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WORLD WIDE MINERALS v. REPUBLIC OF KAZAKHSTAHN

September 27, 2000

WORLD WIDE MINERALS LTD., WORLD WIDE RESOURCE FINANCE INC., KAZURAN CORPORATION, AND NUCLEAR FUEL RESOURCES CORPORATION, PLAINTIFFS,
V.
THE REPUBLIC OF KAZAKHSTAHN, THE STATE COMMITTEE OF THE REPUBLIC OF KAZAKHSTAN ON THE MANAGEMENT OF STATE PROPERTY, THE NATIONAL ATOMIC COMPANY KAZATOMPROM, AND NUKEM, INC., DEFENDANTS.



The opinion of the court was delivered by: Lamberth, District Judge.

MEMORANDUM OPINION

Plaintiffs World Wide Minerals Ltd., World Wide Resources Finance Inc., Kazuran Corporation, and Nuclear Fuel Resources Corporation (hereinafter "World Wide") brought suit over a contract dispute with the Republic of Kazakhstan concerning the mining and export of uranium. After the filing of the Complaint and First Amended Complaint numerous motions to dismiss were filed by the defendants. Most recently, the plaintiffs have requested Leave to File Second Amended Complaint. The defendants, the Republic of Kazakhstan, the State Committee of the Republic of Kazakhstan on the Management of State Property, the National Atomic Company Kazatomprom, and Nukem Inc., have opposed this motion and moved to dismiss. Upon consideration of these motions, the corresponding replies, the entire record herein, and the relevant law, the Court has determined that:

1. Plaintiff World Wide's Motion for Leave to File Second Amended Complaint is denied for futility.

2. As to defendants the Republic of Kazakhstan, the State Committee on the management of State Property, and Kazuran Corporation (hereinafter Kazakhstan) the claims of plaintiff World Wide are barred by the act of state doctrine. Therefore Kazakhstan's motion to dismiss is granted.

3. As to defendant Nukem, the Court lacks personal jurisdiction, and therefore grants defendant Nukem's motion to dismiss.

BACKGROUND

After gaining independence from the Soviet union in 1991, Kazakhstan began to seek foreign investment. Among the areas of interest to foreign companies were the northern and southern uranium mines of Kazakhstan. In June of 1996, World Wide Minerals Ltd., a Canadian corporation, submitted a proposal for the management of the northern mines complex in Kazakhstan. World Wide was simultaneously negotiating with the Kazakhstan Joint Stock Company of Atomic Power, Engineering, and Industry (KATEP) for the right to export and sell uranium from Kazakhstan.

On July 2, 1996, World Wide and KATEP agreed on the points of negotiation. They called for good faith negotiations on the issue of marketing the uranium. No final agreement to market the uranium was ever reached.

On March 25, 1997 World Wide, through its wholly owned subsidiary World Wide Resource Finance Inc., entered into the Pledge Agreement with the State Committee of Kazakhstan. This agreement secured the loans of the Management Agreement. Under Article 19 of the Pledge Agreement, the parties indicated that any disputes would be addressed first by negotiations, and then by arbitration under UNCITRAL. Paragraph 19.5 provided that the parties would not be restricted in their right to settle disputes in court. That paragraph also provides that Kazakhstan waives immunity "for the purposes of the United States Foreign Sovereign Immunities Act of 1976 in any action or proceedings to which such Act applies."

On January 15, 1997, World Wide contracted with Nuclear Fuel Resources Inc., (NFR) of Colorado to market uranium from the northern mines. NFR and World Wide then entered into an agreement to provide uranium to Consumer's Energy, a Michigan corporation, on March 27, 1997. When the export license was not issued World Wide could not perform its duties under the contract. As a result of the failure to obtain the export license, World Wide suspended operations at the Northern Mines. Kazakhstan informed World Wide that it would not be able to grant an export license because of an earlier agreement with Nukem Inc., a U.S. company, for exclusive marketing of the uranium. This agreement had been kept confidential. In July of 1997, Nukem took over the failed contract with Consumer's Energy. On August 1, 1997, Kazakhstan terminated the northern mines management agreement. Plaintiffs filed suit, alleging breach of contract, conspiracy, violations of the RICO statute and, in the proposed second amended complaint violations of the Sherman Act.

ANALYSIS

The Plaintiff requested leave to file a second amended complaint. Leave to amend pleading should be given when justice so requires. See Firestone v. Firestone, 76 F.3d 1205 (D.C.Cir. 1996). The decision to allow or deny amendment is firmly within the court's discretion. Id. It is proper to deny leave for amendment if the amendment would be futile. See Graves v. United States, 961 F. Supp. 314 (D.D.C. 1997). Futility is determined by whether or not the amended complaint would survive a motion to dismiss. Id. For reasons explained more fully below, the second amended complaint would be futile.

I. Kazakhstan

A. FSIA and Minimum Contacts

The Republic of Kazakhstan is a foreign sovereign nation. Foreign sovereigns traditionally have enjoyed immunity from suit in courts of the United States. The Foreign Sovereign Immunities Act ("FSIA") of 1976 lays out the conditions of immunity. FSIA is the sole basis for jurisdiction over foreign nations. See Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 434, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989). Instrumentalities of the State also have immunity from suit under FSIA. Both the State Committee of the Republic of Kazakhstan on the Management of State Property and the National Atomic Company Kazatomprom, meet the definition of instrumentalities of state under 28 U.S.C. § 1603 (b)(2). The defendants maintain that the exceptions to FSIA do not apply and argue that a minimum contacts test is necessary.

In Flatow v. Islamic Republic of Iran, 999 F. Supp. 1 (D.D.C. 1998), this court concluded that the minimum contacts test was not required when deciding jurisdictional issues concerning foreign sovereigns. See Flatow, 999 F. Supp. at 21. In Flatow, this court stated that the traditional minimum contacts test was subsumed in the exceptions to FSIA. Id. This ruling drew on the Supreme Court's suggestion that a foreign state might not be a "person" for due process considerations. See Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 619, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992) (citing South Carolina v. Katzenbach, 383 U.S. 301, 323-24, 86 S.Ct. 803, 15 L.Ed.2d 769 (1966)). Since Flatow, this circuit has raised the issue but not decided it. See Creighton Limited v. Government of the State of Qatar, 181 F.3d 118, 124 (D.C.Cir. 1999). Consistent with the decision in Flatow, we find that no minimum contacts analysis is required concerning defendants the Republic of Kazakhstan, the State Committee of the Republic of Kazakhstan on the Management of State Property, and the National Atomic Company Kazatomprom. See Flatow, 999 F. Supp. at 21. The jurisdictional analysis instead depends on the presence or absence of one of the exceptions to FSIA. Id.

In this case, World Wide alleges that Kazakhstan waived its immunity in the "Pledge Agreement." In the alternative, World Wide argues that the acts of Kazakhstan qualify for the commercial activities exception to the FSIA. 28 U.S.C. § 1605 (a)(2). Kazakhstan disputes these points and, in addition, argues that the act of state doctrine applies. These issues are discussed in turn below.

B. Waiver of Immunity under FSIA

FSIA provides that a sovereign may be sued if it has "waived its immunity either explicitly or by implication[.]" 28 U.S.C. § 1605 (a)(1). World Wide claims that Kazakhstan explicitly waived its immunity in the "Pledge Agreement." The waiver provision of FSIA is to be interpreted narrowly, and it must be clear the foreign state intended to waive its immunity. See Foremost-McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 444 (D.C.Cir. 1990).

1. The Pledge Agreement

The parties entered into the "Pledge Agreement" to secure various loans required under the management agreement. Article 19 of the "Pledge Agreement" provides for dispute resolution mechanisms. If negotiations fail, the parties have the option to arbitrate but are not required to do so. See Proposed Second Am.Compl., Ex. 2, art. 19.5. The waiver clause specifically indicates that the waiver is to apply to FSIA. Id. The dispute at hand involves all of the contracts between the parties and therefore the dispute resolution requirements of the "Pledge Agreement" are applicable here.

Defendant Kazakhstan argues that the waiver is void since the agreement is between Kazakhstan and World Wide Financial Resources, a British Virgin Islands corporation. Kazakhstan claims that since article 19.5 allows that the parties may sue in their jurisdictions, it was not on notice that it would be sued in the United States. Article 19.5 does allow that the parties may bring suit in court of the jurisdiction of each party, but goes on to waive immunity in any jurisdiction. See Proposed Second Am.Comp., Ex. 2, art. 19.5. Article 19.5 concludes by stating that the waiver is intended specifically for jurisdictions in which FSIA is applicable. Id.

The fact that World Wide Fincorp is a British Virgin Islands company is not determinative in this case. See Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 490, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983) (holding that FSIA did not bar actions brought by foreign plaintiffs). The language of the waiver makes the United States the only possible jurisdiction to which it could apply. Therefore, this court holds that Kazakhstan intended to waive immunity to suit.


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