Dispute over tanker's Kurdish oil continues in Houston Court

Photo: U.S. Coast Guard
 
 
A photo taken from a U.S. Coast Guard HC-144 Ocean Sentry airplane shows the tanker United Kalavryta underway in the Gulf of Mexico on July 25, 2014, before it anchored off Galveston with a load of oil from Kurdistan, a semi-autonomous region of Iraq. The Iraqi government alleged the oil was smuggled from Iraq, and the legal dispute went to U.S. courts.
Iraq and the Kurdistan Regional Government are still trying to resolve a dispute that for six months has kept a tanker full of Kurdish oil off Galveston and figures in the broader question of Kurdistan's right to sell oil overseas.

Iraqi and Kurdish officials struck an interim, temporary deal late last year allowing exports of oil produced in semiautonomous Kurdistan if it went through Iraq's state oil company.

But that agreement didn't cover the tanker United Kalavryta, anchored 60 miles offshore in the Gulf of Mexico since July, or other broader political and legal issues that could define Kurdistan's independence.
Those issues, which include an interpretation of Iraq's constitution, also are now at play in a lawsuit in a Houston federal court involving the United Kalavryta

U.S. District Judge Gray Miller of Houston this week denied several of Kurdistan's procedural arguments seeking to dismiss Iraq's lawsuit over the anchored oil tanker, including a bid to deny Iraq a hearing on whether the vessel's million-barrel cargo can be seized if it reaches U.S. waters.

The jdge denied Kurdistan's motion to dismiss one mechanism for seizing property under state law, but granted a motion to deny Iraq the same mechanism under maritime law. Effectively, Iraq could call for a hearing on the matter if the tanker crossed into U.S. waters.

The suit, filed in July, alleges Kurdistan illegally transported oil drilled from Kurdish fields through a pipeline that ran from Iraq to Turkey. The oil, the suit says, was loaded aboard the United Kalavryta for transport to an unidentified buyer in the United States.

The tanker last reported its position in the Gulf of Mexico on Wednesday afternoon, according to the ship tracking site Vesselfinder.com.
The oil on the United Kalavryta would have fetched more than $100 million last summer. Now the cargo is worth less than half as much because of the collapse in oil prices since July.

Jim Loftis, a partner at Vinson & Elkins in Houston who represents the Iraqi government in the Houston lawsuit, said in an interview Thursday that the parties "are still working on the broader settlement of the political and legal issues that remain."

Miller on Wednesday ordered lawyers for Iraq's Ministry of Oil and the Kurdistan Regional Government to provide the court an update on the status of settlement negotiations in 10 days.

The lawsuit and Kurdistan's motions to dismiss it, Miller said, seek an interpretation of the Iraqi constitution. Kurdistan has said the U.S. court shouldn't take sides "in a political and constitutional impasse over Iraq's most critical resource."

But under the law, a court can't shirk its responsibility to decide a case because it may have significant political overtones, "no matter how desirable it may be to avoid deciding a case like this one," Miller said, rebutting one of Kurdistan's arguments to dismiss the case.
If the case goes forward without a settlement, the remaining issues will be decided by interpretation of Iraqi law, said Phillip Dye, another Vinson & Elkins partner representing Iraq.

The lawsuit has evolved from a commercial dispute over whether Kurdistan could sell the oil outside of Iraqi channels to much broader questions of Kurdistan's sovereignty - and that's probably while the Houston lawsuit has drawn out, said Michael Wray, a partner at Legge, Farrow, Kimmitt, McGrath & Brown in Houston who has followed the case but isn't involved.

"Maybe they can air those issues out in U.S. court," Wray said. "That's probably why the judge wants it to settle. I was surprised they were still at it."

2015-01-09

http://www.houstonchronicle.com/business/energy/article/Dispute-over-tanker-s-Kurdish-oil-continues-in-6003385.php

Iraq Allowed to Sue Kurds Over Texas Oil Tanker in U.S.


By Laurel Brubaker Calkins  Jan 8, 2015 8:42 PM ET  

 
Iraq’s oil ministry can sue the Kurdistan regional government for possession of 1 million barrels of crude that have waited in a tanker circling off the Texas coast for more than five months, a U.S. judge said.

U.S. District Judge Gray Miller in Houston rejected the Kurds’ claims of sovereign immunity and said the regional government’s plans to sell its crude in the U.S. gave him authority to hear the lawsuit.

Miller had previously ruled he had no authority to hear Iraq’s dispute because the alleged misappropriation of the oil took place in Kurdistan, outside the jurisdiction of U.S. courts. After the Iraqis reworked their claim, Miller agreed the Kurds’ involvement in the U.S. oil market triggered a legal exception that properly placed the dispute over the cargo in his court.

“The activity complained of is the taking of Iraqi oil for sale, there are specific allegations that it has been sold in the U.S., and the sale of oil in the U.S. creates a direct effect in the U.S.,” Miller said in a ruling yesterday.

In December, the Iraqi central government and the Kurdistan regional government reached a production-sharing accord that let the Kurds export up to 550,000 barrels of oil a day from northern Iraq, with 250,000 barrels of that amount placed under the control of the central government. That accord in Baghdad didn’t address ownership of Kurdish shipments previously exported, according to court papers, leaving unresolved the dispute over the tanker off the Texas coast.

Seizure Bid
Miller said he wasn’t making a final determination on ownership of the cargo. He also said he won’t consider Iraq’s bid to seize the oil or hold proceeds from its sale under court supervision “unless and until the cargo is brought into U.S. waters.” He said Iraq could make its request when that happens.

The two governments have been sparring over the tanker since late July, when Iraq persuaded a federal magistrate judge in Houston to issue a warrant letting federal agents seize the crude and store it ashore at Iraqi expense if the ship entered U.S. territorial waters.

The tanker has been circling a navigational buoy about 60 miles off Galveston, Texas, since then and was still there as of 4:35 a.m. local time today, according to Bloomberg tracking data.

The price of oil has fallen by almost half during the time the ship has waited offshore. The Kurds had initially hoped to sell the cargo for about $100 million.
Property Law

Miller said he’ll apply Texas state laws covering stolen property to the case, which will also require him to interpret Iraq’s constitution and related case law.
“The heart of this dispute is to whom the text of the Iraqi Constitution grants the right to export oil, and whether the KRG converted the oil here,” Miller explained. “U.S. courts regularly interpret other countries’ laws, including constitutions.”

Hal Watson, the Kurds’ Houston attorney, didn’t immediately respond to phone and e-mail messages seeking comment on the judge’s ruling. Jim Loftis, the lead Houston lawyer for the Iraqi Oil Ministry, declined to comment on the ruling beyond confirming that Miller has agreed to let the lawsuit proceed for now.

The case is Ministry of Oil of The Republic of Iraq v. 1,032,212 Barrels of Crude Oil, 3:14-00249, U.S. District Court, Southern District of Texas (Galveston).
To contact the reporter on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Douglas Wong



http://www.bloomberg.com/news/2015-01-09/iraq-allowed-to-sue-kurds-over-texas-oil-tanker-in-u-s-1-.html

mmmm, wonder if the crew is home sick?