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US Justices Drill Down on Venezuela Oil Rig Dispute

FILE - Idled drilling rigs owned by contractor Helmerich & Payne International Drilling Company sit on a lot in Seguin, Texas, Jan. 13, 2016.

Some U.S. Supreme Court justices on Wednesday appeared wary about the foreign policy implications of making it too easy for foreign governments to be sued in U.S. courts as they considered a lawsuit by an Oklahoma-based oil drilling company that claims Venezuela unlawfully seized 11 drilling rigs six years ago.

The eight justices heard an hour-long argument in Venezuela's appeal of a lower court ruling that allowed one of the claims brought by Helmerich & Payne International Drilling Company against the South American nation to proceed.

The company sued both the Venezuelan government and state-owned oil companies under a U.S. law called the Foreign Sovereign Immunities Act, claiming among other things that the property seizure violated international law.

That law allows for foreign governments to be sued in U.S. courts under certain circumstances, including when private property is seized.

Justice Anthony Kennedy was among those concerned about the foreign policy implications, noting the "extreme sensitivity with reference to suing foreign sovereigns." But other justices including Ruth Bader Ginsburg seemed more sympathetic to the company's arguments.

The legal question before the justices was whether the company's lawsuit succeeded in meeting the legal bar that would allow the case to continue. Venezuela, backed by the Obama administration, says it did not.

The rigs in question were owned by Helmerich's wholly owned Venezuela-based subsidiary. The Foreign Sovereign Immunities Act does not allow lawsuits to go forward when a foreign government seizes domestic-owned property. But the U.S. Court of Appeals for the District of Columbia Circuit in May 2015 said such suits can proceed when the interests of foreign shareholders are implicated.

Illustrating the difficulty facing the court in resolving the dispute, Justice Stephen Breyer said he "can't get my hands around this case, or my mind around it."

Breyer suggested that individual judges should get to decide which cases can be heard in U.S. courts, as long as they understand that "we don't want to have foreign countries in our courts unless there's a good case against them."

Helmerich had long provided drilling services for the Venezuelan government. The company disassembled its rigs in 2009 after Venezuela had failed to pay $100 million in bills. In response, Venezuela's government in 2010 seized the properties, which were still in the country. Then-President Hugo Chavez ordered the seizure, saying the rigs could be used by the government-owned companies.

A U.S. district court had ruled largely in favor of the drilling company. The appeals court then blocked the company's separate breach of contract claim while allowing the expropriation claim to proceed.

A ruling is due by the end of June.