United States: International Politics And Maritime Law Collide In Texas: Ministry Of Oil Of The Republic Of Iraq V. 1,032,212 Barrels Of Crude Oil, Et Al.

$100 million worth of disputed crude oil remains onboard a tanker about 60 miles offshore of Galveston, Texas, awaiting lightering, while a federal judge in Houston weighs the intricacies of international and maritime law.²

On July 28, 2014, the Ministry of Oil of the Republic of Iraq ("Iraq") filed suit in the Galveston Division of the Southern District of Texas, seeking to seize the cargo pursuant to Rules B, C, and D of the Federal Rules of Civil Procedure, Supplemental Rules for Admiralty or Maritime Claims. Iraq alleges the crude oil was illegally produced by the Kurdistan Regional Government of Iraq³ ("Kurdistan"), pumped through the Iraq-Turkey Pipeline and loaded onboard the MT UNITED KALAVRYTA.⁴ A warrant of attachment issued, but the cargo never came into the jurisdiction.⁵

Kurdistan entered a restricted appearance under Rule E(8) and filed a motion to vacate the attachment order. Kurdistan argued that 1) it was premature for the Court to consider vacatur, because the cargo had not yet been seized; 2) the Court lacked jurisdiction because the alleged conversion, if any, took place on land, within the Kurdistan region of Iraq; and 3) seizure of the cargo is barred under the Foreign Sovereign Immunities Act ("FSIA"). Iraq argued among other things that the conversion occurred at the time the oil was transferred from Turkish possession and loaded at Kurdistan's instruction onboard the MT UNITED KALAVRYTA as she lay in navigable waters off of Ceyhan, Turkey. After a reply and sur-reply, the Court heard oral arguments on August 22, and ruled on August 25.

As to prematurity, the plain language of Rule E(4)(f) suggests that a motion to vacate is only cognizable after property is arrested or attached.⁶ However, in treating Kurdistan's motion to vacate as a jurisdictional challenge, Judge Miller found the motion ripe for consideration, stating that "it would be illogical and inconsistent with the court's independent review duties to permit a jurisdictional attack only after an arrest has occurred."

On jurisdiction, the Court noted the current state of the law: "A party seeking a federal forum for an alleged maritime tort claim 'must satisfy conditions both [1] of location and [2] of connection with maritime activity.'"⁷ Based in part upon statements in Iraq's pleadings, the Court found that Kurdistan's alleged act of conversion occurred on land when Kurdistan exercised dominion over the crude oil without Iraq's consent. Thus, failing the location test for admiralty jurisdiction, Iraq's maritime claims under the supplemental admiralty rules were dismissed without prejudice, and the attachment vacated.⁸

And the Saga Continues

Over Kurdistan's objection, the Court granted Iraq leave to file an amended complaint, wherein Iraq asserts jurisdiction under admiralty and the FSIA, and brings multiple in personam claims against Kurdistan and any subsequent buyer of the crude oil, including claims for tortuous interference with a contract, and seeks to attach or arrest the cargo under Supplemental Rules B, C, and D, and also requests sequestration under Texas state law. As of this writing, the MT UNITED KALAVRYTA remains outside the Court's jurisdiction, off Galveston.

Footnotes

1.C.A. G-14-249, pending before Judge Gray H. Miller.

2.Judge Miller is well suited for the task as his work prior to being appointed to the bench included practicing maritime law.

3.Identified in subsequent pleadings as Kurdistan Region of Iraq, represented by the Ministry of Natural Resources of the Kurdistan Regional Government.

4.Initially identified as UNITED KALAVRTA.

5.On August 1, Iraq filed an amended complaint clarifying that the issues of ownership of the oil should be heard and determined by the courts in Iraq.

6. In pertinent part, Rule E(4)(f) provides, "Whenever property is arrested or attached, any person claiming an interest in it shall be entitled to a prompt hearing..." Fed.R.Civ.P.Supp. E(4)(f) (emphasis added).

7.Quoting Jerome B. Grubart, Inc. v. Great Lakes Dredging & Dock Co., 513 U.S. 527, 534 (1995).

8. Although it would appear admiralty jurisdiction may be available under Rule D, particularly because the bill of lading for the ocean carriage was issued "unto order" of Kurdistan, it is possible Iraq chose not to press Rule D at the time, as this would be an action to try title of the oil, and its first amended complaint called for ownership issues to be determined by Iraqi courts. Because of the dismissal, it was unnecessary for the Court to address Kurdistan's assertion of FSIA immunity. However, Judge Miller granted Iraq's request for leave to amend its complaint again to assert in personam claims against Kurdistan arising under any applicable exception to FSIA immunity under 28 U.S.C. § 1605

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