[00:00:01] Speaker 00:
Case number 24-7161, Elmery Campaign International Drilling Co.

[00:00:06] Speaker 00:
versus Petroleos de Venezuela SA and PDVSA Petroleos SA Appellants.

[00:00:12] Speaker 00:
Mr. Perla, for the appellants.

[00:00:14] Speaker 00:
Mr. Rosen, for the appellant.

[00:00:17] Speaker 01:
Good morning.

[00:00:18] Speaker 01:
Good morning, Your Honors.

[00:00:19] Speaker 01:
Juan Perla of Curtis-Millay for the Petaveza Defendants.

[00:00:22] Speaker 01:
And may it please the court, I reserve three minutes for rebuttal.

[00:00:26] Speaker 03:
I'm in a little trouble here.

[00:00:27] Speaker 01:
I'll try to speak closer.

[00:00:30] Speaker 01:
The district court's decision on jurisdiction under the FSIA is riddled with legal errors, some thornier than others.

[00:00:38] Speaker 01:
But there is a related issue that would do away with the entire case, any remaining claims in one fell swoop.

[00:00:46] Speaker 01:
And that is the act of state doctrine.

[00:00:48] Speaker 01:
So I'd like to start there.

[00:00:50] Speaker 03:
Before you start there, could you start with why we have jurisdiction to hear that issue?

[00:00:57] Speaker 01:
Well, Your Honor,

[00:00:59] Speaker 01:
You have a pending appellate jurisdiction when there is a appeal from a denial of sovereign immunity, which is what is happening here, to decide the act of state doctrine.

[00:01:09] Speaker 01:
That happened in the Agudas decision where the court considered in passing whether the act of state doctrine might apply and thought that it was appropriate to do so.

[00:01:19] Speaker 01:
You also have the help.

[00:01:20] Speaker 01:
That's a drive-by.

[00:01:22] Speaker 01:
Your Honor, I would agree it is a drive-by.

[00:01:23] Speaker 01:
But I think that the principle stands insofar as

[00:01:27] Speaker 01:
The active state doctrine is bound up with the concept of sovereign immunity.

[00:01:31] Speaker 03:
You have a strong argument that the issues are related.

[00:01:37] Speaker 03:
Yes.

[00:01:38] Speaker 03:
Pinkenlooper and 160583 have a common history.

[00:01:41] Speaker 03:
One might bear on the other, but that's a convenience point.

[00:01:47] Speaker 03:
You don't need to get into active state in order to give you a full and fair

[00:01:55] Speaker 03:
question that you're entitled to appeal.

[00:02:00] Speaker 03:
Well, Supreme Court has warned us not to be loosey goosey and expanding appeals just for the sake of convenience.

[00:02:09] Speaker 01:
Well, I think it's more than convenience here because your honor is correct that Section 1605A3 and the second Hickenlooper Amendment

[00:02:17] Speaker 01:
especially after the Supreme Court's decision in Simon, clearly share a common history.

[00:02:21] Speaker 01:
And it's relevant to look at both.

[00:02:24] Speaker 01:
And it's proper, I think, to look at both.

[00:02:25] Speaker 01:
And this court has signed up previously.

[00:02:27] Speaker 04:
Are you saying that if we just applied the factors from SWINT, such as intertwined, and it's strictly intertwined, would that apply here, given that you have the common question of a violation of international law?

[00:02:46] Speaker 04:
in both the FSIA and the act of state.

[00:02:50] Speaker 01:
Yes, I think that's one of the basis on which the immunity issue is intertwined with the act of state doctrine because you're looking at a situation in which there is a violation of international law.

[00:03:02] Speaker 04:
Could you establish penitent jurisdiction under SWINT as opposed to our precedent, which has gone beyond the two factors identified in SWINT?

[00:03:15] Speaker 01:
Yes, I think there is, underswint, the interrelation that you pointed to already.

[00:03:19] Speaker 01:
But also, there is an issue in this case as to whether the property being in the United States is still relevant in terms of the pitabase of defendants being alter egos as opposed to separate legal persons, which is part of the argument and the interpretation of the second Hickenlooper Amendment as to where the property is.

[00:03:40] Speaker 01:
So these issues are bound up.

[00:03:42] Speaker 01:
You also have the judicial efficiency considerations to look at.

[00:03:45] Speaker 01:
In Helmric 2, which my friends on the other side point to, the court eschewed the issue of the active state because there were still sovereign immunity issues left to litigate on remand.

[00:03:56] Speaker 01:
And there were still other merits issues to consider that could alter or moot the analysis for the active state doctrine.

[00:04:02] Speaker 01:
That's just not the case anymore.

[00:04:04] Speaker 01:
The sovereign immunity decisions have been decided.

[00:04:07] Speaker 01:
And there's nothing left that would change the analysis of the district court.

[00:04:12] Speaker 01:
The district court also hadn't made a decision in Helmric II yet on the act of state.

[00:04:16] Speaker 01:
It has now.

[00:04:17] Speaker 01:
And under the Halabi decision, which we have cited in our reply, it makes sense to go to the act of state doctrine first if there are more complicated, maybe thornier issues.

[00:04:27] Speaker 01:
that subject matter jurisdiction analysis would require.

[00:04:31] Speaker 01:
There it was the statute of limitations issue, which is a threshold.

[00:04:37] Speaker 04:
One question is whether we have pendant jurisdiction, but is your argument that, because active state is a merits question, so normally we would have to decide jurisdiction before, because we have pendant jurisdiction doesn't mean we can reorder our resolution of issues

[00:04:57] Speaker 04:
what's normally required, which is jurisdiction before you get to merits.

[00:05:00] Speaker 04:
Is your argument that we can skip over jurisdiction altogether and decide that merits question?

[00:05:06] Speaker 01:
Well, in Halabi, this court looked at that procedural process and satisfied itself that it had Article 3 jurisdiction, which was the fundamental jurisdiction that the court needs in order to act.

[00:05:20] Speaker 01:
looked at statutory subject matter jurisdiction, which is what we're looking at here with the Foreign Sovereign Immunities Act, and said we can go directly to a threshold merits defense that would actually advance the objectives of sovereign immunity because it would end the litigation.

[00:05:36] Speaker 01:
I think that the active state doctrine in this case acts in the same way.

[00:05:40] Speaker 01:
It is intertwined.

[00:05:41] Speaker 01:
It is bound up.

[00:05:43] Speaker 01:
If we are right about the active state doctrine, then the case goes away.

[00:05:48] Speaker 01:
And this case has been lingering for more than 10 years, dying a slow death.

[00:05:53] Speaker 01:
And I think it's time to put an end to it.

[00:05:56] Speaker 01:
And the active state doctrine would allow the court to do that and avoid all these other thornier issues.

[00:06:02] Speaker 04:
In your position, we could decide active state without deciding jurisdiction first?

[00:06:07] Speaker 01:
That is what the court did in the Halabi case.

[00:06:09] Speaker 01:
Yes, in terms of a merits, a threshold merits defense, just like a statute of limitations.

[00:06:14] Speaker 03:
Is that because you think for Steele Co purposes, we can skip over statutory jurisdiction as opposed to Article III standing?

[00:06:26] Speaker 03:
Or is it because you think the active state doctrine is kind of threshold and non merits?

[00:06:36] Speaker 03:
Like the forum-known opinions or other threshold grounds that don't fully get subject to the Steel Co.

[00:06:46] Speaker ?:
order.

[00:06:47] Speaker 01:
The former, Your Honor.

[00:06:48] Speaker 01:
There's no doubt here that there is a case or controversy.

[00:06:53] Speaker 01:
So there is clear Article III jurisdiction.

[00:06:56] Speaker 01:
And in Halabi, the court said we can skip over subject matter jurisdiction, assume... A lot of controversy on that question.

[00:07:05] Speaker 03:
Well, Your Honor, I think that in the circuit split, some of us think that's pretty indefensible.

[00:07:15] Speaker 01:
While I think that Halabi is defensible, I will, if you would like, look at the subject matter jurisdiction issue because there's plenty to criticize about the district court's decision on that front as well.

[00:07:27] Speaker 01:
So we'll take the primary issue on sovereign immunity in jurisdiction here, which is, has there been a property right that has been identified?

[00:07:36] Speaker 01:
And we think the fundamental error from which everything else goes wrong in the district court is

[00:07:42] Speaker 01:
The confusion and conflation between the ownership interest to the company and the assets of the company.

[00:07:50] Speaker 01:
What was taken here and what has been alleged to have been taken here is

[00:07:55] Speaker 01:
the rigs, the wrenches, the trucks, everything that was used to support the rigs.

[00:08:02] Speaker 01:
And the rigs were property of the Venezuelan corporation, H&P Venezuela.

[00:08:09] Speaker 03:
Now, you don't dispute the general rule from Helmerick and I think Exxon that at some point taking the

[00:08:21] Speaker 03:
stuff of the foreign sub can deprive the sub of so much economic value that the shareholder has an international take-in claim, right?

[00:08:33] Speaker 01:
Well, I would say that it's not about the value alone and certainly not just the profits that the Venezuelan... Permanently take over management and control and completely destroy share value.

[00:08:46] Speaker 01:
You don't dispute that legal point.

[00:08:48] Speaker 01:
No, I think the test in Helmerick 4 is the test that we should be looking at.

[00:08:52] Speaker 03:
And now you're just fighting the district court's fact finding on whether this taking rose to that level.

[00:09:00] Speaker 01:
No, it's more than that because I think that the district court fundamentally misunderstood what the test requires and therefore misapplied the facts to determine and the evidence to determine whether the test

[00:09:14] Speaker 01:
was satisfied.

[00:09:15] Speaker 01:
And the fundamental error, again, is in conflating this nebulous concept of business with what the property right that is actually at issue.

[00:09:24] Speaker 01:
And the property right is the ownership interest.

[00:09:26] Speaker 01:
I take the court to the Exxon decision.

[00:09:31] Speaker 01:
In the Exxon decision.

[00:09:32] Speaker 05:
Sorry, so why can't we conceptualize this as they've taken the ownership interest of the parent company, and now they're owning and operating that ownership interest.

[00:09:41] Speaker 01:
because there has been no factual finding and there is no evidence that the ownership interest has been taken or has been owned or operated by anyone in Venezuela.

[00:09:51] Speaker 04:
HMPIDC can- They actually have to take the shares though.

[00:09:53] Speaker 04:
If they render the shares, I mean, if that's your point is, yes, they still hold their certificates, their pieces of paper, they give them shares in the company, that's not the test.

[00:10:02] Speaker 04:
The test is, and this is proposed by the United States in its brief as well, is whether they have rendered the economic value of those shares

[00:10:11] Speaker 04:
zero or essentially zero, worthless.

[00:10:15] Speaker 04:
And that happens by taking all the operating capacity of the business away so they can't function.

[00:10:25] Speaker 04:
That's why the district court was talking about rigs and stuff.

[00:10:29] Speaker 04:
What this company did to make value for shareholders was

[00:10:33] Speaker 04:
Drill.

[00:10:35] Speaker 04:
And all of that was taken away.

[00:10:37] Speaker 04:
And management was taken away.

[00:10:39] Speaker 04:
And all control over operations was taken away.

[00:10:43] Speaker 04:
All profits taken away.

[00:10:45] Speaker 04:
I don't think the district court found that they lost a property interest in the rigs.

[00:10:52] Speaker 04:
They lost everything it was in this company that gave those shares economic value.

[00:11:00] Speaker 04:
Well, your honor agree with that factual finding by the district court.

[00:11:04] Speaker 01:
Well, the facts are not disputed.

[00:11:06] Speaker 01:
I think the conclusion that the district court drew from those facts is what is problematic because the entire first of all, there is.

[00:11:16] Speaker 01:
management and control of the company.

[00:11:18] Speaker 01:
It's not just paper shares that have been left.

[00:11:20] Speaker 01:
They still have all the voting rights.

[00:11:21] Speaker 01:
They appoint directors and that allows them to show it's not function.

[00:11:25] Speaker 04:
It's not it's not doing any business.

[00:11:27] Speaker 04:
It can't do any business.

[00:11:29] Speaker 04:
It can't do it's just this shell.

[00:11:32] Speaker 01:
But well on day one after the expropriation, they had $30 million in cash.

[00:11:38] Speaker 01:
They had more than $25 million about went through all those as to why that's not real money.

[00:11:43] Speaker 04:
So those again are fact issues.

[00:11:45] Speaker 04:
that I don't think you've argued were clearly erroneous.

[00:11:48] Speaker 04:
So I mean, did you put on any evidence as to the market value of the shares that Hellmark International holds in this company?

[00:11:59] Speaker 04:
Or say it was an individual stockholder.

[00:12:01] Speaker 04:
What is the market value of their shares?

[00:12:03] Speaker 01:
Well, that would not be our burden.

[00:12:05] Speaker 01:
But they have not put forward any evidence.

[00:12:07] Speaker 04:
I think they have, that it's worthless.

[00:12:09] Speaker 04:
They get no money.

[00:12:11] Speaker 04:
There's no profits.

[00:12:12] Speaker 04:
There's no dividends.

[00:12:13] Speaker 04:
There's nothing.

[00:12:13] Speaker 01:
Well, their corporate witness said that he had not done.

[00:12:18] Speaker 01:
They had not done evaluation of what the shares were worth.

[00:12:21] Speaker 01:
And the problem is that that's a fundamental problem.

[00:12:24] Speaker 01:
If you're going to look at the beneficial and productive value of the shares, because the sheer argument that these shares are worth something on an open market, they could be.

[00:12:32] Speaker 01:
And certainly they are.

[00:12:35] Speaker 01:
Well, but we know that there at least there were $30 million there.

[00:12:38] Speaker 01:
There were $22 million in insurance claims that were obtained as a result of their ownership interests in HMP Venezuela.

[00:12:45] Speaker 01:
They had the ability to pursue legal actions here in this court.

[00:12:48] Speaker 04:
The value of the shares that they get insurance payment from their property haven't been taken from them.

[00:12:56] Speaker 01:
Someone could buy the company in order to pursue the legal actions.

[00:12:59] Speaker 04:
I mean, if I get a payment from insurance company because my car was totaled in an accident,

[00:13:04] Speaker 04:
That doesn't mean the car has any value left in it, does it?

[00:13:09] Speaker 01:
Well, does it?

[00:13:10] Speaker 01:
Does it?

[00:13:11] Speaker 01:
It could.

[00:13:12] Speaker 04:
Well, that's basically how insurance works here.

[00:13:15] Speaker 04:
There's no value left in that car.

[00:13:18] Speaker 04:
It's just compensation.

[00:13:20] Speaker 01:
Sure, but that compensation goes back to the company and then the shareholder, through its ownership interest in the company, is able to extract that value from it.

[00:13:29] Speaker 01:
The company continues to exist, and they treat it as something that has strategic value because they continue to be.

[00:13:35] Speaker 05:
Do you think this appeal turns on whether the shares have value?

[00:13:39] Speaker 01:
Your Honor, I don't think it turns on whether the shares have value.

[00:13:42] Speaker 05:
It seems that there are two parts of the statute.

[00:13:45] Speaker 05:
One is whether the rights and property were taken in violation of international law.

[00:13:49] Speaker 05:
And part of that is you take the shares if you reduce their value to zero.

[00:13:54] Speaker 05:
And the second part of the statute says it has to be owned or operated

[00:13:58] Speaker 05:
by an agency or instrumentality of the foreign state.

[00:14:01] Speaker 05:
And so I think the second part is the more interesting issue for purposes of this appeal, because I don't know that the value of the shares goes to whether it's being owned and operated by the agency.

[00:14:13] Speaker 05:
But it still seems clear to me that if they've taken over everything that this subsidiary does, they're owning or operating the ownership interest that the parent company had.

[00:14:26] Speaker 01:
I think that the district court's decision on the narrower claim under Venezuelan law is where the crack in the logic is exposed.

[00:14:36] Speaker 01:
Because the district court there realized that what they had was a shareholder right to dispose of in terms of what the district court said.

[00:14:45] Speaker 01:
And the court understood that that was derivative.

[00:14:48] Speaker 05:
That's a separate claim, though.

[00:14:49] Speaker 05:
But on the claim on the ownership interest, they're still owning and operating the ownership interest by controlling

[00:14:56] Speaker 05:
the subsidiary and the assets and subsidiary.

[00:14:58] Speaker 01:
Well, HMPIDC is the one that owns and controls the ownership interest because they are the ones that reported on their balance sheets.

[00:15:05] Speaker 01:
They are the ones that use HMPV to litigate in this case, to litigate in Venezuela, to litigate in the arbitrations for the insurance claims.

[00:15:16] Speaker 01:
They are the ones that have been keeping it up to date with its licensing requirements, its tax payments in Venezuela.

[00:15:22] Speaker 01:
They're keeping this company alive.

[00:15:23] Speaker 05:
You think this appeal does turn on whether they've taken

[00:15:26] Speaker 05:
the ownership interest.

[00:15:28] Speaker 05:
It has to because that's what they've taken it.

[00:15:30] Speaker 05:
They're definitely operating and operating it.

[00:15:34] Speaker 01:
Well, I when you look at No, I don't think that's right in terms of destroying the ownership interest, perhaps.

[00:15:42] Speaker 01:
And I don't think that's right because of the reasons I've said.

[00:15:45] Speaker 01:
But then when you get to the owner operated, the only thing that the district court could point to was the rates.

[00:15:51] Speaker 01:
And the problem with allowing the district court's decision to stand here is that it eviscerates the domestic takings rule.

[00:15:58] Speaker 01:
And the US government, when it submitted its supplemental brief that formed the basis of the test that we now have, said you have to look at an indirect taking in light of the domestic takings rule.

[00:16:10] Speaker 01:
Because if you just focus on the value in the company without looking at whether under international law the company continues to exist, and you have the ability to control and manage the ownership interests

[00:16:21] Speaker 01:
then you can convert any kind of taking of assets of a company into the taking of the actual ownership interest.

[00:16:28] Speaker 01:
And in Exxon, this case, actually, this court.

[00:16:31] Speaker 03:
That's not right.

[00:16:32] Speaker 03:
It's only takings that are so dramatic that they almost entirely destroy the value of the enterprise.

[00:16:42] Speaker 03:
Well, you take lots of things that don't rise to that level.

[00:16:47] Speaker 01:
But if you don't take domestic takings.

[00:16:51] Speaker 01:
If you don't take the company itself, which is what Helmerick for said, you do not have an indirect expropriation of the ownership interest.

[00:17:00] Speaker 01:
You have to be able to exclude.

[00:17:02] Speaker 01:
You have to exclude the shareholder from its business, its company.

[00:17:07] Speaker 04:
And that's important because if you don't distinguish clearly what your theory is that if the shell of the company is left,

[00:17:17] Speaker 04:
So you take all of its assets, its employees, its business, control and management, you empty it out so all you have is a sort of shell of a building that's left there, maybe the name of the company.

[00:17:33] Speaker 04:
Your argument is that it's insufficient to establish that the shares have been rendered valueless.

[00:17:43] Speaker 01:
under customary international law, if the company continues to exist, and this is what Barcelona Traction said, even if you leave it defunct, if the company continues to exist, international law only cares about the ownership interest that the shareholder has.

[00:17:58] Speaker 04:
Right, the ownership interest is zero, even if the company, the fact that the company name and shell is sitting there doesn't address the issue of whether the value of the shares, that's what's been taken here, is the value of the shareholders.

[00:18:12] Speaker 04:
company, and that's been reduced to zero.

[00:18:15] Speaker 01:
But Your Honor, the value is not a property right.

[00:18:18] Speaker 01:
The property right is the ownership interest that is represented by the ownership of the company.

[00:18:24] Speaker 04:
That's what reduces zero, right?

[00:18:26] Speaker 04:
The company is sort of sucked up completely by the government.

[00:18:30] Speaker 04:
Otherwise, your argument would leave nothing.

[00:18:33] Speaker 04:
would leave nothing to this theory that the United States has endorsed, that we recognized in prior Hellmark decision, that when shares are rendered valueless, because all the foreign government has to do is not take the company name, right?

[00:18:53] Speaker 04:
Then the company still exists.

[00:18:56] Speaker 04:
That empties, this makes it all a charade.

[00:19:00] Speaker 01:
Well, Your Honor, it's not a charade, because that's not what happened here.

[00:19:03] Speaker 04:
No, I'm asking you about your theory.

[00:19:04] Speaker 04:
And you just said, as long as we don't take the company itself, so we leave it its name, maybe we leave the empty building sitting there, then everything's fine.

[00:19:14] Speaker 04:
It's just a domestic taking.

[00:19:15] Speaker 04:
That's not what we said in Helmer Report.

[00:19:17] Speaker 04:
That's not what the United States said in this brief.

[00:19:19] Speaker 04:
But I'm asking you directly, is that what your position is?

[00:19:22] Speaker 01:
No, Your Honor, that it's not our position.

[00:19:24] Speaker 04:
That's what it sounded like to me when you said we didn't take the business.

[00:19:26] Speaker 04:
What do you mean by we didn't take the business?

[00:19:30] Speaker 01:
We left, what Venezuela did was take rigs.

[00:19:34] Speaker 01:
The expropriation decree talks about the- It did way more than that.

[00:19:38] Speaker 04:
It took all the equipment.

[00:19:39] Speaker 04:
It took the employees.

[00:19:42] Speaker 04:
It's managing it.

[00:19:43] Speaker 04:
It's using that equipment.

[00:19:45] Speaker 04:
There's nothing left.

[00:19:48] Speaker 04:
for Helmer Venezuela to do its entire business operation, which obviously it was a heavy equipment operation, but it was more than that.

[00:19:58] Speaker 04:
It was employees.

[00:19:59] Speaker 04:
It was a business plan.

[00:20:01] Speaker 04:
It was a model of producing profits.

[00:20:05] Speaker 04:
It was probably contracts for providing this service, all gone.

[00:20:11] Speaker 04:
You keep saying that we didn't take the company.

[00:20:14] Speaker 04:
The company's still there.

[00:20:15] Speaker 04:
What do you mean by the company's still there?

[00:20:18] Speaker 01:
the ownership interest, their ability to use the company to pursue claims, to maintain it ready to go in case there is an opportunity to operate.

[00:20:30] Speaker 04:
They have all the- So it's completely valueless, but you know, they keep the name of the company, you know, copyrighted at this point, and so they've got, they keep the name of the company, and shares are utterly valueless when they're just hoping and praying that maybe there'll be a change in government, and that means

[00:20:49] Speaker 04:
They don't have any claim.

[00:20:51] Speaker 01:
Your honor, I see my time is up.

[00:20:53] Speaker 01:
So I'd still like to reserve some time for rebuttal.

[00:20:54] Speaker 01:
I'd like to answer your question.

[00:20:55] Speaker 04:
We'll give you time for your rebuttal.

[00:20:56] Speaker 04:
I'm just trying to understand what you mean when you say, well, everything's valueless.

[00:21:01] Speaker 04:
All the value of this operation has been hoovered up.

[00:21:04] Speaker 04:
But we're going to, but you've still got, you still own the company.

[00:21:09] Speaker 01:
Well, your honor, I don't think the entire value has been taken because they continue to treat the company.

[00:21:14] Speaker 04:
That's a factual dispute with the district court.

[00:21:17] Speaker 01:
It's not a factual dispute in so far as you have to show that, you still have to show that HMPADC has been permanently deprived of management and control.

[00:21:27] Speaker 01:
And that is what's absent.

[00:21:28] Speaker 04:
Where does permanent come in?

[00:21:30] Speaker 01:
From the test, Your Honor, from this court's articulation of the test.

[00:21:32] Speaker 04:
How long is permanent?

[00:21:34] Speaker 01:
Forever.

[00:21:35] Speaker 05:
And they have- Well, again, then this is no test at all.

[00:21:37] Speaker 05:
What about what we said in Helmerick IV?

[00:21:39] Speaker 05:
We said if it completely destroys the beneficial and productive value of the ownership,

[00:21:45] Speaker 05:
that would be depriving them of the shares.

[00:21:48] Speaker 05:
Just beneficial and productive.

[00:21:49] Speaker 05:
It doesn't have to be every single thing.

[00:21:54] Speaker 01:
In conjunction with permanently depriving them of management and control, the two things have to be

[00:21:59] Speaker 05:
put together in order to completely destroy the beneficial productive value of the company.

[00:22:06] Speaker 05:
And the remand was to determine whether that had happened.

[00:22:10] Speaker 01:
No, no, your honor.

[00:22:11] Speaker 01:
Actually, the remand reveals that that's not what was the only thing.

[00:22:14] Speaker 01:
If you look at Helmut for the articulation of the test from the United States amicus brief, it says when a state permanently takes over management, this is I believe it would be age

[00:22:29] Speaker 05:
I'm sorry, which brief?

[00:22:30] Speaker 01:
This is Helmerich IV, the discourse decision in Helmerich IV.

[00:22:33] Speaker 01:
The decision in?

[00:22:35] Speaker 01:
Yeah, Section 3A, which I have my print out here that I can't quite get you the exact page.

[00:22:43] Speaker 01:
But it's in the section discussing the broader claim.

[00:22:48] Speaker 01:
It's indented where the test is articulated.

[00:22:52] Speaker 01:
When a state permanently takes over management and control of the foreign shareholders' business,

[00:22:57] Speaker 01:
completely destroying the beneficial and productive value of the ownership of the company and leaving shares that have been rendered useless, then you have an indirect expropriation of the ownership of that business.

[00:23:09] Speaker 05:
So I'm sorry, so are you relying on the idea that Venezuela is going to give this back so it's not permanent?

[00:23:16] Speaker 05:
Is that what this turns on?

[00:23:18] Speaker 01:
What has been taken is the rigs, and that belongs to HNPV.

[00:23:22] Speaker 01:
The ownership interest has not been taken or permanent.

[00:23:26] Speaker 01:
They have not been deprived of it now or permanently.

[00:23:29] Speaker 05:
So the key feature of the ownership interest is controlling what happens as a subsidiary, and they have no control over the subsidiary.

[00:23:38] Speaker 05:
And PVDSA is exercising that ownership and control of the subsidiary.

[00:23:45] Speaker 01:
I think part of the confusion again is that we're looking at what does HMPADC have a right to control?

[00:23:52] Speaker 01:
They have the right to control the company.

[00:23:55] Speaker 05:
Right, including what happens to the subsidiary.

[00:24:00] Speaker 01:
But this is where the problem starts to get blurred in terms of the domestic takings rule.

[00:24:04] Speaker 01:
If you just look past the company and ignore the fact that they incorporated a Venezuelan entity to do their business, then you're treating the property of the company as the property of the shareholder.

[00:24:14] Speaker 01:
And that's why the United States.

[00:24:16] Speaker 05:
I don't think so.

[00:24:16] Speaker 05:
There's a corporate form here.

[00:24:18] Speaker 05:
There's a parent company.

[00:24:20] Speaker 05:
It has 100% ownership interest in the subsidiary.

[00:24:23] Speaker 05:
And part of that interest is to control the subsidiary.

[00:24:27] Speaker 05:
And that interest of the parent company has been taken away.

[00:24:30] Speaker 05:
And it's being owned and operated by EDVSA.

[00:24:38] Speaker 01:
hasn't been taken away, but it's certainly to the point about.

[00:24:40] Speaker 05:
How has it not been taken away?

[00:24:41] Speaker 05:
Because they no longer can control the company.

[00:24:44] Speaker 05:
That's the key feature of the ownership.

[00:24:47] Speaker 05:
Voting shares that have no value is not the key feature of ownership.

[00:24:52] Speaker 01:
They have the capacity by retaining their own.

[00:24:55] Speaker 05:
How do they have capacity to control what happens to the subsidiary?

[00:24:58] Speaker 05:
It's the key feature of ownership.

[00:25:00] Speaker 01:
If HMPIDC infused capital into HMP Venezuela,

[00:25:06] Speaker 01:
That capital would not go to the Pederbaesa defendants.

[00:25:09] Speaker 01:
That capital would go to HMP Venezuela.

[00:25:11] Speaker 05:
It doesn't answer the question of how they're controlling the subsidiary.

[00:25:15] Speaker 01:
Because they use their shareholder power to be able to do things with the company, like go after the insurance claims, bring a lawsuit in the United States.

[00:25:24] Speaker 04:
The money in Venezuela takes that too.

[00:25:26] Speaker 01:
That is absolutely not the claim that we're dealing with here.

[00:25:30] Speaker 01:
And the cash was left in the bank accounts.

[00:25:32] Speaker 04:
I think you're over reading the permanence here.

[00:25:35] Speaker 04:
I think what it's referencing there is if a government were to temporarily take something to deal with some kind of emergency.

[00:25:41] Speaker 04:
I do not read permanence here as like,

[00:25:45] Speaker 04:
eternity as you are.

[00:25:47] Speaker 04:
Is there any evidence in the record that this is a temporary takeover by the Venezuelan people?

[00:25:53] Speaker 04:
They nationalized it, said it now belongs to the Venezuelan people, serves the Venezuelan people.

[00:25:57] Speaker 04:
Doesn't sound temporary to me.

[00:26:00] Speaker 01:
Well, the temporary, well, what hasn't been taken again, and I understand that the panel may not be interested in this view in terms of the ownership interest being still left because their ability to control

[00:26:13] Speaker 01:
as a shareholder, the actions at the company that HMP Venezuela takes.

[00:26:17] Speaker 01:
But I think, again, if we look at the owned or operated problem, it helps to crystallize what the problem is in terms of what actually was taken.

[00:26:26] Speaker 01:
Because when you look at the narrow right, which is a shareholder right, as opposed to the entire bundle of shareholder rights that come from ownership, you look only at what the district court looked at in terms of the voting power or the right to dispose.

[00:26:38] Speaker 01:
And the court said, that is derivative.

[00:26:40] Speaker 01:
because they don't actually own the rigs.

[00:26:43] Speaker 01:
Once the rigs changed hands, that right was extinguished and is not owned or operated by the PDVSA defendant.

[00:26:54] Speaker 04:
I mean, it wasn't distinguished, right?

[00:26:56] Speaker 04:
Venezuela has that equipment.

[00:26:58] Speaker 04:
It can dispose of it or not, correct?

[00:27:01] Speaker 04:
It's not distinguished.

[00:27:03] Speaker 04:
It was transferred.

[00:27:04] Speaker 04:
It's not extinguished.

[00:27:06] Speaker 04:
It was just taken by Venezuela.

[00:27:09] Speaker 04:
But the right to dispose of that property is now held by Venezuela, PDVSA, right?

[00:27:15] Speaker 04:
Does PDVSA or Venezuela not have the ability to dispose of that physical property as it chooses?

[00:27:24] Speaker 04:
Does it, yes or no?

[00:27:25] Speaker 01:
Yes, the property, the equipment.

[00:27:28] Speaker 04:
Right.

[00:27:28] Speaker 04:
That right is there.

[00:27:29] Speaker 04:
I'm just talking about the separate claim that they have that their right under domestic law to control disposal of these assets, which hasn't been disputed.

[00:27:43] Speaker 04:
That right exists under Venezuelan law.

[00:27:45] Speaker 04:
The district court said that was extinguished.

[00:27:47] Speaker 04:
I don't understand how it was extinguished.

[00:27:50] Speaker 04:
It was taken because the right to control that property still exists.

[00:27:55] Speaker 04:
It's just now in the hands of Venezuela instead of in the hands of Helmerick.

[00:27:59] Speaker 01:
Well, Your Honor, it is disputed what that right to dispose of is because under Venezuelan law, like it is in the United States, ordinary corporate law of all major jurisdictions,

[00:28:11] Speaker 01:
It is a voting right.

[00:28:13] Speaker 01:
It is the right of the shareholder to vote, but the company still retains ownership and control and the ability Article 2.4 of the HMP bylaws to say.

[00:28:23] Speaker 04:
Does Helmer have a right to vote on how Venezuela disposes of that property?

[00:28:27] Speaker 04:
But that's why they have a right to vote on how Venezuela disposes of that property.

[00:28:33] Speaker 01:
No, no, but there we go.

[00:28:35] Speaker 04:
Well, Your Honor, then Venezuela has control over how to dispose of that property.

[00:28:41] Speaker 01:
The property that belonged to HMP Venezuela, yes.

[00:28:44] Speaker 01:
Okay.

[00:28:44] Speaker 01:
Your honor, let me move on to the... Can I try to just come at it slightly differently?

[00:28:51] Speaker 03:
It seems like, suppose just to take some of the factual questions out of the case, focus on what should be the legal test from Elmerick for.

[00:29:05] Speaker 03:
Suppose that

[00:29:09] Speaker 03:
the Venezuelan government had formally expropriated, the expropriation order says every asset on the sub's balance sheet, everything they own, formally taken, transferred to Venezuela.

[00:29:31] Speaker 03:
But it's completely silent over

[00:29:36] Speaker 03:
about the rights of the shareholders to vote in directors or whatever over this thing that now has a zero balance sheet.

[00:29:44] Speaker 03:
Would you say that can't support an expropriation claim by the US parent?

[00:29:55] Speaker 01:
Well, that isn't what happened here, but I think that- I said it was- Yes, I understand, Your Honor.

[00:30:03] Speaker 01:
I think in that situation, the problem that arises is that you start to run into, well, how much is an indirect expropriation?

[00:30:12] Speaker 01:
Is it 100%?

[00:30:13] Speaker 01:
I'm stipulating.

[00:30:15] Speaker 03:
I'm trying to get at whether taking a value can ever be sufficient without getting it.

[00:30:24] Speaker 03:
You seem to be saying you can take 100%

[00:30:29] Speaker 03:
And that will never be a taking so long as the shareholders have the corporate rights to manage the valueless shell that remains.

[00:30:42] Speaker 01:
Well, it's relevant because this court said it was relevant that they have the ability to manage and control the company.

[00:30:49] Speaker 01:
And that's why it remanded to the district court for discovery so that we can understand how much they continue to do.

[00:30:54] Speaker 03:
Look, I take if we are

[00:30:58] Speaker 03:
reading Helmerick for as if it were a statute, which, right, trying to figure out, are these independent elements that both have to be satisfied, or is this a squishy sliding scale inquiry?

[00:31:12] Speaker 03:
That's debatable.

[00:31:14] Speaker 03:
But what is the right answer?

[00:31:15] Speaker 03:
Why isn't it right to think my hypothetical 100% taking of every asset should be sufficient to support a claim by the parent?

[00:31:27] Speaker 01:
Because you have to balance it with the domestic takings rule.

[00:31:31] Speaker 01:
The power of a sovereign to dispose of the property of its nationals is embedded in international customary international law.

[00:31:40] Speaker 01:
The Supreme Court has recently confirmed that it is an important piece of the expropriation exception.

[00:31:45] Speaker 01:
The domestic takings rule has to be abided by.

[00:31:49] Speaker 01:
The US government's position in this case, when it articulated this test, said.

[00:31:54] Speaker 05:
But why haven't we abided by that?

[00:31:55] Speaker 05:
Because the subsidiary

[00:31:57] Speaker 05:
has been dismissed from this case.

[00:31:59] Speaker 05:
We're just talking about the parent company, which is not a Venezuelan company.

[00:32:04] Speaker 01:
Because under customary international law, Barcelona Attractions, Diallo, it is clear that just taking the value, leaving the company in a near state of bankruptcy was not enough to establish a taking of the shareholders' right because the company continued to exist.

[00:32:20] Speaker 01:
They had the ability to control and manage that.

[00:32:22] Speaker 05:
We held in Helmwerk IV that depriving this

[00:32:27] Speaker 05:
parent company of the beneficial and productive value of its ownership interest is a taking.

[00:32:32] Speaker 05:
We've already helped that.

[00:32:34] Speaker 01:
But you still adopted the test from Customary International Law and Barcelona Attraction.

[00:32:40] Speaker 01:
And the decision in Exxon, I think, is also illustrative and informative when this court looks at what was happening there and says they still have a shareholder meetings.

[00:32:51] Speaker 01:
They still appoint directors.

[00:32:52] Speaker 01:
They still have a company that they've registered in the local registry.

[00:32:56] Speaker 01:
They're in good standing.

[00:32:57] Speaker 03:
And you have a forfeited claim

[00:33:00] Speaker 03:
of whether taking all the value wouldn't have been sufficient.

[00:33:06] Speaker 03:
We didn't say that was legally not enough.

[00:33:10] Speaker 03:
We said that claim wasn't preserved.

[00:33:13] Speaker 01:
That is right.

[00:33:14] Speaker 01:
But I don't think we can read Exxon differently.

[00:33:16] Speaker 01:
Because if you look at what they said at Exxon, this is I believe it is page 29 of Exxon.

[00:33:26] Speaker 01:
When they're looking at an argument about what the plaintiff's Exxon in that case said,

[00:33:30] Speaker 01:
You know, the United States thinks it's okay to take the property of the subsidiary and you take the value.

[00:33:36] Speaker 01:
And the court said it is true that the statute establishing the commission does allow for a valid claim for exon, but that statute specifically treats the property, including any right or interest therein owned wholly or partially directly or indirectly,

[00:33:52] Speaker 01:
At the time by the National of the United States as what is protected, but then it goes on and says that's not what's protected under customary international law.

[00:34:00] Speaker 01:
That's what's different.

[00:34:01] Speaker 01:
That's what Helmer can for a helmet for set in this court also pointed to that distinction when it rejected the notion that

[00:34:09] Speaker 01:
we could look to international investment law under bilateral investment treaties that conflate in the definition of investment the shares with the property of the company.

[00:34:19] Speaker 01:
And the United States made that clear in its US amicus brief here in this case in the last appeal when it said when you're looking at an indirect expropriation you have to make sure that you keep the domestic takings rule in sight.

[00:34:33] Speaker 04:
It's not on the property being taken but the productive value

[00:34:37] Speaker 04:
of those shares haven't been reduced to zero or near zero.

[00:34:42] Speaker 01:
And the US government said that would not be enough in their amicus brief.

[00:34:44] Speaker 01:
You have to take management and control away as well.

[00:34:48] Speaker 01:
The ability and the capacity to produce.

[00:34:50] Speaker 01:
But I'd like to move on if I may.

[00:34:51] Speaker 04:
Management and control of the business that they had, of their subsidiaries' business.

[00:34:59] Speaker 01:
The foreign shareholders' business.

[00:35:00] Speaker 04:
Or management and control of the shares?

[00:35:05] Speaker 01:
The ownership interest.

[00:35:06] Speaker 01:
Yes, their ability to use the company to pursue whatever other activities they want.

[00:35:11] Speaker 01:
And they could.

[00:35:12] Speaker 01:
And that's not what has been interfered with here.

[00:35:14] Speaker 04:
How could they?

[00:35:15] Speaker 04:
The assets are all gone.

[00:35:17] Speaker 01:
They continue to do that.

[00:35:18] Speaker 04:
The operations are gone.

[00:35:21] Speaker 04:
The business is gone.

[00:35:24] Speaker 01:
Of H&P Venezuela.

[00:35:25] Speaker 01:
But let me move on then.

[00:35:27] Speaker 04:
That's what they have an ownership interest in.

[00:35:29] Speaker 01:
And they have their ownership interest.

[00:35:31] Speaker 01:
But let me move on.

[00:35:32] Speaker 04:
So they still hold their shares, is your argument.

[00:35:36] Speaker 01:
their shareholder rights, they still own the company, all of the shareholder rights that they have been exercising.

[00:35:41] Speaker 01:
Let me move on to the US talking.

[00:35:43] Speaker 04:
I know you want to move on.

[00:35:44] Speaker 04:
But at first, when the US said in its brief talked about reducing to zero or near zero, the productive value of those shares.

[00:35:53] Speaker 04:
What does it mean?

[00:35:56] Speaker 01:
When the US government said that, it said that you had to show something beyond just that the value had been reduced to zero.

[00:36:03] Speaker 01:
And that had to be whether the company continues to exist, because that's what customary international law requires.

[00:36:09] Speaker 01:
And that's what Helmerich IV was articulating, was a test of customary international law.

[00:36:15] Speaker 01:
But let me move on to, if I may, with- One more.

[00:36:18] Speaker 01:
Yes.

[00:36:19] Speaker 03:
Which is you're trying to ground Helmerich

[00:36:25] Speaker 03:
international law.

[00:36:27] Speaker 03:
Barcelona Traction has the default rule that you state, no doubt.

[00:36:32] Speaker 03:
But then it says different rule if the action is, in some sense, directed at the shareholders.

[00:36:44] Speaker 03:
Just seems like, you know, if the government

[00:36:51] Speaker 03:
Back to my hypothetical, a foreign government says, you know, we don't like Americans investing in our company.

[00:37:00] Speaker 03:
This is an American-owned company.

[00:37:02] Speaker 03:
We're just going to take everything they own.

[00:37:05] Speaker 03:
That sounds like an action directed at the shareholders.

[00:37:09] Speaker 03:
You think international law would shoehorn that into the domestic takings rule?

[00:37:16] Speaker 01:
Well, in this case, the Supreme Court looked at

[00:37:21] Speaker 01:
precisely whether the discriminatory taking aspect and said there is no discriminatory taking exception to the domestic takings rule.

[00:37:29] Speaker 01:
And the Supreme Court has reaffirmed the importance of the domestic takings rule as part of the international law that is incorporated into the expropriations exception in the Philip case.

[00:37:39] Speaker 01:
And that was a critical case in terms of the Supreme Court establishing that under customary international law, which is what the only thing incorporated into the expropriation exception

[00:37:49] Speaker 01:
you have to take account of the domestic takings rule.

[00:37:52] Speaker 01:
And that's what I would say is the fundamental problem here with affirming the district court's decision on these facts.

[00:37:59] Speaker 01:
It's very mushy.

[00:38:00] Speaker 01:
It's very abstract.

[00:38:02] Speaker 01:
You do not have the requirements that this court articulated in hemorrhag 4 for taking under customary international law.

[00:38:09] Speaker 01:
But none of this may even be relevant.

[00:38:11] Speaker 01:
If you look at the district unit, Your Honors, if I may take another minute, even though I am way beyond my time,

[00:38:18] Speaker 04:
You can just give you one more sentence.

[00:38:20] Speaker 01:
Yes.

[00:38:21] Speaker 01:
I want to say all of this also just goes away with the ruling that the district court said in terms of whether the PDVSA defendants are alter egos of the republic.

[00:38:33] Speaker 01:
Under BANSEC, which is the test that is used to determine whether you're an agency or instrumentality or a foreign state under the FSIA, once you become adjudicated to be the alter ego of the state, you are the state.

[00:38:45] Speaker 01:
And therefore, the first prong of the commercial nexus clause would have to apply.

[00:38:50] Speaker 01:
The property is not in the United States.

[00:38:53] Speaker 01:
And although we don't believe that the PDVSA defendant, that it has been established in this case that the PDVSA defendants are alter egos of the Republic, if the court were to agree and sidestep personal jurisdiction in due process, then you would come squarely back into the first prong of the commercial nexus requirement.

[00:39:12] Speaker 01:
And the case would have to be

[00:39:14] Speaker 01:
knocked out because the property is not here, which is the same reason the Act of State Doctrine also knocks out the case.

[00:39:42] Speaker 02:
Thank you, Your Honors, and may it please the Court.

[00:39:44] Speaker 02:
Matthew Rosen, Gibson Dunn for Plaintiff Appellee, Helmwork and Payne International Drilling Company.

[00:39:51] Speaker 02:
This court in Helmwork IV said that our complaint

[00:39:56] Speaker 02:
and indirect expropriation to a T. Judge Cooper then found that we proved the allegations in our complaint.

[00:40:02] Speaker 02:
So he correctly denied Petavesa's motion to dismiss.

[00:40:06] Speaker 02:
This court is focused on subject matter jurisdiction, so I will start there and focus there, but I'm happy to discuss any other issues the court wants to discuss.

[00:40:14] Speaker 02:
The arguments that Petavesa has made today are the same arguments that it made and lost in Helmarck 4.

[00:40:21] Speaker 02:
It's arguing that if the company still exists, there is no indirect expropriation.

[00:40:27] Speaker 02:
Well, the company still existed.

[00:40:29] Speaker 02:
That was patently obvious in Helmerick IV in a technical sense, because Helmerick and Payne Venezuela was a party in this court.

[00:40:37] Speaker 02:
And that didn't stop the court from finding that we had pleaded an indirect expropriation to a T. Our statement of the rule in Helmerick IV

[00:40:48] Speaker 03:
seems to require taking the management and control rights as well as taking all the value.

[00:40:59] Speaker 02:
Yeah, so what the court said is when a state permanently takes over management and control of a foreign shareholders business.

[00:41:06] Speaker 02:
The focus is on control of the business, not control of the shares.

[00:41:11] Speaker 02:
If it were on control of the shares, there would be no such thing as indirect takings.

[00:41:15] Speaker 02:
And here, there's no question that the business is a drilling business.

[00:41:19] Speaker 02:
The business is a drilling business.

[00:41:22] Speaker 02:
And that drilling business has been taken by PEDOVASA.

[00:41:25] Speaker 02:
We do not control that at all.

[00:41:27] Speaker 02:
The only management and the only board activities that are in the record

[00:41:33] Speaker 02:
are winding down the company.

[00:41:35] Speaker 02:
There's three board resolutions in the record, two of them concern authorizing the few remaining employees to engage with the agencies of the Venezuelan government and the utility companies for the purpose of shutting down the company.

[00:41:47] Speaker 02:
And the third is just accounting measures to account for the expropriation.

[00:41:51] Speaker 02:
So there's no management and control of the company.

[00:41:54] Speaker 02:
And there's no question that the company has no value left.

[00:41:58] Speaker 02:
I will respond to a couple of the points that my opponent made.

[00:42:01] Speaker 02:
First of all, there were some questions about what permanent deprivation of control means.

[00:42:08] Speaker 02:
That is resolved by the international law cases that we cite in our brief.

[00:42:12] Speaker 02:
the government's brief in the Electronica Sicula case and the 1985 CEDCO case that both clarify that the standard here is when there is no reasonable prospect of regaining control.

[00:42:23] Speaker 02:
That's clearly the case.

[00:42:25] Speaker 02:
No one thinks that the Venezuelan government is going to give us back any aspect of our business.

[00:42:30] Speaker 02:
So that's easily satisfied.

[00:42:32] Speaker 02:
My opponent also referenced a couple of international law decisions, the Barcelona Traction decision and the Diallo decision.

[00:42:40] Speaker 02:
Neither of those decisions are helpful to PDVSA at all.

[00:42:43] Speaker 02:
The Barcelona Traction decision, there's a brief mention of the indirect expropriation theory in paragraph 48 of that decision.

[00:42:52] Speaker 02:
And the court goes on to say, actually, the Belgian government has not raised that theory, so we're not going to address it.

[00:42:57] Speaker 02:
The rest of the decision is discussing a completely different theory, which is more of a shareholder derivative claim or an alter ego claim in the event that there isn't a liability.

[00:43:06] Speaker 02:
And also, Barcelona Attraction and Light does not involve any of the facts that are relevant to the standard under homework four.

[00:43:15] Speaker 02:
Government of Spain did not take the company.

[00:43:17] Speaker 02:
The company had not been deprived of value.

[00:43:19] Speaker 02:
Paragraph 67 makes clear that the shares still had value in that case.

[00:43:22] Speaker 02:
Similarly with Diallo.

[00:43:24] Speaker 02:
Diallo is a case where the plaintiff alleged that he had been imprisoned and then kicked out of the Democratic Republic of Congo.

[00:43:34] Speaker 02:
And as a result, his shares, his company had declined in value.

[00:43:38] Speaker 02:
There's no allegation Diallo of the company had lost all value, not by the plaintiff at least.

[00:43:43] Speaker 02:
And there's no allegation that the Democratic Republic of Congo had taken over control of that company.

[00:43:48] Speaker 02:
So in that case.

[00:43:49] Speaker 03:
Do you have any international cases to affirmatively support the proposition that taking 100% of the value is sufficient without getting into all this other business about management rights?

[00:44:07] Speaker 02:
Um, yes, I think the Clorox case, which is an international treaty arbitration case, applying international law expressly.

[00:44:17] Speaker 02:
In that case, there is no taking over the management control.

[00:44:20] Speaker 02:
There's just actions by the Venezuelan government that completely destroyed the value of Clorox.

[00:44:26] Speaker 02:
Yes.

[00:44:27] Speaker 02:
Is that in the briefs?

[00:44:28] Speaker 02:
It is cited in the briefs.

[00:44:29] Speaker 04:
And it also, that case also... You said it was a treaty case, but was that an investment treaty case?

[00:44:35] Speaker 02:
It was an investment treaty case, but it is clear in the decision that it is not in the passage that we're discussing talking about what the treaty says.

[00:44:43] Speaker 02:
It's talking about basic principles of international law.

[00:44:46] Speaker 02:
There's several express references to customary international law.

[00:44:50] Speaker 02:
And this court considered two treaty arbitration cases in Helmwerk IV, Piedwater and Fopen Talbot, and relied on those decisions to construe international law where relevant and where the cases were actually discussed in that issue.

[00:45:04] Speaker 05:
So it seems that the jurisdictional inquiry really relies on two different aspects.

[00:45:11] Speaker 05:
One is property taken in violation of international law.

[00:45:14] Speaker 05:
And the second is,

[00:45:16] Speaker 05:
for our purposes, owned or operated by an agency or instrumentality.

[00:45:20] Speaker 05:
And it seemed to me that comic four was really addressing that first part, taken in violation of international law, and didn't really speak to owned or operated by an agency.

[00:45:29] Speaker 05:
And it wasn't clear to me that to meet the second part, which is also necessary, owned and operated, that the value, the productive value and beneficial use, that aspect of it, definitely relevant to taking in violation of international law, because this is taking away all the shares, depriving of its value.

[00:45:46] Speaker 05:
But owning or operating by an agency doesn't seem, it doesn't seem like you couldn't fulfill that second part of this just by reducing value.

[00:45:55] Speaker 05:
You actually have to own and operate.

[00:45:58] Speaker 05:
And I think that it's probably met because if you take over the ownership interest and start doing things with subsidiary, it seems that you've taken it over.

[00:46:08] Speaker 05:
But the analysis that relied on reducing value to me didn't really seem to support owned or operated by an agency.

[00:46:16] Speaker 02:
Yeah, so your honor is correct that the decision did not directly address the issue of own an operator, but I think it's quite instructive because the key premise, the helmet for decision is the word equivalent, right?

[00:46:27] Speaker 02:
The idea is that when you meet this standard, when you've taken management and control and destroyed the beneficial productive value of the company, that is the equivalent under international law of taking the shares.

[00:46:37] Speaker 02:
So that means that those.

[00:46:39] Speaker 05:
You think anytime you've taken the shares, then you own.

[00:46:42] Speaker 05:
It's owned or operated.

[00:46:44] Speaker 05:
Is that sufficient?

[00:46:46] Speaker 02:
I think if you are running the business, that is the equivalent of taking the shares.

[00:46:51] Speaker 04:
The business has to continue.

[00:46:53] Speaker 02:
The business has to continue.

[00:46:54] Speaker 04:
If some foreign company came in and just took it and said this is an evil business that's contrary to the interests of our people and just shut it down and didn't operate it then.

[00:47:05] Speaker 02:
Right.

[00:47:06] Speaker 04:
Even the values, the shares is now zero.

[00:47:08] Speaker 02:
Right.

[00:47:08] Speaker 02:
If they blew up the drilling rigs, then they're not owning and operating.

[00:47:10] Speaker 02:
And that would be, for example, the Evanenko case where the property was actually physically destroyed.

[00:47:14] Speaker 05:
But here, the property, the relevant property that's the equivalent to the shares is the... So would you apply this statutory test to any time the shares are taken and the business is still ongoing and the test is met?

[00:47:29] Speaker 02:
Regardless of whether the shares are technically taken, if the business is taken as being operated, that is sufficient.

[00:47:35] Speaker 02:
That's the equivalent of taking the shares.

[00:47:36] Speaker 05:
Well, I'm focusing on shares because we are talking about the parent company, not the subsidiary company.

[00:47:40] Speaker 05:
We can't talk about the subsidiary company because of domestic takings loss.

[00:47:42] Speaker 05:
So it has to be the shares.

[00:47:44] Speaker 05:
It has to be the ownership interest of the parent company.

[00:47:47] Speaker 02:
I think it has to be the equivalent of the shares.

[00:47:49] Speaker 02:
And the business is the equivalent of the shares, right?

[00:47:52] Speaker 02:
That's the premise of Heldman IV.

[00:47:54] Speaker 05:
So when you've taken a set- That's where things get squishy.

[00:47:59] Speaker 05:
And that's what your friend on the other side was trying to get at.

[00:48:02] Speaker 05:
It can't just be taking the business, because then you run into the domestic takings problem.

[00:48:07] Speaker 05:
It has to be taking the parent company's ownership interest in the subsidiary.

[00:48:11] Speaker 05:
And Helmick IV says, those shares, if you reduce the beneficial productive value to zero, you've taken them.

[00:48:18] Speaker 05:
The shares, the ownership interest of the parent company.

[00:48:21] Speaker 05:
And my question is, if you've taken them and the business is still ongoing, then you are owning and operating them.

[00:48:29] Speaker 02:
That's right, exactly.

[00:48:30] Speaker 02:
If you have taken over management and control of the business, and you are exercising management control of the business, and you have completely destroyed the beneficial and productive value of the ownership of the company for the shareholder, and you are reaping all of the beneficial and productive value of the company, then you have taken the shares.

[00:48:53] Speaker 02:
You have engaged in an indirect corporation.

[00:48:57] Speaker 03:
You have two taking theories.

[00:49:01] Speaker 03:
If we agree with you on the first ownership, both the taking and the own and operate, do we need to reach the second?

[00:49:11] Speaker 03:
There be any consequence for damages or anything?

[00:49:13] Speaker 02:
No, I don't think you need to reach the second theory.

[00:49:17] Speaker 04:
Do you want to address Republic of Hungary versus Simon Springport's recent decision, that one, because your friend on the other side?

[00:49:24] Speaker ?:
Sure.

[00:49:25] Speaker 02:
Absolutely.

[00:49:26] Speaker 04:
Great value for their argument.

[00:49:27] Speaker 02:
Yes.

[00:49:28] Speaker 02:
So we didn't cite that decision because it's completely irrelevant to this case.

[00:49:32] Speaker 02:
The Simon decision is not considering the second Hickenlooper Amendment.

[00:49:35] Speaker 02:
It is construing a provision of the expropriation exception that is not an issue in this case.

[00:49:40] Speaker 02:
There's two paths to jurisdictional nexus under the expropriation exception.

[00:49:44] Speaker 02:
One is whether the property is present in the US.

[00:49:46] Speaker 02:
But even if it's not, there's a second prong which we're relying on here, which is the property is in the hands of an agency in instrumentality that is engaged in commercial activity.

[00:49:56] Speaker 02:
The Simon was construing the present in the US prong.

[00:50:02] Speaker 02:
And in fact, it makes clear that that requirement, and this on page 488 of the decision, that requirement is stricter than anything in the second Hickenlooper Amendment, which is exactly our point.

[00:50:16] Speaker 02:
There is no jurisdictional nexus requirement in the second Hickenlooper Amendment.

[00:50:20] Speaker 02:
It doesn't require the property to be present in the US.

[00:50:22] Speaker 02:
It's actually helpful to us, certainly not harmful.

[00:50:26] Speaker 03:
You're pressing the merits.

[00:50:29] Speaker 03:
You want to say a word on jurisdiction, on active state.

[00:50:33] Speaker 02:
Sure, yeah.

[00:50:35] Speaker 02:
So this case falls squarely within the second Hickenlooper Amendment.

[00:50:40] Speaker 02:
The amendment applies whenever there is a case in which a claim for title or property rights is asserted.

[00:50:49] Speaker 02:
There's no question.

[00:50:50] Speaker 03:
No, I'm sorry.

[00:50:51] Speaker 03:
Pending appellate jurisdiction.

[00:50:53] Speaker 02:
Oh, and jurisdiction over that.

[00:50:54] Speaker 02:
Yes.

[00:50:54] Speaker 02:
So right.

[00:50:55] Speaker 02:
We agree that the issues are not inextricably intertwined.

[00:50:59] Speaker 02:
Are not.

[00:51:00] Speaker 02:
Are not inextricably intertwined.

[00:51:03] Speaker 03:
I mean, it's a tough standard.

[00:51:07] Speaker 03:
Yeah.

[00:51:08] Speaker 03:
And a pellet.

[00:51:09] Speaker 03:
But I mean, the storyline here from Sabatino to Hinkenlooper to 1605A3, I mean, it's just one continuous story.

[00:51:26] Speaker 03:
You have

[00:51:27] Speaker 04:
similar text you have arguments about meaningful variation you have arguments about history i mean these are they seem to be very intertwined yeah i mean there there are some connections between the issues and we'd be content for the court to to reach the issue we think we'll either win an hour later okay is the violation of international law and clearly the same under both the fsi i know there's the also nexus requirement for jurisdiction commercial nexus that there isn't under

[00:51:55] Speaker 04:
active state for Hickenlooper Amendment.

[00:51:57] Speaker 04:
But the core question of whether the taking it as a violation of international law, is there any difference between those two?

[00:52:03] Speaker 02:
I don't think there's any difference.

[00:52:04] Speaker 04:
So it is actually the same question.

[00:52:06] Speaker 02:
I think that part of the question is the same question.

[00:52:08] Speaker 04:
So the only other thing that the jurisdictional inquiry asks is the relevant commercial nexus, depending on whether you're assuming the sovereign or agency or instrumentality.

[00:52:18] Speaker 04:
That's correct.

[00:52:19] Speaker ?:
OK.

[00:52:19] Speaker 04:
And why wouldn't, you know, we're in a unique area here for penitent jurisdiction because there is, we're told time and time again that we're supposed to resolve these questions, threshold questions of whether the jurisdiction, whether this foreign sovereign should be in court or not.

[00:52:42] Speaker 04:
as early as possible.

[00:52:43] Speaker 04:
We are already pretty far past early in this case.

[00:52:47] Speaker 04:
But why wouldn't exercises of pending jurisdiction, at least in the unique context of the Foreign Sovereign Immunities Act, favor reviewing closely intertwined legal questions together at the threshold because that's

[00:53:09] Speaker 04:
the thrust of our role.

[00:53:11] Speaker 02:
And I think that's reasonable.

[00:53:13] Speaker 02:
And again, we don't really have an objection to the court reaching the merits of the active state doctrine.

[00:53:17] Speaker 02:
We were relying on the homework to decision.

[00:53:19] Speaker 02:
But if the court thinks that that's distinguishable, we're content to decide the merits of the issue either now or later.

[00:53:28] Speaker 03:
Just on personal jurisdiction.

[00:53:31] Speaker 03:
I'm not so much interested in sufficiency on the fan check factors, but on the inconsistency point, what's your, if we apply those factors to establish altered ego status, doesn't that make the putative agency or instrumentality into the foreign sovereign itself?

[00:54:00] Speaker 03:
It doesn't gives you a tougher standard on subject.

[00:54:04] Speaker 02:
It doesn't, because this court made clear in TMR that these are separate tests.

[00:54:08] Speaker 02:
And the test established in TransAero is not a test that's rooted in corporate principles.

[00:54:15] Speaker 02:
It's rooted in the restrictive theory of sovereign immunity, which distinguishes entities engaged in commercial activities from entities engaged in governmental function.

[00:54:23] Speaker 02:
That's what the court is looking at when it determines whether a suit is brought by an agency or instrumentality.

[00:54:34] Speaker 02:
The band check test, which is really a corporate principles test for when you disregard the corporate form, is not really relevant to that threshold.

[00:54:41] Speaker 03:
But I thought I might be misremembering.

[00:54:45] Speaker 03:
I thought it was a gloss imposed by the Supreme Court for the precise purpose of distinguishing between the foreign sovereign and the agency or instrumentality for FSIA purposes.

[00:55:00] Speaker 02:
It does not frame the issue in terms of whether something is an agency or instrumentality under the FSIA or or not.

[00:55:08] Speaker 02:
That's not the question in the case.

[00:55:10] Speaker 02:
The question is really can.

[00:55:13] Speaker 02:
It was.

[00:55:14] Speaker 02:
I believe it was whether.

[00:55:17] Speaker 02:
Cuban entity could be subject to a counterclaim based on an action of a different Cuban entity.

[00:55:23] Speaker ?:
OK.

[00:55:25] Speaker 04:
Can you?

[00:55:27] Speaker 04:
Can you be an agency or instrumentality?

[00:55:31] Speaker 04:
the FSIA and not be an alter ego of the state.

[00:55:38] Speaker 02:
Can you be, can you be an agency nurse battalion and not be a

[00:55:46] Speaker 02:
Yes, I mean, most corporate entities would be agencies and instrumentalities and not alter egos.

[00:55:53] Speaker 02:
So I think the question here is, can you be an alter ego?

[00:55:56] Speaker 04:
No, no, I'm just trying to understand the universe of agency or instrumentality, because at some level, its definition suggests a level of control by the sovereign that one might say would make it an alter ego.

[00:56:12] Speaker 02:
might have a corporate form but it's still not when we disregard the corporate firm purposes of this alter ego inquiry i think in the typical case if you have a not closely run foreign company in that situation they would be you you'd look to the core function test to see if they're an agency or instrumentality so if they're primarily engaged in commercial activity they're an agency or an instrumentality

[00:56:35] Speaker 02:
Nonetheless, many of those companies are not closely held if the foreign state.

[00:56:41] Speaker 04:
So when you have here where it is so tightly held, it is one in the same as the sovereign.

[00:56:47] Speaker 04:
Why doesn't a determination upfront at the jurisdictional stage that the company here is the alter ego mean that we dismiss?

[00:57:05] Speaker 04:
Just as we would, I have two questions.

[00:57:08] Speaker 04:
Why don't we just dismiss, like we have to, with the sovereign itself?

[00:57:12] Speaker 04:
Or two, why doesn't this make this case, like Simon v. Republic of Hungary, a suit against the sovereign itself for a taking, as opposed to an agency?

[00:57:26] Speaker 04:
But we've said it's the same as the state.

[00:57:29] Speaker 02:
So the test that Congress has set, that this court

[00:57:33] Speaker 02:
established in TransAero to interpret the term agency or instrumentality is a completely separate test from the alter ego test.

[00:57:40] Speaker 02:
It's looking to the concept of the restrictive theory of sovereign immunity.

[00:57:45] Speaker 02:
When Congress established the Foreign Sovereign Immunities Act, its goal was to treat entities- I'm trying to say if it makes sense.

[00:57:51] Speaker 04:
Maybe we're bound by it as a panel, but I'm trying to understand how it makes sense.

[00:57:55] Speaker 04:
If there's a large world of agency instrumentalities that aren't alter egos, then we don't have to adopt that type of reading to

[00:58:03] Speaker 04:
to keep the statute functioning to the agency instrumentality provision to have a role under the statute.

[00:58:11] Speaker 04:
It can just apply whenever it's not an alter ego.

[00:58:13] Speaker 04:
But if you've said it's an alter ego, it would seem to me it's an alter ego full stop.

[00:58:20] Speaker 04:
And so when you find that they're the alter ego, you dismiss.

[00:58:24] Speaker 04:
I mean, it was weird here to say they're the alter ego, and so therefore they don't get

[00:58:31] Speaker 04:
minimum contacts under personal jurisdiction.

[00:58:34] Speaker 04:
But we didn't then just say, well, it's Venezuela.

[00:58:39] Speaker 04:
We need to dismiss.

[00:58:41] Speaker 02:
Right, because the Congress, when they established the Foreign Sovereign Immunities Act, was trying to establish a regime in which engaging in commercial activity is treated differently than engaging in governmental function.

[00:58:54] Speaker 02:
So when a foreign state is operating through an alter ego that is primarily engaged in commerce,

[00:59:01] Speaker 02:
As long as the control is sufficient, you establish, you're not a person for purposes of due process, but Congress's judgment was that that kind of entity should be treated differently for purposes of service of process, punitive damages.

[00:59:19] Speaker 04:
The commercial nexus requirement differs depending on whether you assume the sovereign directly or an agency or instrumentality.

[00:59:27] Speaker 04:
It seems like

[00:59:29] Speaker 04:
There's a bit of picking and choosing going on here, because we want to say it is both the sovereign and an agency or instrumentality.

[00:59:36] Speaker 04:
And so how do we know which of the approaches to the commercial nexus?

[00:59:42] Speaker 04:
Do you all have to show?

[00:59:45] Speaker 04:
that the property they've taken from you is now being operated in the United States?

[00:59:51] Speaker 02:
No, we don't, because Petavesa and Petavesa Petroleum still meet the test for agency and instrumentality.

[01:00:00] Speaker 04:
They meet both tests.

[01:00:02] Speaker 02:
They meet both tests.

[01:00:02] Speaker 04:
They meet both agency and instrumentality, but they're also the sovereign itself.

[01:00:07] Speaker 04:
How do we know which commercial nexus requirement to apply?

[01:00:10] Speaker 02:
Well, because they are an agency and instrumentality for statutory purposes.

[01:00:16] Speaker 04:
They're also the sovereign itself.

[01:00:18] Speaker 02:
Not for statutory purposes.

[01:00:20] Speaker 02:
Under the statute, there's a separate task for how you determine whether something is an agency or an instrumentality.

[01:00:25] Speaker 02:
And if you look, for example, at the SO case.

[01:00:27] Speaker 04:
I understand that there's a separate statutory definition of it, but I don't think that answers what the statute says to do when something is

[01:00:36] Speaker 04:
may meet that test, but is also, in fact, the state itself.

[01:00:41] Speaker 02:
It is.

[01:00:41] Speaker 02:
Well, it's not in fact the state itself.

[01:00:45] Speaker 02:
The alter ego test is an equitable inquiry that the court is applying so that a foreign state can't benefit from its disregard of the corporate form.

[01:00:53] Speaker 03:
I'm sorry, why?

[01:00:54] Speaker 03:
The statutory structure

[01:00:57] Speaker 03:
is set up to afford an extra degree of protection to the sovereign itself as opposed to the agency or instrumentality.

[01:01:09] Speaker 03:
So if we're in this odd circumstance where, at least for some purposes and in some intuitive sense, this agency or instrumentality

[01:01:23] Speaker 03:
really is the foreign sovereign, why wouldn't we treat it as such for FSIA purposes?

[01:01:30] Speaker 02:
Well, it's not that in some metaphysical sense it really is the foreign sovereign.

[01:01:34] Speaker 02:
When you do an alter ego analysis, what you're saying is that the foreign state has disregarded the corporate formalities, and so it cannot claim the benefits.

[01:01:47] Speaker 02:
of identifying the entity as separate for purposes here of due process.

[01:01:53] Speaker 02:
It doesn't follow that the entity is therefore a foreign state proper and not an agency or instrumentality under the test.

[01:02:00] Speaker 02:
And if you look at the reasoning of TransAero, it kind of confirms this.

[01:02:03] Speaker 02:
One of the key factors that the TransAero focused on was administrability.

[01:02:07] Speaker 02:
Whether something is an agency or an instrumentality is something that needs to be determinable early in the case because you have to serve process affects how you serve process.

[01:02:15] Speaker 02:
And so, for example, in the SO case in the Second Circuit, you have an entity that was served under 1608B, the Nigerian National Petroleum Company.

[01:02:24] Speaker 02:
It was only

[01:02:26] Speaker 02:
you know, served in a manner that would only apply if it was an agency or instrumentality.

[01:02:30] Speaker 02:
And later in the case, an alter ego showing was made to deal with this exact due process problem.

[01:02:37] Speaker 02:
And the court didn't say, now you have to go back and redo service.

[01:02:40] Speaker 03:
I looked at the band check.

[01:02:42] Speaker 03:
Your characterization of it is right.

[01:02:45] Speaker 03:
And one can imagine that there are different tests for different purposes.

[01:02:52] Speaker 03:
This does have a little bit of a

[01:02:54] Speaker 03:
one-way ratchet flavor to it where we're treating the instrumentality as different from the state for purposes to help you, but only for

[01:03:08] Speaker 02:
But I think that's consistent with Congress's intent, because you have to keep in mind that this was a statute in which Congress intended to extend personal jurisdiction to the farthest reach possible.

[01:03:18] Speaker 02:
1330B says that if you establish subject matter jurisdiction under any of these prongs, then you have established personal jurisdiction.

[01:03:25] Speaker 02:
And so I don't think Congress would have wanted some external additional obligation under the due process clause that Congress didn't even believe was in place.

[01:03:33] Speaker 02:
to put pressure on the subject matter jurisdiction prongs that it has established by altering the test for whether it's something costly.

[01:03:41] Speaker 04:
The due process isn't some external thing for all the agencies and instrumentalities that are not alter egos.

[01:03:49] Speaker 04:
Don't you have to establish some context for them?

[01:03:51] Speaker 04:
That's true, but I think what I'm... Congress wasn't saying we don't want to, even assuming it could, we don't want to deal with that due process mess here.

[01:04:01] Speaker 04:
The question is, do you think you are a sovereign?

[01:04:06] Speaker 04:
And you say, yes, you are a sovereign.

[01:04:08] Speaker 04:
But then when we turn to applying the statute to you, we say, actually, you're not really a sovereign.

[01:04:14] Speaker 02:
I think that Congress wanted to extend personal jurisdiction to the farthest possible and wanted to extend the ability to sue to the kind of circumstances in this case.

[01:04:23] Speaker 02:
If you just read the statute, it's clear that when you have a foreign state

[01:04:30] Speaker 02:
A commercial entity that's engaged in commercial activity is its primary function.

[01:04:37] Speaker 02:
Congress wanted to treat that as an agency or instrumentality.

[01:04:39] Speaker 02:
Congress wanted that entity to be able to satisfy the second prong of the expropriation exception where the property doesn't have to be president.

[01:04:46] Speaker 02:
in the US, and Congress wanted that entity to be subject to personal jurisdiction.

[01:04:50] Speaker 02:
So the idea that there's an additional requirement for due process would require an alter ego standard that would nonetheless take that entity out of the Foreign Sovereign Immunities Act.

[01:04:59] Speaker 02:
I don't think that's what Congress intended here.

[01:05:01] Speaker 05:
Although we use the term alter ego, it seems to me that what we're saying to meet that test, it's sufficient that the company or entity is an agent of the country.

[01:05:16] Speaker 05:
not necessarily that it is the country.

[01:05:19] Speaker 05:
Is that an important distinction?

[01:05:21] Speaker 02:
Yes, that's a very good point.

[01:05:22] Speaker 02:
So under the Trans Americas decision, there's a two part, there's really three part test for alter ego, right?

[01:05:30] Speaker 02:
You can either have the agency prong or the fraud and injustice prong.

[01:05:35] Speaker 02:
And then under the agency prong, you can either have alter ego or traditional agency principles.

[01:05:39] Speaker 02:
And I think traditional

[01:05:40] Speaker 02:
agency principles would be sufficient here to establish that because PEDOVACE is operating as an agent of the state, they're not subject to the due process.

[01:05:51] Speaker 05:
It does not reconcile that with the FSIA standard.

[01:05:53] Speaker 05:
We're not saying you are the country.

[01:05:56] Speaker 05:
We're saying you're the agent of the country.

[01:05:57] Speaker 02:
That's a very good point.

[01:05:58] Speaker 04:
The phrase is agency or instrumentality.

[01:06:01] Speaker 04:
And you just said that there's all kinds of agencies or instrumentalities that are not alter egos.

[01:06:10] Speaker 02:
Yes, and the court has said that there's all sorts of agencies and instrumentalities that are not operating as an agent of the foreign government.

[01:06:18] Speaker 02:
I mean, maybe part of that's because of the word instrumentality, but not every corporation that's owned by a foreign state is acting as an agent of that foreign state.

[01:06:26] Speaker 02:
Here they are because of the complete control that Venezuela exercises over the base.

[01:06:31] Speaker 04:
What does instrumentality mean distinct from agency?

[01:06:35] Speaker 02:
I don't know.

[01:06:36] Speaker 02:
It might be one of those terms like arbitrary and capricious.

[01:06:38] Speaker 02:
It's sort of a term of art, I don't think.

[01:06:40] Speaker 04:
Well, you just said, not everyone's an agency.

[01:06:43] Speaker 02:
An agent.

[01:06:45] Speaker 02:
So my point is that if you were to read agency,

[01:06:49] Speaker 02:
as necessarily inherently implying the kind of agency relationship that would establish, would make band check apply and get you out of the due process clause, then you would have to give instrumentality a different meaning as a commercial entity that does not.

[01:07:04] Speaker 04:
Can you satisfy minimum context here?

[01:07:09] Speaker 02:
We certainly argued that below.

[01:07:11] Speaker 02:
We haven't argued it in this court.

[01:07:13] Speaker 02:
If you were to conclude that we needed to establish minimum context.

[01:07:17] Speaker 04:
It would make it a lot easier than having this have your cake and eat it too approach to the statute.

[01:07:21] Speaker 02:
The other factor here is that the Supreme Court in full is currently deciding whether there is a separate minimum context.

[01:07:30] Speaker 04:
I listen to the argument.

[01:07:32] Speaker 04:
I don't think they're here.

[01:07:33] Speaker 04:
That wasn't even a sovereign.

[01:07:35] Speaker 04:
I mean, well, there's enormous barriers to deciding whether the Palestinian Authority is a sovereign to begin with.

[01:07:43] Speaker 04:
So it seems highly unlikely they're actually going to decide that issue.

[01:07:47] Speaker 02:
Right.

[01:07:47] Speaker 02:
But the premise of this court's decision that requires us in this case to meet the traditional 14th Amendment minimum context test is the Livnaut decision, which holds that the Fifth Amendment's due process standard is identical

[01:08:04] Speaker 02:
to the 14th Amendment.

[01:08:05] Speaker 02:
So if the Supreme Court were to hold, no, they're not identical.

[01:08:07] Speaker 02:
I think all bets are off.

[01:08:09] Speaker 02:
We can relitigate that issue.

[01:08:10] Speaker 05:
So the distinction between agency and agent, I mean, I'm just looking at 1603A.

[01:08:15] Speaker 05:
I mean, there have been cases, I've sat on them, where the agency is actually an agency of the government.

[01:08:24] Speaker 05:
There's a difference between agent for a principal and an agent and an agency.

[01:08:32] Speaker 05:
And I'm just wondering if agency just means literally an agency of the foreign state, like a government agency.

[01:08:37] Speaker 02:
Well, I don't think it can because traditional government agencies like the Treasury or the Department of Health and Human Services, those would all qualify as the foreign state proper and not agencies and instrumentalities under the test.

[01:08:52] Speaker 04:
Right, Department of Defense is one of the examples.

[01:08:54] Speaker 02:
Yeah, or exactly, the Bolivian military.

[01:08:58] Speaker 05:
Any other questions?

[01:08:59] Speaker 05:
Do you think an agency is an agent?

[01:09:02] Speaker 02:
I think it one possible reading of that term if you think agency and instrumentality have distinct meanings is that agents refer agency refers to agents that are meet traditional agency principles and are not separate commercial entities and instrumentality refers to agent if they meant agent perhaps.

[01:09:27] Speaker 05:
Okay.

[01:09:27] Speaker 05:
Thank you.

[01:09:28] Speaker 05:
All right.

[01:09:29] Speaker 04:
You want to just take one minute.

[01:09:31] Speaker 04:
Thank you.

[01:09:32] Speaker 02:
Yeah, we would ask the court to affirm the decision to deny had a basis motion to dismiss.

[01:09:37] Speaker 02:
Thank you very much.

[01:09:40] Speaker 04:
Right, Mr. Perla, we will give you three minutes for rebuttal.

[01:09:44] Speaker 01:
Thank you, your honor, I'd like to hit three points.

[01:09:48] Speaker 01:
I just want to close the issue on the expropriation exception with Judge Pan's observation about the owned or operated prong.

[01:09:54] Speaker 01:
I do think that that is what gets squishy.

[01:09:57] Speaker 01:
And the answer that my friend gave was, well, ownership is the business.

[01:10:03] Speaker 01:
And then the district court and HMPADC also go further and say, and the business is the assets.

[01:10:09] Speaker 01:
And that does away with the entire distinction between a shareholder and company.

[01:10:13] Speaker 01:
And I think that that is the fundamental problem with the district court decision there.

[01:10:18] Speaker 01:
The Clorox decision doesn't help them at all because it is dealing with an investment treaty arbitration.

[01:10:24] Speaker 01:
Again, it highlights the problem of bringing in this body of law under customary international law.

[01:10:30] Speaker 01:
Because if you look at the Clorox decision, paragraphs 670 to 700,

[01:10:34] Speaker 01:
or 670 and 700, you can see that the court that the tribunal there is disregarding the distinction between the company and the property because the investment is the whole thing under the treaty.

[01:10:46] Speaker 01:
And that is the risk that the that is being run here in this case as opposed to Helmerick for

[01:10:54] Speaker 01:
where the test was articulated at the pleading stage, because now we know that the evidence shows that what happened was, what is being established here under the owned or operated prong, is that the assets, the assets are being used to produce and drill, and therefore that equates to the business, and the business equates to the ownership.

[01:11:15] Speaker 01:
That we don't think is possible to do under a customary international law or Helmric IV.

[01:11:21] Speaker 01:
On the point about the agency or instrumentality and alter ego, the argument that my friends make doesn't add up because BandSec has been applied by multiple courts, including this court, to analyze the sovereign immunity provisions of the FSIA under the commercial activity exception.

[01:11:41] Speaker 01:
You can attribute the acts of an agency or instrumentality to the state

[01:11:45] Speaker 01:
if you establish that there are alter egos under being SEC.

[01:11:48] Speaker 01:
The decision that they rely on increases.

[01:11:50] Speaker 01:
What's wrong with thinking about this?

[01:11:54] Speaker 03:
The FSIA says if you set up the foreign state sets up

[01:12:02] Speaker 03:
a separate agency, formally separate agency as opposed to the state itself, that entity or subject matter jurisdiction purposes gets an extra level of protection, right?

[01:12:17] Speaker 03:
And you've done that and we are respecting that in so far as we're applying the commercial nexus standard or agency or instrumentality.

[01:12:31] Speaker 03:
But none of that has anything to do with this question, which is, you know, what kinds of entities get due process protection, or with Vancechek, which is the substantive international standard for veil piercing.

[01:12:50] Speaker 01:
Well, they are interrelated because BandSec has been used not only for the substantive bill piercing aspect, but also for subject matter jurisdiction.

[01:12:59] Speaker 01:
And it's also used for personal jurisdiction.

[01:13:02] Speaker 01:
It's the same test, TMR, Transamerica.

[01:13:06] Speaker 01:
Transamerica is using BandSec to attribute acts of agency instrumentality to the state.

[01:13:11] Speaker 01:
It is using BandSec.

[01:13:13] Speaker 01:
So you have the same test that cuts across all of these different analyses.

[01:13:17] Speaker 01:
Because what they're trying to get at is,

[01:13:20] Speaker 01:
do you have a separate legal person?

[01:13:22] Speaker 01:
And the Gator Assets case is a great case from the Second Circuit to look at explaining how BANSEC and the separate legal personhood requirement of the FSIA are bound up, including BANSEC that looked to the FSIA for this presumption of separateness.

[01:13:37] Speaker 01:
So I think, Your Honor, Judge Millett, your observations were correct that once you say that under BANSEC, you're the state for due process purposes,

[01:13:46] Speaker 01:
You're the state.

[01:13:47] Speaker 01:
That's the conclusion that has been arrived at.

[01:13:49] Speaker 01:
And I don't know that the.

[01:13:50] Speaker 04:
Are we not bound by our trans aero decision?

[01:13:54] Speaker 01:
Because.

[01:13:54] Speaker 04:
Which simply said can be here.

[01:13:56] Speaker 04:
It can be alter ego of the state for purposes of the due process laws, but not for purposes of.

[01:14:06] Speaker 01:
That's not what TransAero respectfully or honor held.

[01:14:08] Speaker 01:
TransAero dealt only with the core function, didn't, dealt only with the insect at the personal jurisdiction stage.

[01:14:16] Speaker 01:
There was no contested fact about whether the fund there was an agency instrumentality for purposes of service of process.

[01:14:23] Speaker 01:
So that was just, it was presumed to be separate and it was treated separately.

[01:14:27] Speaker 01:
And then the separateness was challenged.

[01:14:30] Speaker 01:
And once the separateness was challenged,

[01:14:31] Speaker 01:
There is no case that then treats the alter ego as, once again, a separate entity under the FSIA.

[01:14:39] Speaker 04:
Do you object to service of process on PDVSA as insufficient?

[01:14:44] Speaker 04:
It wasn't completed in the manner in which you have to serve a sovereign?

[01:14:50] Speaker 01:
No, your honor, we think we're separate.

[01:14:52] Speaker 01:
We think we're an agency or instrumentality and therefore entitled to due process under the due process clause.

[01:14:58] Speaker 01:
And minimum context has not been established and could not be established.

[01:15:02] Speaker 01:
And that is why they are trying to get around due process by alleging alter ego.

[01:15:06] Speaker 01:
But they run up against this problem that once they establish alter ego for purposes of deciding that you are the state, you're the sovereign,

[01:15:15] Speaker 01:
then you have to be kicked out under the first prompt.

[01:15:17] Speaker 04:
Well, even to instrumentality, you have to, or at least for the commercial nexus purpose, you have to be engaging in economic activities in the United States.

[01:15:27] Speaker 04:
Reference here, the CITCO operations.

[01:15:31] Speaker 04:
You don't dispute that, right?

[01:15:32] Speaker 04:
Why can't that be the source of minimum contacts?

[01:15:34] Speaker 01:
Because, well, first of all, under the Daimler decision, to have general jurisdiction to bring a claim generally, you need to be

[01:15:41] Speaker 01:
either incorporated here or have your principal place of business here.

[01:15:44] Speaker 01:
And PDVSA is not incorporated here and does not have its principal place of business here.

[01:15:49] Speaker 01:
And for specific jurisdiction, you need to have some kind of connection in arising or related to connection between the contacts and the claim.

[01:15:57] Speaker 01:
And there is absolutely no connection that has been established or could be established between whatever commercial activities are found to be attributable to PDVSA in the United States

[01:16:07] Speaker 01:
and the taking of HMP Venezuela's rigs in Venezuela.

[01:16:12] Speaker 01:
There is no assertion or any evidence showing that the property has found its way into the United States or any property exchange for that property.

[01:16:20] Speaker 01:
The district court here has already dismissed the Republic from this case because it found that the property was outside the United States.

[01:16:28] Speaker 01:
And I'd like to conclude on this, on the point of this act of state doctrine, because I think this is all of a piece

[01:16:36] Speaker 01:
The Supreme Court in Simon, I think, has left no doubt that, and you heard my friend say, that the Supreme Court in Simon was focused on the prong about whether the property was in the United States.

[01:16:50] Speaker 01:
That was the focus of the expropriation exception analysis in Simon.

[01:16:54] Speaker 01:
And to inform that analysis, it went to the history of Sabatino.

[01:16:58] Speaker 01:
It went to the history of the second Hickenlooper Amendment because all that was being addressed in that set of circumstances was a claim to ownership rights in proceeds in New York.

[01:17:11] Speaker 01:
And that is what Congress was concerned about.

[01:17:13] Speaker 01:
It textually indicated so by using the language claim of title

[01:17:17] Speaker 01:
or other ownership interests, which is exactly like what the Supreme Court analyzed in Dole under Section 1603B2, shares or other ownership interests.

[01:17:26] Speaker 01:
Instead, the other ownership interests had to be direct, like shares.

[01:17:31] Speaker 01:
The other property rights here have to be ownership rights, like claim of title.

[01:17:35] Speaker 01:
And that can only be adjudicated by a US court if the property is in the United States.

[01:17:42] Speaker 01:
With that, Your Honor, I will conclude.

[01:17:45] Speaker 01:
Thank you very much.

[01:17:45] Speaker 04:
Thank you very much to both counsel.

[01:17:46] Speaker 04:
The case is submitted.