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IDAS Resources N.V. v. Empresa Nacional de Diamantes de Angola E.P.

October 26, 2006

IDAS RESOURCES N.V., CURACAO; PABECO B.V., ADASTRA MINERALS, INC. F/K/A AMERICA MINERAL FIELDS, INC. PLAINTIFFS,
v.
EMPRESA NACIONAL DE DIAMANTES DE ANGOLA E.P.; NOFAR MINING B.V. DEFENDANTS.



The opinion of the court was delivered by: Ellen Segal Huvelle United States District Judge

MEMORANDUM OPINION

The dispute in this case arises from contracts to conduct diamond prospecting and mining in Angola. All of the parties are foreign companies, and one of the defendants, Empresa Nacional de Diamantes de Angola E.P. ("ENDIAMA"), is owned and controlled by the Angolan government. Given the citizenship of the parties and ENDIAMA's status as an instrumentality of the Angolan government, the only possible basis for this Court's jurisdiction is the Foreign Sovereign Immunities Act of 1976 ("FSIA"), 28 U.S.C. §§ 1602 et seq. Both defendants contend that neither FSIA's "expropriation exception" nor its "commercial activity exception" defeats ENDIAMA's sovereign immunity. Defendant NOFAR Mining B.V. ("NOFAR") further contends that the Court lacks diversity jurisdiction pursuant to 28 U.S.C. § 1332(a) and personal jurisdiction pursuant to the District of Columbia's long-arm statute. For the reasons explained herein, the Court will grant defendants' motions to dismiss, will deny plaintiffs' request to conduct jurisdictional discovery, and will dismiss the above-captioned case without prejudice for lack of subject matter jurisdiction.

BACKGROUND

Plaintiff IDAS is a Dutch Antilles company with its principal place of business in the United Kingdom. (Cmpl. ¶ 1.) IDAS is a wholly owned subsidiary of plaintiff Adestra Minerals, Inc. ("AMI"), a Canadian company with its principal place of business in the United Kingdom. (Id. ¶¶ 3, 14.)Prior to AMI's acquisition of IDAS, plaintiff Pabeco B.V. ("Pabeco") was a shareholder in IDAS. (Id. ¶ 12 & n.2.) Thereafter, Pabeco "retained a net profits interest" in IDAS. (Id. ¶ 14.)

According to the complaint, in 1995 IDAS procured two licenses for diamond prospecting and mining in the Luanda Norte and Malange regions of Angola. (Id. ¶ 10.) IDAS then contracted with ENDIAMA and a third party, Twins Limited ("Twins"), to form a joint venture to develop the licensed areas. (Id.) It is undisputed that ENDIAMA has its principal place of business in Luanda, Angola, and that ENDIAMA is owned and controlled by the Angolan government. (See id. ¶ 4; Def. ENDAMA's P. & A. at 3.) The parties also agree that Twins is a company formed in the Cook Islands. (See, e.g., Pls.' Resp. to Def. NOFAR's Mot.to Dismiss ["Pls.' NOFAR Resp."] at 5; Def. ENDIAMA's Reply at 4 n.3.) Plaintiffs allege that Twins has its principal place of business and "nerve center of operations" in the District of Columbia, and that each of the company's two "principals" maintains a residence or part-time residence there. (E.g., Pls.' NOFAR Resp. at 5.)

In 1999, IDAS, ENDIAMA, and Twins agreed to terminate their original joint venture agreement. (Cmpl. ¶ 17.) They did so because a change in Angolan law set new limits upon the total area of diamond concessions that any single company could hold. (Id.) Under the new law, IDAS's original concessions were too large. (See id. ¶¶ 17, 19.) In anticipation of receiving new, smaller concessions from the Angolan government, IDAS and ENDIAMA executed a "Memorandum of Understanding" ("MOU") providing for a new joint venture among IDAS, ENDIAMA, and Twins. (Id. ¶ 18.)

After Angola's Government Council of Ministers officially granted IDAS and ENDIAMA new concessions, the joint venturers executed two contracts formalizing the structure of their enterprise. (Id. ¶¶ 18, 19.) In August 2002, they executed a "Heads of Agreement" that detailed relative shareholdings and a plan for reimbursing shareholder loans. (Id. ¶ 21.) In December 2002, the joint venturers executed an agreement in which they "detailed the composition of the Board of Directors, the management structure of the joint venture company, the minimum investment to be made by IDAS, and details governing the payment of a signing bonus to ENDIAMA and the repayment of shareholder loans to IDAS." (Id. ¶ 22.) The agreement allegedly specified that IDAS would own 51 percent of the company until all shareholder loans were repaid, while ENDIAMA would own 38 percent and Twins 11 percent. (Id.) Consistent with this ownership structure, IDAS would choose three of the five board members. (Id.) After capital recoupment, IDAS's ownership would fall to 49 percent, Twins would own a 13 percent share, ENDIAMA's share would remain unchanged, and IDAS would maintain three representatives on the board of directors. (Id.)

Plaintiffs allege that, soon after these agreements were reached, ENDIAMA began negotiating for changes to the joint venture's structure. (Id. ¶¶ 23--24.) When ENDIAMA asked to revise some of the terms of the Heads of Agreement, IDAS agreed. (Id. ¶ 23.) IDAS did not agree, however, when ENDIAMA proposed reducing IDAS's ownership from 51 to 43 percent and limiting IDAS to one representative on the board of directors. (Id. ¶ 24.)

According to plaintiffs, IDAS learned in mid-2004 that ENDIAMA had been negotiating for several months with NOFAR, a Netherlands company, to replace IDAS as ENDIAMA's joint venture partner. (Id. ¶ 25.) On May 18, 2004, ENDIAMA, NOFAR, and Twins executed a contract to explore and exploit most of the concession area that ENDIAMA and Twins had previously agreed to explore and exploit with IDAS. (Id. ¶ 25; Pls.' Reply to ENDIAMA's Resp. to Pls.' Mot. for Leave to Supp. ["Pls.' Supp. Reply"] Ex. 1 at 0, 30.) In July 2004, ENDIAMA informed IDAS that ENDIAMA would no longer honor its contractual obligations under the joint venture agreements with IDAS. (Cmpl. ¶ 26.)

As alleged in the complaint, plaintiffs claim that ENDIAMA's actions "have caused a direct effect in the United States, including a loss of income to the principals in Twins" and "losses to the United States shareholders of AMI." (Id. ¶ 27.) Plaintiffs seek to hold ENDIAMA liable for breach of contract, breach of duty of good faith, fraudulent misrepresentation, and discrimination between investors and cancellation of licenses in violation of Angolan law, and they accuse NOFAR of tortious interference with contractual relations. Plaintiffs request compensatory and punitive damages in excess of $529 million. (Id. ¶¶ 60--63.)

ANALYSIS

I. Legal Standard Governing Defendants' Motions to Dismiss

When defendants file motions to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1),plaintiffs bear the burden of establishing subject matter jurisdiction. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). A court may dismiss a complaint for lack of subject matter jurisdiction only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Richardson v. United States, 193 F.3d 545, 549 (D.C. Cir. 1999) (quoting Caribbean Broad. Sys., Ltd. v. Cable & Wireless PLC, 148 F.3d 1080, 1086 (D.C. Cir. 1998)).In considering the sufficiency of a plaintiff's allegations for this purpose, a court may consider materials outside the pleadings. Herbert v. Nat'l Acad. of Scis., 974 F.2d 192, 197 (D.C. Cir. 1992).

II. This Court Lacks Subject Matter Jurisdiction Over Plaintiffs' Claims Against ENDIAMA

A. Jurisdiction Under FSIA

FSIA "establishes a comprehensive framework for determining whether a court in this country, state or federal, may exercise jurisdiction over a foreign state." Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 610 (1992). FSIA permits suits in U.S. courts against foreign states (or their political subdivisions, agencies, or instrumentalities) even when all plaintiffs are themselves foreign citizens. See Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 490--91 (1983) (explaining that, if FSIA's substantive standards are satisfied, an action "may be brought in federal court regardless of the citizenship of the plaintiff"). Foreign states are immune from suit in U.S. courts, however, "unless one of several statutorily defined exceptions [to sovereign immunity] applies." Weltover, 504 U.S. at 610. Thus, unless one of FSIA's exceptions applies, claims against foreign states are beyond a U.S. court's subject matter jurisdiction. Id.

Foreign defendants challenging a U.S. court's subject matter jurisdiction bear the ultimate burden of proving immunity. E.g., Global Index., Inc. v. MKAPA, 290 F. Supp. 2d 108, 111 (D.D.C. 2003). When, as here, a defendant "challenges . . . the legal sufficiency of the plaintiff's jurisdictional allegations, then the . . . court should take the plaintiff's factual allegations as true and determine whether they bring the case within any of the exceptions to immunity invoked by the plaintiff." Id. (quoting Phoenix Consulting, Inc. v. Republic of Angola, 216 F.3d 36, 40 (D.C. Cir. 2000)).

B. The "Expropriation Exception"

Plaintiffs argue that their allegations meet the requirements of FSIA's expropriation exception:

(i) [that] rights in property are at issue; (ii) [that] those rights were taken in violation of international law; and (iii) [that] the property . . . is [either] present in the United States in connection with a commercial activity carried on in the United States by the foreign state, or . . . owned or operated by an agency of the foreign state engaged in a commercial activity in the United States.

Peterson v. Royal Kingdom of Saudi Arabia, 332 F. Supp. 2d 189, 196 (D.D.C. 2004); see 28 U.S.C. ยง 1605(a)(3) (2006). Defendants argue that plaintiffs have failed to meet the first and third of these requirements, and the Court agrees. Moreover, it is premature ...


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