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In re Application of Caratube International Oil Co.

August 11, 2010

IN RE APPLICATION OF CARATUBE INTERNATIONAL OIL COMPANY, LLP


The opinion of the court was delivered by: John D. Bates United States District Judge

MEMORANDUM OPINION

Caratube International Oil Company, LLP is currently engaged in international arbitration against the Republic of Kazakhstan. Caratube has filed a petition in this Court seeking discovery "for use in a proceeding in a foreign or international tribunal" pursuant to 28 U.S.C. § 1782. For the reasons explained below, the Court will deny the petition.

BACKGROUND

I. Factual Background

In 2002, Caratube became, through an assignment, a party to a contract with Kazakhstan to explore for and produce oil. See Kazakhstan's Mot. to Intervene and Opp'n to Caratube's Pet. for Discovery ("Kazakhstan's Opp'n") [Docket Entry 15], Decl. of Peter Wolrich ("Wolrich Decl."), ¶ 4. Kazakhstan terminated this contract in 2008, purportedly because Caratube breached the agreement. See id. at ¶ 5. Caratube maintains, however, that "the contract was terminated as part of the fall-out of a nasty family political fight within Kazakhstan." Caratube's Pet. for Discovery ("Caratube's Pet.") [Docket Entry 1], at 3.

According to Caratube, its troubles with the Kazakh government stem from a dispute between Kazakhstan's President, Nursultan Nazarbayev, and his former son-in-law, Rakhat Aliyev. Caratube's Pet., Ex. 6 (Caratube's Request for Arbitration ("Request for Arbitration")), at 12. Caratube contends that, after Aliyev announced in 2007 that he intended to run against Nazarbayev in the 2012 presidential election, "the Nazarbayev regime sought out and punished anyone related to Aliyev, however remotely." Caratube's Pet. at 4. The connection to this case is that Aliyev's sister is married to Issam Hourani, whose brother Devincci owns 92% of Caratube. See Request for Arbitration at 12-13; Caratube's Pet. at 4. Citing this connection, Caratube contends that its relationship with Kazakhstan "deteriorated in direct correlation with the rise of political tensions between Nazarbayev and Aliyev." Caratube's Pet. at 4. It also maintains that Kazakhstan has undertaken a campaign of harassment against it. Id.

In June 2008, pursuant to a bilateral investment treaty between the United States and Kazakhstan, Caratube filed a request for international arbitration with the International Centre for Settlement of Investment Disputes ("ICSID") to resolve its contract dispute with Kazakhstan. The ICSID Arbitral Tribunal ("Tribunal") held its first session on April 16, 2009, adopting a schedule that required the parties to exchange document requests by January 15, 2010, and to produce discovery by April 16, 2010. See Caratube's Pet., Ex. 28 (Minutes of the First Session of the Arbitral Tribunal ("First Session Minutes")), ¶¶ 4.7-14.11. The parties were to complete briefing by the end of 2010, and a hearing date was scheduled for February 2011. See id. at ¶¶ 14.12-14.19.

On April 26, 2010, the Tribunal issued its second procedural order. See Wolrich Decl., Ex. E ("Procedural Order No. 2"). This Order resolved several discovery disputes between the parties and clarified their discovery obligations. See id. at ¶ 2.1. Pushing back the discovery deadline somewhat, it required discoverable material to be disclosed "within four weeks from the date this Order is received." Id. (emphasis removed).

Caratube filed this petition two days later. Along with its petition, Caratube submitted to this Court proposed subpoenas duces tecum that it seeks to serve on Dr. Alexander Mirtchev, Krull Corporation UK, GlobalOptions, Inc., BGR Group, and Policy Impact Communications ("PIC").*fn1 Each of these individuals and entities, according to Caratube, "has done or is doing various acts on behalf of the Republic of Kazakhstan and the Nazarbayev family that directly impact Caratube and members of the Hourani family." Caratube's Pet. at 10-11.

The next day, Caratube informed the Tribunal of this action and requested a six-month extension of the arbitration schedule. See Caratube's Response in Supp. of Pet. ("Caratube's Reponse") [Docket Entry 24], Ex. B (Apr. 29, 2010 Letter from Caratube to Tribunal), at 2-5. Kazakhstan opposed the request for an extension, and asked the Tribunal to order Caratube to cease and desist from its section 1782 petition in this Court. See Caratube's Response, Ex. A (May 10, 2010 Letter from Kazakhstan to Tribunal), at 4-5.

The Tribunal issued its third procedural order on May 26, 2010. See Wolrich Decl., Ex. F ("Procedural Order No. 3"). In that order, the Tribunal expressed displeasure with Caratube's unilateral actions, but nonetheless declined to require Caratube to cease and desist:

[W]hilst the Tribunal might have been minded to find that its prior consent should have been sought by [Caratube] before the presentation of its Section 1782 petition, the Tribunal concludes that it is not necessary for it to order Claimant to cease and desist from the US action. A party starting a Section 1782 procedure before the US courts does so and chooses the time for such a petition at its own risk. But the existence of such a petition to domestic courts cannot interfere with the Tribunal's maintenance of its authority over the arbitral procedure and with the timetable established with the consent of the Parties.

Id. at ¶ 2.6. The Tribunal also rejected Caratube's request to delay the arbitration proceedings. See id. at ¶ 2.4. Finally, the Tribunal reserved the question of whether it would admit any documents obtained through the section 1782 petition:

Should Claimant, at a later stage of this arbitral procedure apply to admit any document produced in the Section 1782 procedure, this Tribunal will have to decide on such an application having regard to its obligation to accord procedural fairness to the Parties and ...


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