Tatneft v. Ukr.
Tatneft v. Ukr.
Opinion of the Court
This matter comes before the Court on review of an arbitration award pursuant to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention" or "Convention") and its implementing legislation,
On March 30, 2017, Tatneft filed its Petition to Confirm Arbitral Award and to Enter Judgment in favor of Petitioner, which is opposed by Ukraine. On June 12, 2017, Ukraine filed a motion to stay proceedings in this Court, pending the outcome of a foreign set-aside proceeding, which was opposed by Tatneft. Subsequently, Ukraine filed both a motion to dismiss the petition and a motion for jurisdictional discovery. Because the Petition and three motions filed by Ukraine are interrelated, they will be considered by the Court together.
For the reasons explained below, the Court shall DENY Respondent's Motion to Dismiss, DENY Respondent's Motion for Leave to take Jurisdictional Discovery, DENY Respondent's Motion to Stay, and HOLD IN ABEYANCE Tatneft's Petition for enforcement of the arbitration award until Tatneft submits additional briefing with regard to the issues raised in Ukraine's Opposition to Tatneft's Petition.
I. FACTUAL BACKGROUND
A. Formation of Ukrtatnafta
Pao Tatneft, formerly known as OAO Tatneft, is a "publicly-traded open joint stock company, established and existing under the laws of the Russian Federation." See Pet. ¶ 1.
In 1998 and 1999, the United States-based Seagroup International, Inc. ("Seagroup") and Switzerland-based AmRuz Trading Co. ("AmRuz") acquired shares in Ukrtatnafta, and together with Tatneft and Tatarstan (the four entities are collectively referred to as the "Tatarstan Shareholders"), they owned a majority 56% of Ukrtatnafta's shares, and they agreed to vote as a bloc. See
B. Arbitral Tribunal Proceedings
On December 11, 2007, Tatneft sent a Notice of Dispute to Ukraine, requesting negotiations pursuant to Article 9(1) of the Russia-Ukraine Bilateral Investment Treaty ("Russia-Ukraine BIT" or "BIT"). Merits Award ¶ 6; Blackman Decl., ECF No. 1-3, Ex. B (Russia-Ukraine BIT), ECF No. 1-8, Art. 9(1). On May 21, 2008, after trying to resolve the dispute for approximately five months, Tatneft served Ukraine with a Notice of Arbitration and Statement of Claim under UNCITRAL, alleging that Ukraine had violated its obligations with regard to granting legal protection to and disallowing discrimination against investors from Russia, such as Tatneft, under the Russia-Ukraine BIT. Merits Award ¶ 7; Russia-Ukraine BIT Arts. 2, 3(1).
Following written submissions and a hearing, the arbitral tribunal issued a September 28, 2010 decision confirming its jurisdiction over Tatneft's claims (the "Jurisdiction Decision"), and after receiving additional written submissions and documents, the arbitral tribunal held a merits hearing from March 18, 2013 to March 27, 2013, wherein fact and expert witnesses testified. Award ¶¶ 6-46. On July 29, 2014, the arbitral tribunal issued a Merits Award, whereby it concluded that Ukraine's actions resulted in a "total deprivation of [Tatneft's] rights as a shareholder of Ukrtatnafta" and further, that Ukraine had failed under the Russia-Ukraine BIT to provide "fair and equitable treatment" (FET) to Tatneft. Merits Award ¶¶ 464, 412. Ukraine was ordered to "pay [Tatneft] the amount of US$ 112 million as compensation for its breaches of the Russia-Ukraine BIT" along with interest at the U.S. dollar LIBOR rate plus 3% compounded every three months, with further instructions about the accrual of interest.
C. Proceedings following the Arbitration
On August 27, 2014, Ukraine brought an action before the Paris Court of Appeal in France to annul both the Merits Award and the earlier Jurisdiction Decision. Blackman Decl. ¶ 5. On November 29, 2016, the Paris Court of Appeal rejected Ukraine's annulment request, upheld both the Jurisdiction Decision and the Merits Award, and ordered Ukraine to pay fees and costs to Tatneft.
On December 29, 2016, Tatneft sent a letter to Ukraine demanding payment of the Merits Award amount and noting that if payment was not made by February 15, 2017, Tatneft would commence enforcement *183proceedings. See Blackman Decl., ECF No. 1-3, Ex. C (Dec. 29, 2016 Demand Letter), ECF No. 1-9, at 2. Tatneft filed its Petition to Confirm Arbitral Award on March 30, 2017, seeking recognition of the award in this Court. Ukraine requested that this Court stay its determination of the Petition pending the decision in the French Court of Cassation. Shortly after the briefing on the stay motion became ripe, Ukraine filed its opposition to Tatneft's Petition, and also filed a motion to dismiss and motion for jurisdictional discovery.
In its motion to dismiss Tatneft's Petition, Ukraine argues that this Court lacks subject matter jurisdiction because Ukraine is entitled to foreign sovereign immunity and further, that dismissal is warranted on grounds of forum non conveniens . With regard to the jurisdictional challenge, Ukraine contends more specifically that the arbitration exception in Section 1605(a)(6) of the Foreign Sovereign Immunities Act does not apply because Tatneft is not a "private party" and the award was not made "pursuant to" any agreement to arbitrate. Ukraine moves for permission to conduct jurisdictional discovery in the event that this Court does not grant its motion to dismiss. Petitioner Tatneft opposes all of Ukraine's motions.
II. LEGAL STANDARD
Prior to beginning an analysis of the arguments raised in the motions and the petition which are pending before the Court, it may be useful to briefly set out the legal provisions underlying such analysis, i.e. , the Foreign Sovereign Immunities Act and the arbitration exception thereto, which govern this Court's jurisdiction over Respondent Ukraine, and The New York Convention, which governs enforcement of foreign arbitration awards.
A. Foreign Sovereign Immunities Act and the Arbitration Exception
The Foreign Sovereign Immunities Act of 1976 ("FSIA"), codified at
The FISA provides an exception to foreign sovereign immunity for actions to confirm certain arbitration awards, as follows:
[a] foreign state shall not be immune from the jurisdiction of courts of the United States in any case-... in which the action is brought, either to enforce an agreement made by the foreign state with or for the benefit of a private party to submit to arbitration all or any differences which have arisen or which may arise between the parties with respect to a defined legal relationship ... or to confirm an award made pursuant to such an agreement to arbitrate, if ... the agreement or award is or may be governed by a treaty or other international agreement in force for the United States calling for the recognition and enforcement of arbitral awards.
B. The New York Convention
The 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention, codified into United States law through the Federal Arbitration Act ("FAA"),
Federal courts in the United States have minimal discretion to refuse to confirm an arbitration award under the FAA, which provides that the district court "shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the [ ] Convention."
Pursuant to the New York Convention: (1) an arbitral award may be refused at the request of the party against whom it is invoked where (a) the parties to the agreement were under some incapacity; (b) the party against whom the award is invoked did not receive proper notice of the arbitration proceedings; (c) the award deals with an issue not falling within the terms of the parties' submission to arbitration; (d) the composition of the arbitral tribunal was not in accordance with the parties' agreement; (e) the award has not yet become binding; or (2) recognition and enforcement of an arbitral award may be refused in the country where it is sought if (a) the issue arbitrated is not capable of being arbitrated under the law or (b) it would be contrary to the public policy of such country. New York Convention, Art. V, June 10, 1958, 21 U.S.T. 2517,
Ukraine argues against confirmation and enforcement of the Merits Award on N.Y. Convention Article V grounds; namely, Ukraine alleges there was a lack of impartiality of the arbitral tribunal, and further, that recognition and enforcement would be contrary to the public policy of the United States. Ukraine's previously-noted challenges based on sovereign immunity and forum non conveniens are outside of the confines of Article V and were raised in its Motion to Dismiss as opposed to its response to the Petition. The Court will first address Ukraine's jurisdictional and other non-Article V arguments before analyzing the merits of its Article V arguments.
III. DISCUSSION
A. Ukraine's Motion to Dismiss is based on alleged lack of subject matter jurisdiction
Before a court may exercise subject matter jurisdiction over a proceeding to enforce an arbitral award against a foreign sovereign, first, "there must be a basis upon which a court in the United States may enforce a foreign arbitral award" and second, the foreign sovereign "must not enjoy sovereign immunity from such an enforcement action." Diag Human, S.E. v. Czech Republic-Ministry of Health ,
Under the FSIA, "a foreign state is presumptively immune from the jurisdiction of the United States courts," and "unless a specified exception applies, a federal court lacks subject-matter jurisdiction over *186a claim against a foreign state." Saudi Arabia v. Nelson ,
The petitioner bears the initial burden of supporting its claim that a FSIA exception applies, and this burden of production may be met where a party seeking to confirm an award produces "the BIT, [its] notice of arbitration against [the foreign sovereign], and the tribunal's arbitration decision." Chevron Corp. v. Ecuador ,
1. Arbitration Exception to FSIA
Tatneft asserts that this Court may exercise subject matter jurisdiction in this case because the FSIA provides an exception to foreign sovereign immunity for actions to confirm arbitration awards that are made pursuant to an agreement to arbitrate and are governed by an international treaty in force in the United States calling for the recognition and enforcement of arbitral awards.
Tatneft's assertions are confirmed, first, by the language of the Merits Award, which indicates that it was made pursuant to the BIT, an agreement that provides for arbitration. Article 9 of the Russia-Ukraine BIT provides in part that:
1. Any dispute between one Contracting Party and an investor of the other Contracting Party arising in connection with investments, including disputes regarding the amount, terms of and procedure for payment of the compensation ..., shall be set out in a written notification accompanied by detailed comments which the investor shall send to the Contracting Party involved in a dispute. The parties to the dispute shall attempt to resolve that dispute where possible by negotiation.
*1872. In the event that the dispute is not resolved within six months of the date of the written notification, ..., the dispute shall be referred to be considered by:
* * *
(c) an ad hoc arbitration tribunal, in conformity with the Arbitration Rules of the United Nations Commission on International Trade Law (UNICITRAL).
3. The arbitration award shall be final and binding upon both parties to the dispute....
Russia-Ukraine BIT, ECF No. 1-8, Article 9. See, e.g., Merits Award, ECF No. 1-4, at 16, 17, 23 (referring to obligations "under the Russia-Ukraine BIT" and describing the subject of the arbitration as concerning "the lawfulness under the Russia-Ukraine BIT"); ECF No. 1-5, at 43 (setting out Tatneft's claims under the Russia-Ukraine BIT).
Second, there is no dispute that the Merits Award is governed by the New York Convention, which controls when a party moves for recognition and enforcement of an arbitral award that was made in the territory of a State other than the State where such award recognition and enforcement is sought. See generally New York Convention, 21 U.S.T. 2517. Awards are enforceable in the courts of any signatory so long as "the place of the award ... is in the territory of party to the Convention." Creighton ,
Ukraine argues however that the arbitration exception to foreign sovereign immunity does not apply because: (1) Tatneft is a state-controlled entity and not a "private party" as per the arbitration exception to the FSIA; (2) the Merits Award, which was based on the "fair and equitable treatment" provision, was not made "pursuant to" any agreement to arbitrate because that "fair and equitable treatment" provision was excluded from the Russia-Ukraine BIT and; (3) the Merits Award awarded the "vast majority of the damages for the shares of Swiss and American companies that were not covered by Ukraine's offer to arbitrate with Russian investors" because Tatneft lacked standing to assert claims on behalf of AmRuz and Seagroup. See generally Mot. to Dismiss at 13-33.
In this case, "the [arbitral] tribunal bifurcated the proceedings in order to first consider Ukraine's various 'objections to jurisdiction and admissibility.' " See Supplemental Blackman Decl., ECF No. 27-2, Ex. A (Jurisdiction Decision), ECF No. 27-3, ¶¶ 16-19.
The arbitral tribunal's Jurisdiction Decision addressed and rebutted a variety of jurisdictional objections raised by Ukraine, including that: (1) the Russia-Ukraine BIT does not apply to disputes concerning Ukrtatnafta; (2) Tatneft is not an investor within the meaning of the BIT because it is controlled by the Government of Tatarstan; (3) Tatneft's participation in Ukrtatnafta is not an investment within the meaning of the BIT; and (4) Tatneft's participation in Ukrtatnafta is not in conformity with Ukrainian legislation. The tribunal further addressed a number of admissibility objections raised by Ukraine, including that: (1) Tatneft has no standing on behalf of AmRuz and Seagroup; (2) Tatneft has no standing to claim for unpaid oil deliveries; and (3) Tatneft failed to state an arguable case concerning alleged violations of its rights under the BIT and for damages. See Jurisdiction Decision at 30-49 (addressing objections to jurisdiction); 72-88 (addressing objections to admissibility).
With regard to the allegations that Ukraine is relying on in this case-that Tatneft is not a private party, the "fair and equitable treatment" provision is not incorporated in the BIT, and Tatneft has no standing on behalf of AmRuz and Seagroup-the Court notes that the tribunal made specific findings in favor of Tatneft on each of these claims. By way of example, the tribunal found that "[t]here is undoubtedly a government presence in Tatneft [ ]," but it concluded that "business-related aspects predominate in Tatneft's operations and [ ] it is thus entitled to claim as a private investor under the Russia-Ukraine BIT." Jurisdiction Decision ¶¶ 129, 151. The tribunal characterized the issue regarding the fair and equitable treatment provision as "a matter for the merits," and upon consideration of the merits, the tribunal found that Ukraine agreed to provide fair and equitable treatment to Tatneft by incorporation through the most-favored-nation clause, but failed to provide such treatment. See Jurisdiction Decision ¶ 249; Merits Award ¶¶ 391-413. Finally, when confronted with Ukraine's assertions that Tatneft could not make a claim on behalf of Seagroup and AmRuz, the tribunal considered and rejected these assertions in the context of the Jurisdiction Decision. See Jurisdiction Decision Paragraphs 202-224.
By means of its Motion to Dismiss, Ukraine is asking this Court to revisit its previously-raised jurisdiction and admissibility objections, in the context of this Court's determination whether or not to apply the arbitration exception to Ukraine's foreign sovereign immunity.
*189Factually similar to the instant case is Chevron Corp. , where Ecuador, the foreign sovereign, asserted that the arbitration exception to the FSIA "required the District Court to make a de novo determination of whether Ecuador's offer to arbitrate in the BIT encompassed Chevron's breach of contract claims" because, according to Ecuador, if such claims were not covered by the BIT, there was no agreement to arbitrate.
In the underlying Chevron decision, Judge James E. Boasberg rejected Ecuador's suggestion that the Court conduct an independent de novo determination of the arbitrability of a dispute in connection with the FSIA's arbitration exception, noting that:
Such an argument appears to be an attempt by Ecuador to get two bites at the apple of the merits of its dispute with Chevron, by seeking to have this Court separately determine the arbitrability of the underlying dispute under both the FSIA and the New York Convention. The inquiry Ecuador suggests runs counter to the clear teaching of this Circuit on the purpose and role of the FSIA. The FSIA is a jurisdictional statute that speak[s] to the power of the court rather than to the rights and obligations of the parties. Likewise § 1605(a) does not affect the contractual right of the parties to arbitration but only the tribunal that may hear a dispute concerning enforcement of an arbitral award. Inquiring into the merits of the enforcement dispute-that is, the arbitrability of the underlying claims-would involve an inquiry into the contractual rights of the parties to arbitration and would thus be beyond the reach of the FSIA's cabined jurisdictional inquiry.
Chevron Corp. v. Republic of Ecuador ,
In Crystallex Internt'l Corp. v. Bolivarian Rep. of Venezuela,
BG Group left intact the principle that "it is up to the parties to determine whether a particular matter is primarily for arbitrators or for courts to decide."Id. at 1206 . In other words, when the parties explicitly agree that the tribunal should decide the scope of its own inquiry, then courts should review that determination deferentially. See First Options of Chicago, Inc. v. Kaplan ,514 U.S. 938 , 943,115 S.Ct. 1920 ,131 L.Ed.2d 985 (1995) ("[A]court must defer to an arbitrator's arbitrability decision when the parties submitted that matter to arbitration.")
Crystallex ,
In the instant case, Ukraine specifically requested that the arbitral tribunal first rule on issues of jurisdiction prior to considering the merits of Tatneft's claims. In the proceeding before this Court, Ukraine challenges the confirmation and enforcement of the foreign arbitral award through both a motion to dismiss as well as its response to the Petition, and as such, similar to the scenario in Chevron, supra . Ukraine appears to attempt to get "two bites at the apple of the merits of its dispute with [Tatneft], by seeking to have this Court separately determine the arbitrability of the underlying dispute under both the FSIA and the New York Convention," which is contrary to the "teaching of this Circuit on the purpose and role of the FSIA." Chevron ,
2. Implied Waiver Exception to FSIA
Tatneft argues in the alternative that this Court has jurisdiction pursuant to
The FSIA does not define "implied waiver." Creighton Ltd. v. Gov't of State of Qatar ,
Courts have found an implicit waiver under § 1605(a)(1) in "cases involving contracts in which a foreign state has agreed to arbitrate disputes without specifying jurisdiction in a particular country or forum" but "most courts have refused to find an implicit waiver of immunity to suit in American courts from a contract clause providing for arbitration in a country other than the United States."
In the instant case, Ukraine agreed to arbitrate in the territory of a state [France] that has signed the New York Convention, and it is also a signatory to the Convention; thus, it should have anticipated enforcement actions in signatory states. See "Contracting States," New York Arb. Convention , http://www.newyorkconvention.org/countries. Accordingly, following the standard set forth in Creighton , this Court finds that implied waiver under Section 1605(a)(1) is an alternative grounds for jurisdiction over Ukraine, and Ukraine's motion to dismiss on jurisdictional grounds shall be DENIED.
B. Ukraine's Motion to Dismiss asserts that the United States is a Forum Non Conveniens
Ukraine also argues that dismissal is warranted on forum non conveniens grounds. See Mot.to Dismiss at 47-50. Under this doctrine, the Court "must decide (1) whether an adequate alternative forum for the dispute is available and, if so, (2) whether a balancing of private and public interest factors strongly favors dismissal." Agudas Chisidei Chabad of U.S. v. Russian Fed'n ,
This Court must determine first if an alternative forum "is both available and adequate." MBI Grp., Inc. v. Credit Foncier du Cameroun ,
In TMR , the petitioner moved to enforce an arbitration award obtained in Sweden against Ukraine, and the respondent argued that the courts of Ukraine and Sweden were adequate forums in which to enforce the award. The petitioner countered however that only a United States court could attach the commercial property of a foreign state, which was located in the United States, upon judgment entered by a United States court.
Ukraine's argument ignores the reasoning set forth by the D.C. Circuit [in TMR ] in response to the Respondent's argument that "the district court should have dismissed this action because [it] had no assets in the United States against which a judgment [could] be enforced."
Even if [Respondent] currently has no attachable property in the United States, however, it may own property here in the future, and [Petitioner's] having a judgment in hand will expedite the process of attachment. In any event, the possibility that the judgment of the district court may go unenforced does not bear upon whether that court is an inconvenient forum in which to defend. [Respondent] also speculates that [Petitioner's] true motive is to go after the property of the State of Ukraine, but [Petitioner's] motive is immaterial and whether [Petitioner] could properly attach such property is not before us.
Because there is no other forum in which [Petitioner] could reach the [Respondent's] property, if any, in the United States, we affirm the district court's refusal to dismiss this action based upon the doctrine of forum non conveniens .
TMR ,
With respect to the aforementioned first step in the test for dismissal based on forum non conveniens , Tatneft bolsters its argument that Ukraine is not an adequate alternative forum with its allegation that "the [Merits] Award is based on the wrongful actions of the Ukrainian courts, prosecutors, and court officials" and accordingly, there is no expectation of impartiality on behalf of the Ukrainian courts and in fact, an expectation that they would fail to enforce the Merits Award on the same "grounds they used to deprive Tatneft of its interests in Ukrtatnafta in the first place." Consol. Opp'n at 50. Cf. Daventree Ltd. v. Republic of Azerbaijan ,
Ukraine relies upon *194In re Arbitration between Monegasque De Reassurances v. Nak Naftogaz of Ukraine ,
Accordingly, because the rationale in TMR Energy controls the specific forum non conveniens question before the Court, and further, Tatneft has raised a credible issue of its ability to obtain justice in Ukraine, this Court finds that Ukraine cannot show that an alternative forum exists. The Court need not thus engage in the balancing step of the forum non conveniens test. See TMR Energy ,
C. Ukraine's Motion for Jurisdictional Discovery
Ukraine argues that it should be permitted to engage in jurisdictional discovery as to the issue of whether Tatneft is a "private party" for purposes of applying the FSIA arbitration exception. See
*195Atlantigas Corp. v. Nisource, Inc. ,
Tatneft contests Ukraine's request for jurisdictional discovery on grounds that Ukraine has not explained what additional facts from discovery "would affect the court's jurisdictional analysis" and thus, Tatneft argues that it is appropriate to deny discovery. Consol. Opp'n at 47, citing Maqeleh v. Hagel ,
In light of the fact that this Court has already determined in Section III A. 1. herein that it will defer to the arbitral tribunal's determination on jurisdiction, which was upheld by the Paris Court of Appeal, Ukraine's request for jurisdictional discovery on the issue of whether Tatneft is a private party is moot. Furthermore, this Court has also determined that Section 1605(a)(1) is an alternative basis to conclude that the FSIA does not grant Ukraine immunity, and that section is not limited to proceedings to enforce arbitral awards made under agreement "with or for the benefit of a private party." Accordingly, Ukraine's request for jurisdictional discovery should be DENIED because Ukraine cannot show that additional discovery will change the Court's analysis of jurisdiction with regard to
D. Ukraine's Motion to Stay
As previously noted herein, Tatneft's Notice of Arbitration was filed on May 21, 2008, and on September 28, 2010, the tribunal rendered an Award on Jurisdiction upholding its jurisdiction over the dispute between Tatneft and Ukraine. The tribunal held a subsequent hearing on the merits, from March 18, 2013 to March 27, 2013, and on July 29, 2014, the tribunal subsequently rendered a Merits Award holding Ukraine liable for violation of the "fair and equitable treatment" standard and ordering it to pay damages to Tatneft in the amount of $112 million plus interest. On August 27, 2015, Ukraine commenced a proceeding to set aside both the Jurisdictional Award and the Merits Award at the seat of the arbitration, in Paris, France, before the Paris Court of Appeal. "In French setting aside proceedings, the Paris Court of Appeal exercises de novo review ... of all issues pertaining to the arbitral tribunals' jurisdiction and discretionary review of all other issues." Mot. to Stay at 7. On November 29, 2016, the Paris Court of Appeal issued a decision upholding both the Jurisdiction Award and the Merits Award.
Ukraine filed cassation proceedings before the French Court of Cassation on March 21, 2017, seeking to overturn the decision of the Paris Court of Appeal upholding the Merits Award. Tatneft moved to dismiss Ukraine's case until it has paid *196the Merits Award and the attorneys' fees and costs ordered by the Paris Court of Appeal pursuant to Article 1009-1 of the French Code, "which authorizes the Court of Cassation to remove a case from its docket if the petitioner has failed to comply with the term of the order that it plans to challenge." Opp'n to Stay at 10-11.
Ukraine's Motion to Stay is based on the pendency of the proceedings in the French Cassation Court; more specifically, Ukraine asserts that enforcement of the Merits Award would "enable multiplication of litigation" and "may lead to inconsistent results," and if the Award were enforced and then set aside, Ukraine would be forced to try to recover money that had already been paid out, which would pose a hardship. Motion to Stay at 8. Ukraine contends that the stay will be for a limited period of time, and as of the June 13, 2017 filing of the Motion to Stay, Ukraine estimated that "the French Cassation Court w[ould] likely deliver its decision in June 2018 or earlier." Motion to Stay at 14. Tatneft opposes the stay on grounds that the Merits Award has already been upheld by the Paris Court of Appeal and the mere possibility that the Court of Cassation will overturn the Merits Award is not enough to justify a stay.
"[T]he power to stay proceedings is incidental to the power inherent in every court to control the disposition of causes on its docket with an economy of time and effort for itself, for counsel, and for litigants." Landis v N. Am. Co. v. Am. Water Works & Elec. Co. ,
In this case, however, this Court has been informed that the parallel proceeding that was ongoing in the French Court of Cassation has been dismissed without prejudice. On November 13, 2017, Tatneft filed a [31] Notice of Filing of a November 9, 2017 Radiation Order entered by the French Court of Cassation, which "dismisses without prejudice Ukraine's Court of Cassation appeal from the judgment of the Paris Court of Appeal that confirmed the Final Award in Tatneft's favor and rejected Ukraine's attempt to annul it." See Tatneft Notice of Filing, ECF No. 31, at 1.
Ukraine asserts however that it is now either preparing to challenge, or in the process of challenging, the Radiation Order issued by the French Court of Cassation through an abrogation proceeding. This Court notes that an abrogation proceeding does not directly challenge the Merits Award; instead, the purpose of this new proceeding is to "seek [ ] abrogation of the decree that introduced Article 1009-1 of the French Code of Civil Procedure before the French State Council" and in the event Ukraine prevails on that challenge, the Cassation Court's Radiation Order "will be annulled, and the French cassation proceeding will resume." Id.
The Court finds that a stay of the recognition and enforcement proceeding in this case is without merit because Ukraine's motion to stay is based on the idea that the ongoing French setting aside proceeding was a parallel proceeding that warranted consideration of the Europcar factors addressed in Chevron , but that setting aside proceeding is no longer active. Despite the fact that Ukraine has indicated its intent to challenge the French Court of Cassation's decision to "deactivate" the setting aside proceeding, Ukraine's prospective challenge is not a "parallel proceeding" that will have any immediate effect on the Paris Court of Appeals' upholding of the Merits Award; i.e. , the most that Ukraine can hope to accomplish is the reactivation of the setting aside proceeding in the French Court of Cassation. "[A] court abuses its discretion in ordering a stay 'of indefinite duration in the absence of a pressing need.' "
*198Belize Soc. Dev. Ltd. v. Gov't of Belize ,
E. Overview of Tatneft's Petition to Confirm Arbitration Award
United States courts have little discretion to refuse to confirm an award under the FAA, which provides that, in exercising its original jurisdiction over enforcing international arbitral awards, the district court "shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the said Convention."
1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:
(a) The parties to the agreement ... were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
(b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings ...; or
(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration ...; or
(d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties ...; or
(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.
2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:
(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or
(b) The recognition or enforcement of the award would be contrary to the public policy of that country.
New York Convention, art. V, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38 (effective for the United States on Dec. 29, 1970).
As discussed above, courts "may refuse to enforce the award only on the grounds explicitly set forth in *199Article V of the Convention." TermoRio S.A. E.S.P. v. Electranta S.P. ,
Ukraine has brought two defenses under Article V to the New York Convention against the enforcement of the Award, alleging that recognition and enforcement of the Merits Award should be refused because: 1) the composition of the arbitral tribunal was not in accordance with the agreement of the parties; and 2) it would be contrary to the public policy of the United States.
Upon review of Tatneft's Petition to Confirm the Arbitral Award, ECF No. 1, and Ukraine's Opposition to the Petition, ECF No. 22, this Court finds that it would be useful to have Tatneft reply to Ukraine's opposition prior to this Court ruling on the Petition, and accordingly, by no later than April 19, 2018, Tatneft shall provide a reply to Ukraine's opposition.
IV. CONCLUSION
For the foregoing reasons, the Court shall DENY Respondent Ukraine's Motion to Dismiss, DENY Respondent Ukraine's Motion for Leave to Take Jurisdictional Discovery, and DENY Respondent Ukraine's Motion to Stay. Petitioner Tatneft is permitted until April 19, 2018 to file its reply to Ukraine's Opposition to Tatneft's Petition, and the Petition is HELD IN ABEYANCE until that time. An appropriate Order accompanies this Memorandum Opinion.
In connection with this Memorandum Opinion and the accompanying Order, the Court reviewed the following documents: Petition to Enforce, ECF No. 1 ("Pet."); Opposition to Petition, ECF No. 22 ("Opp'n to Pet.");Motion to Stay, ECF No. 14 ("Mot. to Stay"); Opposition to Motion to Stay, ECF No. 16 ("Opp'n to Stay"); Reply to Opposition to Stay, ECF No. 18 ("Reply to Stay"); Motion to Dismiss, ECF No. 21 ("Mot. to Dismiss"); Consolidated Opposition to Motion to Dismiss and Motion for Leave to Seek Discovery, ECF No. 26 ("Consol. Opp'n"); Reply to Opposition to Motion to Dismiss, ECF No. 29 ("Reply to Dismiss"); Motion for Leave to Seek Discovery, ECF No. 23 ("Mot. for Disc."); Consolidated Opposition to Motion to Dismiss and Motion for Leave to Seek Discovery, ECF No. 26 ("Consol. Opp'n"); Reply to Opposition to Motion for Leave to Seek Discovery, ECF No. 30 ("Reply to Disc."). The Court also considered Tatneft's Notice of Filing, ECF No. 31 ("Tatneft's Notice"); Ukraine's Notice of Filing, ECF No. 32 ("Ukraine's Notice"); and the arbitral tribunal's Jurisdiction Decision, ECF No. 27-3 (attached as an exhibit to Tatneft's motion for summary judgment).
Ukraine alleges that Tatneft is a "Tatarstan State-owned oil company under pervasive State control" and further, that it was transformed by the Republic of Tatarstan-a political subdivision of the Russian Federation-into a shareholding company in 1994. Mot. to Dismiss at 8. The Court notes that the page number citations refer to the numbers assigned by the Court's Electronic Case Filing system.
Ukraine's shares were held by its state-owned oil and gas company, NJSC Naftogaz ("Naftogaz") after 2004. Mertis Award at 141, 562 n. 903.
The Merits Award [Ex. A] is filed on the Court docket in four parts at ECF No. 1-4 through ECF No. 1-7, because of the length of the document.
The Court indicated that it would consider Ukraine's jurisdictional objection before ruling on any motion to stay. See July 10, 2017 Minute Order. In this Memorandum Opinion, the motion to stay will be considered after consideration of the motion to dismiss and motion for jurisdictional discovery.
There is no dispute that Ukraine is a foreign state pursuant to 28 U.S.C. Section 1603(a).
Tatneft argues alternatively that the Court has jurisdiction under Section 1605(a)(1) because Ukraine waived sovereign immunity when it signed the New York Convention, although the Court notes that this basis for jurisdiction was not raised by Tatneft in its Petition.
Tatneft references the Jurisdiction Decision in its Consolidated Opposition.
Tatneft explains that in the context of this arbitration, "an "admissibility" objection goes to the question of whether the claim should be heard at all (e.g., whether the claim is time barred or subject to some similar legal defect), unlike a "jurisdictional" objection, which goes to the tribunal's power to decide the claim (whether there is a valid agreement to arbitrate)." Consol. Opp'n at 17, n.6. (referencing Jan Paulsson, Jurisdiction and Admissibility, Global Reflections on International Law, Commerce and Dispute Resolution 601 (Gerald Aksen et al. eds. 2005) ). Tatneft further explains that "admissibility objections are considered merits issues for the arbitral tribunal, not the courts, to decide."
The parties consented to an extended briefing schedule on the opposition and reply to the motion to dismiss. See August 7, 2017 Minute Order.
The Russia-Ukraine BIT provides that disputes shall be considered by:
a) a competent court or an arbitration tribunal of the Contracting Party in whose territory the investments were made;
b) the Arbitration Institute of the Stockholm Chamber of Commerce;
c) an ad hoc arbitration tribunal in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL).
Russia-Ukraine BIT, ECF No. 1-8, at Article 9.
Legislation based on the UNCITRAL Model Law has been adopted in 109 jurisdictions, including certain states within the United States. See "Status UNCITRAL Model Law on International Commercial Arbitration (1985), with amendments as adopted in 2006," http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration_status.html.
Ukraine notes that there are two additional "parallel" proceedings that were filed in Moscow and London, but its argument in support of the motion to stay focuses on the "parallel" proceeding in France, which is the country where the Award was rendered.
Ukraine explains that " '[r]adiation' is a measure of administration of justice ... provided in Article 1009-1 of the French Code of Civil Procedure, which allows the First President of the Cassation Court [ ] to temporarily remove the case from the docket if 'the petition cannot prove that it has executed the decision the cassation of which is sought,' except if he/she finds 'that the execution would entail manifestly excessive consequences or that it is impossible for the petitioner to execute such decision.' " Ukraine's Reply to Stay at 8 (citations and quotations omitted).
Ukraine disagrees with the Tatneft's characterization as a "dismissal without prejudice" and states that it is "more analogous to a 'stay.' " Ukraine's Reply to Stay at 9.
Reference
- Full Case Name
- Pao TATNEFT, Petitioner/Plaintiff v. UKRAINE, Respondent/Defendant.
- Cited By
- 8 cases
- Status
- Published