of the entity, not the individual oil drills.

[00:52:23] Speaker 01:
So I think the court would look to Venezuelan law to understand what rights

[00:52:28] Speaker 01:
are conferred upon the sole shareholder to determine whether those are rights and property within the meaning of the expropriation exception.

[00:52:36] Speaker 01:
I think the court would follow the same analysis that it did last time.

[00:52:40] Speaker 01:
One good analogy might be to this court's decision in the Neymar case, for example.

[00:52:46] Speaker 01:
which was a suit against the Republic of Ethiopia involving Eritrean plaintiffs who had had bank accounts in Ethiopia and they had been expelled and they asserted a contractual right to payment of those funds upon demand.

[00:53:03] Speaker 01:
And this court had to analyze, is that a right and property?

[00:53:06] Speaker 01:
And so the court looked to Ethiopian law to understand what exactly is the nature of the rights of these account holders, and then concluded under its own analysis of what rights and property means within the meaning of the expropriation exception, that the expropriation exception captures intangible rights, including what was in that case a contractual right to demand

[00:53:31] Speaker 01:
to demand payment and receive payment upon demand.

[00:53:34] Speaker 01:
So it's a combination really of the Venezuela and the law to understand what the rights are and this court's own analysis under the expropriation exception to understand whether those are the kinds of rights and properties that are protected from expropriation.

[00:53:48] Speaker 01:
Here,

[00:53:49] Speaker 01:
Your honor referred to Barcelona Traction as the sort of nature of the rights that we're talking about.

[00:53:54] Speaker 01:
I think it needs to be very clear that in Barcelona Traction, there was no assertion of direct rights.

[00:54:01] Speaker 01:
In Diallo, the court goes on to consider what those direct rights might have been, and I think it's a really useful contrast, frankly, because

[00:54:09] Speaker 01:
As the court noted earlier, Mr. Diallo, because he had been expelled, had a much harder time exercising control over his business.

[00:54:19] Speaker 01:
But the court recognized that he could appoint a proxy and that proxy could follow his instructions and thereafter control the company as he saw fit.

[00:54:29] Speaker 01:
This case is completely different.

[00:54:31] Speaker 01:
In this case, the allegation is that

[00:54:34] Speaker 01:
Whereas HNPIDC once owned, controlled, and benefited from a successful business, the defendants have taken that entire business and all of its productive assets, and they now run it for themselves as a state-owned concern.

[00:54:48] Speaker 01:
And the result that we allege in the complaint is that HNPIDC's shares have been rendered completely worthless, and its control over the business and the assets of the subsidiary have been completely destroyed.

[00:55:00] Speaker 01:
International law recognizes that as an expropriation notwithstanding

[00:55:04] Speaker 01:
that there may still be stock shares that we can hang up on our wall that haven't been taken.

[00:55:09] Speaker 03:
Just tell me again with this distinction, is that a violation of taking of direct rights or?

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

[00:55:17] Speaker 03:
And in what sense?

[00:55:18] Speaker 03:
The taking of the, effective, indirect taking of the shares?

[00:55:21] Speaker 01:
There's been an effective taking of the shares and there's been, in exactly the way that this court understood last time we were here under Ramirez, a taking of the rights and the corporate property under Venezuelan law.

[00:55:34] Speaker 03:
looking again to the theory under... So I'm not clear, I just don't exactly understand what Barcelona was saying when it said that even if the company was practically defunct, paralyzed, deprived of all of its sources of income.

[00:55:54] Speaker 03:
there wouldn't be a violation.

[00:55:55] Speaker 03:
So what are they saying there?

[00:55:56] Speaker 01:
What they're saying there, and this is where I believe the defendants are drawing this sort of, it has to have ceased to exist as a company.

[00:56:05] Speaker 01:
What Barcelona Attraction is addressing there are the circumstances under which shareholders may assert a derivative claim stepping into the shoes of the company to assert an injury to the company.

[00:56:18] Speaker 01:
So the opinion kind of walks through a few different steps.

[00:56:21] Speaker 01:
It says, first of all, shareholders can bring claims for injury to their direct rights, but not injury to the company.

[00:56:29] Speaker 01:
We don't have a claim of direct rights here, so we say nothing further about it.

[00:56:33] Speaker 01:
That's a paragraph 49.

[00:56:35] Speaker 01:
The court then goes on to consider, you know, there might be some exceptions to when a shareholder can step into the shoes of the company and bring essentially a derivative claim on behalf of the company for an injury to the company.

[00:56:50] Speaker 01:
And in that discussion, the court explains that that would be permissible when the company has ceased to exist or it is under some legal incapacity

[00:57:02] Speaker 01:
that prevents it from being able to assert its own interest.

[00:57:06] Speaker 01:
That might answer Your Honor's question from earlier.

[00:57:08] Speaker 01:
But that's what the Court is getting at there, is what are the circumstances when shareholders who've suffered no direct injury can proceed to bring a claim on behalf of the company itself.

[00:57:21] Speaker 01:
That's not the situation that we're in here.

[00:57:23] Speaker 03:
This is a direct claim.

[00:57:27] Speaker 03:
they do address Diallo's direct interest.

[00:57:30] Speaker 03:
And yet, in 158, they again basically say the same thing, that is, they incorporate what they said in Barcelona, considers there's no need to determine the extent of the business activities.

[00:57:43] Speaker 03:
As the court has already found, a precarious financial situation cannot be equated, blah, blah, blah.

[00:57:48] Speaker 03:
That sounds like they're now saying that even as to a direct right, that total paralysis, et cetera, the company

[00:57:56] Speaker 01:
Except that Mr. Diallo's claim there was simply that, I think the way it's phrased in the opinion is that his profits have been reduced.

[00:58:08] Speaker 01:
There had been a reduction in the volume of business wherein the size of the profits.

[00:58:14] Speaker 01:
That's clearly not sufficient to amount to a direct expropriation under the line of authority that I adverted to earlier.

[00:58:21] Speaker 01:
And that's why

[00:58:24] Speaker 01:
that doesn't get you over that bar.

[00:58:26] Speaker 01:
If he wanted to assert that as a derivative claim, he would have to show the demise of the company, per the language that Your Honor just read.

[00:58:34] Speaker 01:
And if he wants to bring it as a direct claim, he would have to show the complete destruction of all value and control, which he had not managed to show.

[00:58:43] Speaker 01:
His argument there, which is important.

[00:58:45] Speaker 03:
But they say, they quote the part of Barcelona that says, cannot be created with the demise of the corporate entity.

[00:58:52] Speaker 03:
Not even the possibility of it being practically defunct.

[00:58:56] Speaker 01:
If Your Honor looks a little bit earlier, just prior to that discussion, there's a description of the argument that they're answering there, which is he puts out a claim that because of the special nature of the relationship of him to his company, on the facts of those case, there should be understood to be a merger between his own rights and the rights of the company.

[00:59:15] Speaker 01:
in light of the fact that there had been a reduction in the value of the profits.

[00:59:19] Speaker 01:
And so to the extent that that... So this is just a pleading problem you should have added in as one of his direct... I don't know if he would have been able to sustain that claim because I don't know if it would be true that he had in fact lost all of the value of his investment as we've alleged here.

[00:59:37] Speaker 01:
The facts actually in the case suggest that maybe he hadn't since all he would have to do is appoint a proxy and the business could continue

[00:59:47] Speaker 01:
Again, the UN Commission on Trade and Development report, which I inverted to earlier, which is a 2012 report, kind of nicely encapsulates all of these principles together.

[01:00:00] Speaker 01:
And it makes clear that they apply with respect to a foreign shareholder bringing a claim for taking of its own direct investment, even when you're talking about a domestic company.

[01:00:14] Speaker 01:
So I think that largely answers the question with respect to HNPIDC and the fact that it can proceed even when there's not been a formal taking of its shares.

[01:00:32] Speaker 01:
I think some of the legislative history leading up to the FSIA indicates that Congress would have readily understood this point as well.

[01:00:41] Speaker 01:
A couple of the sources that we cite

[01:00:44] Speaker 01:
The 1972 State Department report on nationalizations goes through a long litany of worrisome expropriations that are largely directed at American interests, and many of them are examples where there's U.S.

[01:00:58] Speaker 01:
nationals owning interests in expropriated businesses, similarly with the House Committee report, which explains that

[01:01:07] Speaker 01:
that specifically references indirect measures having the effect of expropriation, discusses the Cuban laws as an example, and explains that investments involving an element of proprietorship or permitting the investor to control or influence the business operations are the type of investor rights that are specifically the worry that is being aimed at in the run up to the drafting of the expropriation exception.

[01:01:34] Speaker 03:
Can I go over Diallo just one more second?

[01:01:38] Speaker 03:
I am a little confused by it.

[01:01:39] Speaker 03:
So paragraph 149 says, Guinea claims that Mr. Diallo no longer enjoying control over effective use of its rights as a socie, which I take it to mean his rights as a shareholder, has suffered the indirect appropriation of his part socialis.

[01:01:55] Speaker 03:
That's the part I don't understand.

[01:01:56] Speaker 03:
Is that what you're talking about?

[01:02:00] Speaker 03:
in the two companies because his property rights have been interfered with to such an extent that he has been lastingly deprived of effective control over our actual use of or the value of those rights.

[01:02:18] Speaker 03:
It's paragraph 149.

[01:02:19] Speaker 01:
Right.

[01:02:19] Speaker 01:
But so if you go on to paragraph 150, it explains that his argument is that the investment in the companies is, quote, falling in value

[01:02:28] Speaker 01:
that there were actions that, quote, resulted in reducing the value.

[01:02:32] Speaker 01:
And so that's why we think this is not quite the same argument there that we're advancing here.

[01:02:42] Speaker 01:
In any event, I mean, I think that... It's a little hard to tell.

[01:02:46] Speaker 01:
It's certainly not so clearly the other direction that it could stand up against what we've pointed to in the bit practice, the position of the United States in

[01:02:57] Speaker 01:
for example, the LC case and the other arbitral submissions and the decisions of the arbitral tribunals.

[01:03:04] Speaker 01:
Again, I think I mentioned the Tidewater case earlier.

[01:03:08] Speaker 01:
Another helpful one, I think, is the Pobin Talbot case, which is an AFTA case.

[01:03:12] Speaker 01:
But with respect to the direct rights issue, it again recognizes that this concept of expropriation

[01:03:18] Speaker 01:
based on the entire value, even where you still retain ownership of shares, is a principle of customary international law that has been incorporated into bid practice precisely because states generally and consistently recognize that that is the nature of protection that's entitled to foreign investment.

[01:03:36] Speaker 01:
And Venezuela recognized it as well in its decrees governing the rights of international investments.

[01:03:44] Speaker 01:
where it noted in Decree 356 and Decree 1867, which implements 356, that the assets, the assets themselves are defined to be the investment and the foreign investor, if they are a 100% sole shareholder, is deemed to be the owner.

[01:04:05] Speaker 01:
In fact, it couldn't say it more clearly, 1867 states

[01:04:09] Speaker 01:
that the investment, that is the assets, quote, is the property of the foreign investor in a 100% sole shareholder situation.

[01:04:19] Speaker 01:
So Venezuelan law recognizes the exact same principle in terms of the ownership interest of the sole shareholder in the corporate property and the value of its investment.

[01:04:31] Speaker 01:
exactly as this court recognized last time we were here, drawing from the Ramirez decision.

[01:04:36] Speaker 03:
I'm sorry, could you say that again?

[01:04:39] Speaker 03:
What provision of Venezuela law?

[01:04:42] Speaker 01:
Yes, so these are the Venezuelan decrees that are appended to our principal brief.

[01:04:49] Speaker 01:
So Decree 356 is the investment promotion and protection law.

[01:04:54] Speaker 01:
This is the law that the Chavez regime issued to

[01:05:00] Speaker 01:
suggests that if you come and invest in Venezuela, we will accord your investment the protections of international law.

[01:05:07] Speaker 01:
And the Article 3 of Decree 356, which is at page 17 of the addendum to our brief, gives the definition of investment, which is, again, very broadly defined to include any asset to be used in producing income.

[01:05:25] Speaker 01:
It then goes on in the next paragraph to describe an international investment

[01:05:29] Speaker 01:
as being an investment belonging to or actually controlled by foreign individuals or corporations.

[01:05:37] Speaker 01:
It then goes on on the next page in the sole additional paragraph to explain that there should be regulations to stipulate the conditions under which it will be deemed that an investment is owned or actually controlled by a foreign individual or corporation.

[01:05:52] Speaker 01:
those regulations that they refer to there are Decree 1867, which is the next decree we append starting at page 23 of the addendum.

[01:06:02] Speaker 01:
And in that section, under Article 3, the decree provides that for purposes of Article 3 of the earlier decree, that's 356.

[01:06:13] Speaker 01:
It's a little hard to see how these all pair up, but they do map on.

[01:06:18] Speaker 01:
It is understood that an investment is the property of foreign investors when their ownership interest in the company receiving the investment, that's the domestic subsidiary, is 100% of the capital stock, equity, or assets.

[01:06:33] Speaker 01:
So here in this situation, particularly under Venezuelan laws recognizing international investments,

[01:06:41] Speaker 01:
even apart from the rights granted to ordinary shareholders under commercial code 280, this is additional recognition under Venezuelan law.

[01:06:49] Speaker 01:
that a 100% sole shareholder governed by this decree is considered to be the owner, not only of the business, but of the assets.

[01:06:58] Speaker 01:
And Venezuelan law went on to say, if that's your position, then in fact, your investment is entitled, as a matter of Venezuelan law, to the protections of international law, to fair and equitable treatment, and to protection against expropriation without adequate compensation and expropriation on discriminatory grounds.

[01:07:18] Speaker 01:
And of course, we do have an uncompensated expropriation here, both the taking of the rights in property of the U.S.

[01:07:26] Speaker 01:
parents as well as the taking of the assets from H&PV, the subsidiary.

[01:07:32] Speaker 01:
We've gone way over time.

[01:07:34] Speaker 01:
I don't know if the court would indulge a couple comments on the H&PV issue.

[01:07:38] Speaker 03:
Let me ask – unless there are questions from the bench, let me ask a question about – still about the first.

[01:07:47] Speaker 03:
What degree of deference do we owe to Venezuela?

[01:07:50] Speaker 03:
I know this is an issue in the Supreme Court right now.

[01:07:52] Speaker 03:
What degree of deference, though, do you think we owe to Venezuela's view of its own law?

[01:07:58] Speaker 03:
And what degree of deference do we owe to the United States' view of international law?

[01:08:04] Speaker 01:
Sure.

[01:08:05] Speaker 01:
So starting with the Venezuelan point, we think in the circumstances of this case, while the court would obviously accord appropriate consideration, we don't think they're entitled to any special degree of

[01:08:17] Speaker 01:
And so we think the circumstances here call for a little bit of additional scrutiny, particularly

[01:08:36] Speaker 01:
where the explanation is not persuasively supported or appears to be contradicted by the text of the legal authorities that we rely on.

[01:08:47] Speaker 01:
So this court in McKesson, for instance, on questions of Iranian law, declined to defer to the position advanced by the sovereign in that case.

[01:08:56] Speaker 01:
And we think the same approach would be appropriate here, given the contrast between the documents of Venezuelan law and the position that Venezuela's taken in its

[01:09:06] Speaker 01:
in its brief, which is obviously a litigating position.

[01:09:09] Speaker 01:
With respect, just one footnote on that point, though, on the question of Venezuelan law, we would note that its relevance is limited to determining the nature of the U.S.

[01:09:24] Speaker 01:
parents' direct rights in the assets.

[01:09:27] Speaker 01:
It does not bear on the question whether there was a taking of H&P IDCs

[01:09:32] Speaker 01:
ownership of the business in the form of its shares.

[01:09:35] Speaker 01:
It's undisputed that HMP IDC owned that business and had shares in it and it is a matter of international law that that was

[01:09:43] Speaker 01:
indirectly and effectively expropriated, notwithstanding that they still own the shares.

[01:09:48] Speaker 01:
So the Venezuelan law doesn't bear on that.

[01:09:49] Speaker 03:
That, too, I think it is a direct interest.

[01:09:51] Speaker 03:
That is the direct interest of the shares.

[01:09:52] Speaker 01:
Exactly.

[01:09:53] Speaker 01:
All of these are direct interests, correct.

[01:09:54] Speaker 03:
Okay.

[01:09:55] Speaker 03:
And the United States?

[01:09:56] Speaker 01:
On the United States position, I mean, obviously, with respect to H&P, IDC, they haven't taken a view one way or the other on the outcome.

[01:10:03] Speaker 03:
Not on the outcome.

[01:10:04] Speaker 03:
And I'm not sure whether we defer to outcome questions or not.

[01:10:07] Speaker 03:
But on their statement of law again, to go over this again,

[01:10:11] Speaker 03:
They say that we only look at the direct rights, and they say, well, the shareholders' direct rights are not implicated, generally are not implicated by state action that depreciates the value of a corporation shares even severely.

[01:10:26] Speaker 03:
What about that?

[01:10:27] Speaker 01:
I don't take issue with that statement.

[01:10:29] Speaker 01:
We agree that the shareholder has a claim for an injury to its direct rights.

[01:10:34] Speaker 01:
That's what we've asserted here.

[01:10:35] Speaker 01:
That's what we've been asserting from the filing of our complaint through today.

[01:10:39] Speaker 01:
So that part is correct, whether it's owed or not.

[01:10:43] Speaker 01:
On the specific point about the diminution in value of shares,

[01:10:50] Speaker 01:
Again, we agree that a claim for even significantly reduced value, even severe, is not a claim.

[01:11:00] Speaker 01:
What has to be alleged and what we do allege is the complete destruction of all economically viable and productive use, similar to the line that U.S.

[01:11:10] Speaker 01:
law draws between a permissible regulation that happens to

[01:11:14] Speaker 01:
affect the value of property even significantly versus an action that effectively takes the property, that renders property so useless that it must be deemed to have been taken.

[01:11:26] Speaker 03:
That would be the difference that eliminates the value of the corporation shares rather than depreciates the value severely.

[01:11:33] Speaker 01:
Right, so when the United States recognizes that there could be a claim if the shares have been taken and you marry that up with the United States recognition and the other sources in its bits,

[01:11:42] Speaker 01:
and in its arbitral submissions, including in ELSI, that shares are taken when their value is completely destroyed and when the shareholders' rights of control and beneficial enjoyment of property have been completely destroyed.

[01:12:00] Speaker 01:
That's what's happened here.

[01:12:01] Speaker 01:
The United States would view that, at least according to all of its other positions, as a taking of the shares.

[01:12:07] Speaker 01:
And so we think that fits comfortably within

[01:12:10] Speaker 01:
the analysis that the court, that the United States has laid out in its amicus brief.

[01:12:16] Speaker 04:
Even if it may be worth very little, there is nonetheless the right remaining in the Venezuelan corporation to arbitrate in the proceeding, which, as you say, has been going on for years.

[01:12:26] Speaker 04:
Is that not the case?

[01:12:30] Speaker 04:
It may not be worth much, but they've still got that right, don't they?

[01:12:33] Speaker 01:
HMPV is the defendant in those proceedings.

[01:12:37] Speaker 04:
And it's an imminent domain type proceeding in which they have the potential for winding up with something, theoretically at least, right?

[01:12:47] Speaker 01:
See, our allegation is that theoretically there is no such prospect.

[01:12:51] Speaker 04:
No, no, theoretically there is such a prospect, isn't there?

[01:12:55] Speaker 01:
That's not the allegation of the case, Your Honor.

[01:12:59] Speaker 01:
And the circumstances, I think,

[01:13:02] Speaker 01:
six, seven, eight years after the fact.

[01:13:05] Speaker 01:
Now, I think, I think, bear that out.

[01:13:07] Speaker 03:
So is this a, if that, if this were the issue, that would be a fact that you've alleged essentially zero value, but if it turns out that on remand facts are developed that it's worth something, that would be a different issue?

[01:13:20] Speaker 01:
I'm sorry, could you read the question?

[01:13:22] Speaker 03:
Your allegation is that it's worth nothing.

[01:13:26] Speaker 03:
But if that's only an allegation, sufficient for purposes of this proceeding, but that would indicate a remand for continued factual development on that question.

[01:13:39] Speaker 03:
And if it turned out that it was only severely depreciated,

[01:13:44] Speaker 03:
Then you would agree with the United States that it's not not a violation.

[01:13:49] Speaker 01:
With respect to the taking of the shares, there would still be the right in the corporate property as defined by Venezuelan law, which itself, as the court previously recognized under Ramirez, is also a right and property of the shareholder that can be expropriated by state action.

[01:14:07] Speaker 01:
that that completely takes away all right to control the property and all right to sort of beneficial enjoyment of the property.

[01:14:14] Speaker 01:
So that that piece of it we would say is still would still go forward.

[01:14:19] Speaker 01:
But certainly if the defendants wanted to defend on the ground that

[01:14:24] Speaker 01:
actually HMP IDC still has some productive property in Venezuela, that might be an available defense.

[01:14:32] Speaker 01:
I'm pretty confident that they would not be able to make that demonstration given how completely and totally, from the drilling rigs to the repair equipment to the real property down to the stationary and the trucks, all of it has been taken.

[01:14:51] Speaker 01:
you know, the Peta Vesa logo painted over ours.

[01:14:54] Speaker 01:
So I think there's not a prospect that that defense would actually be available.

[01:14:59] Speaker 01:
Again, it wouldn't eliminate the defense or the position.

[01:15:02] Speaker 03:
It's not only the drilling rigs that have been taken.

[01:15:04] Speaker 03:
The land has been taken as well.

[01:15:06] Speaker 01:
So what happened here, so there was, yes, the drilling rigs are on property.

[01:15:13] Speaker 01:
What happened is that Peta Vesa defendants accompanied by soldiers from the National Guard

[01:15:19] Speaker 01:
came onto the property, barricaded it, seized it, and seized absolutely everything.

[01:15:24] Speaker 01:
The rigs, property that, both movable and immovable property in terms of repair equipment, barracks for the employees to live.

[01:15:34] Speaker 03:
What about their claims there still being some millions of dollars in the bank account?

[01:15:38] Speaker 01:
That is asserted in citing a

[01:15:41] Speaker 01:
10K form that was filed several years ago, I can tell you it does not reflect the current position by any stretch, but that form also indicates... Did it indicate the position when the suit was filed?

[01:15:54] Speaker 01:
I'm sorry?

[01:15:55] Speaker 03:
Did it indicate the position when the suit was filed?

[01:15:57] Speaker 01:
I think it indicated that there was some tied up cash on hand, but the question is really what

[01:16:05] Speaker 01:
beneficial or productive use can be made of the property.

[01:16:09] Speaker 01:
And so where the forms that they cite show no income, no potential for income, and although the assets were expropriated, the debts were not, and Your Honor can see the deflation that occurred between the 2012 form and the 2013 form.

[01:16:26] Speaker 01:
extrapolate from there.

[01:16:27] Speaker 03:
Well, the deflation is not the consequence of the exorperation.

[01:16:30] Speaker 04:
I'm sorry, I mean the depletion of the... Was there money in the bank at the time of the filing of the lawsuit?

[01:16:36] Speaker 01:
Yes.

[01:16:38] Speaker 05:
I just want to clarify to make sure I understand this point.

[01:16:42] Speaker 05:
Even if there is remaining value in the assets, let's assume there are, does that have any effect on your argument about the direct rights under Barcelona traction?

[01:16:58] Speaker 05:
That is, the taking of your argument that they've taken the rights to govern the corporation, to attend the general meetings.

[01:17:11] Speaker 05:
I was looking at Barcelona, sharing the residual assets of the company.

[01:17:17] Speaker 05:
Are those separate arguments?

[01:17:22] Speaker 01:
We've advanced two forms or two theories

[01:17:27] Speaker 01:
rights and property that have been taken from the U.S.

[01:17:29] Speaker 01:
parent that are both direct rights.

[01:17:32] Speaker 01:
One of those theories is a theory that undisputedly HMP IDC has a right and property in its ownership of the subsidiary.

[01:17:42] Speaker 01:
The issue there is the defendants say that wasn't taken because you still own your shares.

[01:17:47] Speaker 01:
We've pointed out that it's an international law question and under customary international law it is crystal clear

[01:17:54] Speaker 01:
that that can be taken even though we still legally own title to the shares.

[01:17:59] Speaker 01:
The second theory is the theory of a right in the corporate property, a right in the assets of HMPV itself.

[01:18:08] Speaker 01:
Barcelona Attraction tells us that's not a voting right.

[01:18:11] Speaker 01:
That's a right that is a right of, or not a voting right of the type that Barcelona Attraction was referring to.

[01:18:18] Speaker 01:
It tells us to look to the municipal law, under Venezuelan law, to understand

[01:18:22] Speaker 01:
what rights Venezuela accorded to the sole shareholder of a foreign investment.

[01:18:28] Speaker 01:
We've noted in the decrees and in the commercial code that Venezuelan law recognizes those rights of ownership and control by the sole shareholder exactly analogous to the rights of ownership and control

[01:18:40] Speaker 03:
that were present in the Ramirez case, which this court found especially persuasive here, because of the fact... Is there any international law case, any example of a case, and or any statement in a bit or otherwise that taking that right, specific when you're talking about, would be a violation of international law?

[01:19:01] Speaker 01:
I think the Tidewater case is a good example and I'll concede that these two theories are really kind of hand in hand when you're talking about a sole shareholder situation.

[01:19:11] Speaker 01:
And so the Tidewater case was the one where a Venezuelan subsidiary that was, they were in the marine transport business on the Gulf and the Pita Vesa

[01:19:23] Speaker 01:
defendants came in and seized, specifically the vessels was what was taken there, the property of the Venezuelan subsidiary.

[01:19:32] Speaker 01:
The ultimate Tidewater parent was a U.S.

[01:19:37] Speaker 01:
company, but they had an intermediate subsidiary in Barbados.

[01:19:40] Speaker 01:
that owned the Venezuelan company, which is why they could proceed under the Barbados Venezuela bit.

[01:19:46] Speaker 01:
But as the opinion in the case explains, the bit simply incorporated principles well accepted in international law.

[01:19:54] Speaker 01:
So the court goes on to recognize that where there's been a complete taking of the whole business, I think the language they use is all the infrastructure of the business has been completely taken.

[01:20:06] Speaker 01:
There's been an expropriation of the whole investment, the whole business, that that is unquestionably a taking.

[01:20:13] Speaker 01:
under the same principles that we're relying on here.

[01:20:15] Speaker 01:
And it kind of meshes together both of these concepts of the shares and the direct.

[01:20:20] Speaker 03:
If it weren't the case that the investment was effectively zero, would you really have a separate argument?

[01:20:26] Speaker 03:
Aren't they really tied together?

[01:20:28] Speaker 01:
I think in the case of a sole shareholder, they naturally dovetail because part of the value of the shareholder's investment in the business is

[01:20:42] Speaker 01:
as the court recognized the last time, the exclusive beneficial enjoyment of the corporate property and control over that property, the ability to influence that property.

[01:20:55] Speaker 01:
And so what's alleged here, for example, is that HNPIDC in fact reviewed and had to approve the major strategic decisions of the subsidiary, so things like

[01:21:08] Speaker 01:
Whether we move a drilling rig around within Venezuela or out of the country completely, those were decisions that HMPIDC made.

[01:21:16] Speaker 01:
And it's precisely those facts that this court sitting on Bancat in front of it and Ramirez, where the court again rejected out of hand the idea that simply because you have a corporate form of ownership,

[01:21:29] Speaker 01:
that that meant that the sole shareholder and sole controller of the property somehow didn't have any interest in property at all when the entire business has been expropriated.

[01:21:40] Speaker 03:
That's exactly what we've alleged here.

[01:21:58] Speaker 03:
We'll give you two more minutes, Ms.

[01:21:59] Speaker 03:
Stetson, plus questions from the bench.

[01:22:01] Speaker 02:
Thank you, Your Honor.

[01:22:02] Speaker 02:
I'd like to untangle three things and then make a couple points on them.

[01:22:05] Speaker 03:
The first is... Before you do all those, could I just ask two questions?

[01:22:07] Speaker 03:
Sure.

[01:22:08] Speaker 03:
So she referred to a number of documents, too, which I've been able to find easily.

[01:22:13] Speaker 03:
One is the statement in LC, the United States position, that... I'm just trying to get it exactly.

[01:22:28] Speaker 03:
to say.

[01:22:34] Speaker 03:
The protocol to the treaty expressly extends the guarantee of compensation to interests held directly or indirectly by nationals.

[01:22:42] Speaker 03:
The vision aims to assure the – in other words, the treaty unambiguously protects investment interests in the United States.

[01:22:47] Speaker 03:
The taking of property to which the treaty refers encompasses a multitude of activities having the effect of infringing property rights under international law.

[01:22:57] Speaker 03:
A taking generally is recognized, including not nearly outright expropriation.

[01:23:02] Speaker 03:
but also unreasonable interference with its use, enjoyment, or disposal.

[01:23:07] Speaker 03:
And then the statement in, I'm sorry, I think it's the NAFTA, which I've not lost.

[01:23:18] Speaker 03:
Hold on one second.

[01:23:24] Speaker 03:
In the NXP and the NAFTA treaty,

[01:23:29] Speaker 03:
Article 6 expropriations is intended to reflect customary international law concerning the obligation of states with respect to expropriation.

[01:23:38] Speaker 03:
The second situation is indirect expropriation where an action or series of actions has an effect equivalent to direct expropriation without formal transfer of title or outright seizure.

[01:23:54] Speaker 03:
So both of those sound like the United States.

[01:23:56] Speaker 03:
I appreciate your earlier point, which these have to do with treaties or bids or arbitrations or whatever.

[01:24:02] Speaker 03:
But in these, the United States is saying that this is a violation of international law, that this is a principle of international law.

[01:24:11] Speaker 02:
And in neither of those was the United States saying that the customary international law rule on shareholder standing was somehow extinguished.

[01:24:20] Speaker 02:
The United States, as to NAFTA, said in the GAMI Investments submission that we cite, paragraph 14.

[01:24:27] Speaker 03:
Before you get to those, what about this?

[01:24:30] Speaker 03:
Maybe there's inconsisting United States positions, but what's that?

[01:24:35] Speaker 02:
Each of those, I think, Your Honor, goes to something other than

[01:24:38] Speaker 02:
this principle of shareholder standing that I think that HMP IDC keeps trying to import into this discussion.

[01:24:45] Speaker 02:
There is nothing in either NAFTA or these bits when they talk about customary international law that suggests that a shareholder

[01:24:53] Speaker 02:
can have standing to press claims for damage or taking down to somebody else's property.

[01:24:59] Speaker 03:
But no, I take it that their argument is that the argument is it's to the shareholders property, namely its shares, that you can take a person's shares not just by formally taking the document, but also by driving its value to zero.

[01:25:17] Speaker 02:
I do not take any of that to be a derogation from what we maintain customary international law is.

[01:25:25] Speaker 02:
For this reason, one of the other sites that we mentioned in our brief that I think H&P relies on

[01:25:32] Speaker 02:
is the CMS gas transmission case.

[01:25:35] Speaker 02:
That had to do with bits.

[01:25:37] Speaker 02:
It explained that bits permit shareholder claims, and it even said that such claims can now be considered the general rule.

[01:25:44] Speaker 02:
But it explicitly noted that customary international law may follow a different approach.

[01:25:50] Speaker 02:
There's nothing in these bits

[01:25:53] Speaker 02:
that suggests that customary international law as to the ability of a shareholder to maintain a claim going to somebody else's property is somehow vitiated.

[01:26:02] Speaker 02:
In fact, as the Diallo Court put it in its first decision, I think, the fact that these bits exist

[01:26:10] Speaker 02:
is just as equally evidence that that customary rule of international law does not exist.

[01:26:16] Speaker 02:
The U.S.

[01:26:17] Speaker 02:
in the Gambia investments, if I could just continue on that NAFTA point I was making, notes at paragraph 14, it is well recognized

[01:26:25] Speaker 02:
that an important principle of international law should not be held to have been tacitly dispensed with by an international agreement, nothing in the text of this NAFTA article suggests an intent to derogate from customary international law restrictions on the assertion of claims on behalf of shareholders.

[01:26:43] Speaker 02:
And I would note, too, that when Ms.

[01:26:46] Speaker 02:
Carroll began her argument and she was asked what the best authority was,

[01:26:52] Speaker 02:
for the principle that IDC had a claim here.

[01:26:56] Speaker 02:
This is what she started with.

[01:26:57] Speaker 02:
She started with the bits and she started with the treaties.

[01:27:00] Speaker 02:
But of course, that argument in their briefing was found in footnotes, three different footnotes, suggesting that these bits and these treaties had somehow aggregated over time into customary international law.

[01:27:13] Speaker 02:
That is simply not the case.

[01:27:14] Speaker 03:
I'm not focusing on that at all.

[01:27:17] Speaker 03:
I totally understand that point.

[01:27:19] Speaker 03:
What I'm asking is the U.S.'

[01:27:21] Speaker 03:
's representation in those documents about what customary international law is.

[01:27:27] Speaker 03:
That, some level of deference is owed to.

[01:27:31] Speaker 03:
That's what I'm asking about.

[01:27:32] Speaker 02:
I think if we are to give deference to the U.S.'

[01:27:35] Speaker 02:
's interpretation in those documents, you would have to give equal deference to the U.S.'

[01:27:40] Speaker 02:
's interpretations in the other documents that I mentioned, which specifically say that nothing in these bits and treaties

[01:27:47] Speaker 02:
or NAFTA, is designed to derogate from the rule that a shareholder can't press a claim on behalf of the company.

[01:27:54] Speaker 03:
Where is that one?

[01:27:56] Speaker 03:
That last statement, where is that?

[01:27:58] Speaker 02:
That was the GAMI Investments submission, paragraph 14.

[01:28:03] Speaker 02:
And it specifically speaks to shareholder standing.

[01:28:06] Speaker 02:
The other thing that you'll notice is that there's no reference even in these submissions that HMPIDC is suggesting you interpret.

[01:28:15] Speaker 02:
There's no reference to shareholder standing.

[01:28:17] Speaker 02:
It's just a question of a different type of expropriation.

[01:28:20] Speaker 02:
The shareholder standing rule is and remains the same.

[01:28:24] Speaker 02:
It's the same rule that Judge Santel articulated in the first go-round in this case, which is that a parent can't bring claims on behalf of the corporation.

[01:28:31] Speaker 05:
No.

[01:28:33] Speaker 05:
I hear your point about that, but isn't that with respect to shareholder standing, with respect to the assets held by the subsidiary?

[01:28:45] Speaker 05:
Whereas, as Ms.

[01:28:46] Speaker 05:
Carroll made clear, they're making two different

[01:28:50] Speaker 05:
The second one is interference with the parents' direct rights.

[01:28:56] Speaker 02:
Yes.

[01:28:56] Speaker 02:
Aren't those different?

[01:28:57] Speaker 02:
And that is, the answer is yes, and that is what I wanted to untangle.

[01:29:02] Speaker 05:
Yeah, would you, if you're untangling.

[01:29:05] Speaker 02:
So the court, I think, needs to resolve three questions.

[01:29:09] Speaker 02:
First, can H&P v. press an expropriation claim?

[01:29:14] Speaker 02:
Does HMPIDC have a direct right in ownership or control of HMPV's assets?

[01:29:20] Speaker 02:
That's the way that IDC puts it.

[01:29:23] Speaker 02:
Ownership and control of HMPs or in HMPV's assets.

[01:29:28] Speaker 02:
Third is, does HMPIDC claim a legally valid direct right in its productive use of its shares?

[01:29:38] Speaker 02:
As to that first one, we have not had discussion on it, but the domestic takings rule bars HMPV's point.

[01:29:47] Speaker 02:
As to the second, the domestic takings rule also controls, because to the extent that IDC is arguing that it has direct rights in HMPV's assets, which is exactly how they phrase it, at pages 28, 29, 27 of their brief,

[01:30:06] Speaker 02:
those assets were not taken in violation of international law.

[01:30:10] Speaker 02:
So all of the Venezuela sites, Decree 356, Decree 1867, all of the articles, all of that is a relevant underbrush if you agree that H&PV's assets were not taken in violation of international law.

[01:30:26] Speaker 02:
That leaves the shareholder claim, which is that the beneficial or the ownership, sorry, the economically productive use of the shares was extinguished.

[01:30:36] Speaker 02:
Now here, what Miss Carroll seems to be arguing today, in addition to the bits in the treaties and the kind of agglomeration concept in the footnotes in the brief, is that there is a difference not just in degree but in kind from Barcelona Traction and Diallo.

[01:30:55] Speaker 02:
But Barcelona Traction specifically said, even where a company is, quote, emptied of all economic content,

[01:31:03] Speaker 02:
That's page 48 of Barcelona Attraction.

[01:31:06] Speaker 02:
There still is not an impingement on the right of the shareholder to bring a claim on behalf of the company.

[01:31:13] Speaker 02:
So to the extent that there is some sliding scale that is sought to be applied here,

[01:31:18] Speaker 02:
First of all, I don't think that's ever been suggested before, but second, Barcelona Attraction stands for that rock bottom idea that even when a company has been emptied of all content, the parent is not in a position to press claims for its loss of the economic productive use of that company.

[01:31:37] Speaker 02:
That leaves Ramirez.

[01:31:40] Speaker 03:
But so she was saying that's separate from the loss of the value of the shares, which is a direct claim that just wasn't raised in that case.

[01:31:50] Speaker 02:
Yes, but that's where then the Diallo case comes in that I mentioned in response to one of Judge Tatel's questions earlier.

[01:31:57] Speaker 02:
Diallo applies that same principle in the context of a claim for indirect expropriation.

[01:32:05] Speaker 02:
I believe, Judge Garland, one of the paragraphs that you read to Ms.

[01:32:07] Speaker 02:
Carroll describes it as exactly that.

[01:32:10] Speaker 02:
So the same principles held in Barcelona Attraction were applied in Diallo to exactly this type of contention.

[01:32:16] Speaker 05:
But in Diallo, there were findings of the fact that the parent had not lost his effective control over the company.

[01:32:23] Speaker 02:
The parent had not lost, well, I want to make sure that we're not merging the two streams again, Judge Tatel.

[01:32:31] Speaker 02:
The loss of ownership and control in HMPV's assets is that first category of direct claims.

[01:32:42] Speaker 02:
And those?

[01:32:43] Speaker 05:
No, I thought, again, maybe I need some more untangling help here, but I thought that that was different from the Barcelona traction claim that there are direct rights in the control of the corporation that are different from the ownership of the assets.

[01:33:01] Speaker 02:
No, I think the way that IDC at least has characterized it, which I think is correct under corporate and international law, is that they describe one set of direct rights as being their right to ownership and control in HMPD's assets.

[01:33:17] Speaker 02:
The second was the right to the economically productive use of the shares.

[01:33:21] Speaker 05:
Well, why are they invoking the commercial code then?

[01:33:23] Speaker 02:
Sorry?

[01:33:24] Speaker 05:
Why are they invoking the commercial code?

[01:33:26] Speaker 02:
I think they're invoking the commercial code because under their theory, remember, H and PV also has an expropriation claim.

[01:33:35] Speaker 02:
So the reason that they need to invoke the commercial code in decree 356 and decree 1867 is because if we're wrong,

[01:33:46] Speaker 02:
that HMPV's expropriation claim fails, then we and you have to go on to determine whether there are separate direct rights in HMPV's property.

[01:34:00] Speaker 02:
because under their estimation the property was taken in violation of international law.

[01:34:06] Speaker 02:
That's the circumstance that would trigger you having to make an inquiry into Article 280 and Decree 356 and all the various articles therein.

[01:34:17] Speaker 02:
It is only if you conclude that HNPV has a claim

[01:34:22] Speaker 02:
that you have to get into all of that.

[01:34:24] Speaker 02:
The most efficient path through, I would suggest Judge Tatel, is to start with the HMPV question, determine that there is no taking in violation of international law.

[01:34:35] Speaker 02:
That resolves the first of the two categories of IDC's claims.

[01:34:39] Speaker 02:
because all of those claims to direct rights in H&PV's assets don't matter.

[01:34:44] Speaker 02:
So that leaves the shareholder standing.

[01:34:46] Speaker 02:
We've talked about it to a couple extents.

[01:34:49] Speaker 02:
I want to make maybe one point on Ramirez, which is the fact that Ramirez is the first and only case

[01:34:58] Speaker 02:
that Agent Peek can cite tells you something.

[01:35:01] Speaker 02:
And I would direct you to Judge Scalia's dissent in Ramirez at pages 1556 to 57, where he explains why that decision really is fundamentally wrong, I think is the way that he puts it, and has never again been cited.

[01:35:18] Speaker 02:
The last thing I would say with respect to Ms.

[01:35:21] Speaker 02:
Carroll's comment about the only real recourse being here,

[01:35:25] Speaker 02:
is that the recourse was for HMPV to incorporate somewhere other than Venezuela, as many other companies doing business in Venezuela have.

[01:35:35] Speaker 02:
That is the impediment that HMPV, and by extension its parent, has to pursuing a claim here.

[01:35:42] Speaker 03:
What if a country requires you to incorporate in that country in order to operate?

[01:35:48] Speaker 02:
there was no such requirement here.

[01:35:51] Speaker 02:
And I think if the company was required to incorporate in that country, that might trigger some instances of diplomatic protection, some outreach from the sovereign in which the

[01:36:06] Speaker 02:
company's primary shareholder is based.

[01:36:10] Speaker 02:
But I don't think it changes the general international law rule that a taking of a state's own property or the property of its own national is not an instance for international law concern.

[01:36:23] Speaker 02:
If there are no further questions.

[01:36:26] Speaker 03:
Thanks.

[01:36:26] Speaker 03:
Both sides for a very excellent argument.

[01:36:28] Speaker 03:
We really appreciate it.

[01:36:29] Speaker 03:
We can take the matter under suspicion.