Industry News

Iraq's Second Attempt at Bringing Iraqi Kurdistan Oil Dispute to Court

September 9, 2014


    On September 4, 2014, the Ministry of Oil of the Republic of Iraq (MoO) amended their complaint in the US District Court for the Southern District of Texas Galveston Division against the Kurdistan Region of Iraq regarding $100 million of oil.  In the first complaint, MoO claimed that the Kurdistan Regional Government pumped oil illegally from MoO, but this was dismissed by the US court.  The new complaint falls under the Foreign Sovereign Immunities Act, which states that sovereign nations cannot sue in US courts.  However, there are exceptions that may allow this case to proceed.  The Plaintiff in this case states, “Iraqi Kurdistan is a political subdivision of a foreign state and Defendant Iraqi Kurdistan is not entitled to immunity under the Foreign Sovereign Immunities Act.”  Additionally, the Plaintiff claims that Iraqi Kurdistan can be sued in Texas’ court because there was “commercial activity carried on in the United States by or on behalf of Iraqi Kurdistan, and/or [there were] acts by or on behalf of Iraqi Kurdistan outside the territory of the United States in connection with a commercial activity of Iraqi Kurdistan elsewhere that caused a direct effect in the United States.”

    Kurdistan interfered with the Iraq-Turkey pipeline under the Crude Oil Pipeline Agreement of 1973, which “contains distinct maritime obligations.”  The first complaint stated that the oil was pumped from the pipeline into the crude oil vessel called the United Kalavrvta.  MoO had ordered the Turkish government to hold the oil.  Kurdistan admitted during the last hearing under the initial complaint, “The Turks obeyed the instructions of [Kurdistan] and not the instructions of the Ministry of Oil…. to get them to do that, we [Kurdistan] were clearly exercising dominion and control over that oil.”  The oil left Turkey and headed toward Texas.  During the first proceeding, Judge Miller stated, “Kurdistan’s unauthorized export of oil over land – and later overseas - may violate Iraqi law, but it does not violate U.S. maritime law.”  The Plaintiff brought the suit to their home country, but Iraqi Kurdistan has “refus[ed] to participate in these legal proceedings.”

    In the current complaint, a third party referred to as, “John Doe” purchased the oil from Iraqi Kurdistan.  Iraq wants to be “declared the owner of the Cargo,” which includes 1,032,212 net barrels of oil.  Iraq is holding Iraqi Kurdistan as well as the John Doe company responsible.  In addition to the cargo, the Plaintiff also wants Iraqi Kurdistan and the John Doe company to pay “interest and costs” associated with the complaint.

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