This Supreme Court Ruling Raises Global Risks For Resource Firms

Landmark decision in the U.S. Supreme Court this week. Affecting how resource firms globally might be able to respond when assets are seized in a foreign nation. 

The ruling came down in a suit brought by oil services firm Helmerich & Payne. Which had its drilling rigs in Venezuela taken by that country’s government back in 2010. 

Since then, the drilling firm has been pursuing a lawsuit against the Venezuelan government. Using a law called the Foreign Sovereign Immunities Act, which allows legal action against foreign governments in U.S. courts — if those governments have violated international law. 

And that last part is key to this week’s events. 

The Supreme Court Monday ruled unanimously that Helmerich & Payne had not demonstrated a violation of international law by the Venezuela government. With judges saying that lower courts should have demanded a “higher bar” in proving that the case meets standards to be heard in America.

That’s a big change for international resource firms looking for legal relief in friendly courts close to home. Plaintiffs will now have to show stronger evidence of specific legal violations in the case of an asset seizure — or have their cases thrown out almost immediately.

As I’ve discussed previously, lawsuits over government seizures of energy and mining assets are a big deal right now. With major cases working their way through courts around the world — such as the $50 billion suit brought by shareholders of Yukos Oil against the Russian government over expropriations. 

The U.S. has up until now been a preferred jurisdiction for launching such claims. But this week’s decision will make it much more difficult to meet the burden of proof.

Watch for other cases currently before American judges to potentially be impacted — such as a $1.4 billion lawsuit by gold miner Crystallex against Venezuela, and a suit against Argentina over the nationalization of oil and gas operator YPF. 

Here’s to making your case,

Dave Forest

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