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Chevron Corp. v. Republic of Ecuador

United States District Court, District Circuit

June 6, 2013



JAMES E. BOASBERG United States District Judge.

Petitioners Chevron Corporation and Texaco Petroleum Company filed this action to confirm an award issued by an international tribunal under 9 U.S.C. § 207 and the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, better known as the New York Convention. Respondent Republic of Ecuador seeks to deny such confirmation on several bases. First, Ecuador argues that this Court lacks subject-matter jurisdiction because the case does not meet the requirements of the arbitration exception to the Foreign Sovereign Immunities Act. Second, it contends that confirmation must be denied under the New York Convention because the Award was beyond the scope of the submission to arbitration and is contrary to United States public policy. Finally, it maintains that this Court should, at a minimum, stay proceedings in this matter while Ecuador attempts to have the Award set aside by courts in the Netherlands, where the Award was rendered. Disagreeing on all fronts, the Court will deny Ecuador’s request and grant Chevron’s Petition to Confirm the Award.

I. Background

According to the Petition, Chevron and Texaco (together “Chevron”) entered into a contract with Ecuador in 1973, permitting Chevron to exploit oil reserves in Ecuador’s Amazon region, on the condition that Chevron provide a percentage of its crude-oil production at a reduced price to meet Ecuadorian domestic-consumption needs. See Pet., ¶¶ 11-12. The agreement was amended in 1977 and expired in June 1992. Id., ¶¶ 11, 16. As Chevron began winding up its work in Ecuador in 1991, it filed seven breach-of-contract cases there against the Ecuadorian government, seeking over $553 million in damages for various breaches of the 1973 and 1977 agreements. Id., ¶ 17. These disputes largely concerned allegations that Ecuador had overstated its domestic oil-consumption needs, and appropriated more crude oil than it was entitled to acquire at the reduced price. Id. ¶ 17. The lawsuits remained pending in Ecuadorian courts until being incorporated into the arbitration at issue in this case in 2006. Id., ¶ 21.

Meanwhile, in 1997, the U.S.-Ecuador Bilateral Investment Treaty (BIT) entered into force. Id., ¶ 18; Treaty Between the United States of America and the Republic of Ecuador Concerning the Encouragement and Reciprocal Protection of Investments, U.S.-Ecuador, Aug. 27, 1993, S. Treaty Doc. No. 103-15. The BIT generally provides certain legal protections to American and Ecuadorian investors when they engage in foreign direct investment in the reciprocal country. It specifically provides, inter alia, that disputes against one of the parties arising out of such investments may be resolved by resort to binding arbitration upon request of a company or national of the other party. Id., art. VI(3). After more than a decade had elapsed without a determination of its claims pending in the Ecuadorian courts, Chevron filed a Notice of Arbitration in 2006 alleging that Ecuador had breached the BIT by allowing its claims to languish in those courts without a resolution. See Pet., ¶¶ 21, 24-25.

A three-member arbitral Tribunal based at The Hague conducted several rounds of hearings concerning both its jurisdiction to hear the case and the merits of the dispute. Id., ¶¶ 10, 22. The Tribunal issued an Interim Award in December 2008 finding it had jurisdiction to hear the case, see Declaration of Edward G. Kehoe, Exh. 3 (Interim Award), a Partial Award on the Merits in March 2010 finding that the Ecuadorian courts’ undue delay constituted a breach of the BIT, see id., Exh. 4 (Partial Award on the Merits), and a Final Award in August 2011 concerning damages. See id., Exh. 5 (Final Award on the Merits). Ecuador petitioned the District Court of The Hague to set aside the Award in July 2010, but the court denied that request in May 2012. See Pet., ¶ 34. Ecuador subsequently appealed the Dutch District Court’s judgment, and its appeal remains pending. See Resp. Opp. to Pet. (ECF No. 18) at 3, 9.

Chevron now seeks an order confirming the Final Award under the New York Convention. Ecuador, not surprisingly, objects.

11. Analysis

Ecuador raises three arguments in an effort to derail confirmation: the Court lacks subject-matter jurisdiction under the Foreign Sovereign Immunities Act, confirmation should be denied under the New York Convention, and a stay pending appeal in the Netherlands is appropriate. The Court addresses each in turn.

A. Foreign Sovereign Immunities Act

Ecuador first argues that the Foreign Sovereign Immunities Act, 28 U.S.C. § 1604, deprives the Court of subject-matter jurisdiction. See Resp. Opp. to Pet. at 10. The FSIA is “the sole basis for obtaining jurisdiction over a foreign state in our courts.” Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 434 (1989). Under the statute, “a foreign state is presumptively immune from the jurisdiction of the United States courts[] unless a specified exception applies.” Saudi Arabia v. Nelson, 507 U.S. 349, 355 (1993). Because “subject matter jurisdiction in any such action depends on the existence of one of the specified exceptions . . .

[a]t the threshold of every action in a District Court against a foreign state . . . the court must satisfy itself that one of the exceptions applies.” Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 493-94 (1983). Notably, “the defendant bears the burden of proving that the plaintiff’s allegations do not bring its case within a statutory exception to immunity.” Phoenix Consulting, Inc. v. Republic of Angola, 216 F.3d 36, 40 (D.C. Cir. 2000) (citing Transamerican S.S. Corp. v. Somali Democratic Republic, 767 F.2d 998, 1002 (D.C. Cir. 1985)).

The FSIA provides an exception to foreign sovereign immunity for actions to confirm certain arbitration awards. See 28 U.S.C. § 1605(a)(6). Specifically, foreign sovereigns are not immune from suits

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.

Id. (emphasis added). Chevron asserts that its Petition falls under this exception because the Final Award was made pursuant to the BIT and is governed by the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention, implemented at 9 U.S.C. §§ 201 et seq. See Pet., ¶¶ 4-5. This is correct.

First, the Award’s own language indicates it was rendered pursuant to the BIT, an agreement that provides for arbitration. See Interim Award at 1, 39 (referring to the Award as “under the BIT” and describing the BIT as one of the “principal relevant legal provisions” in the dispute).

Second, the Award is clearly governed by the New York Convention, which controls “the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought.” Convention on the Recognition and Enforcement of Foreign Arbitral Awards, opened for signature June 10, 1958, art. I.1, 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 a party to the Convention.’” Creighton Ltd. v. Government of the State of Qatar, 181 F.3d 118, 121 (D.C. Cir. 1999) (quoting Restatement (Third) of Foreign Relations Law § 471 cmt. b (1987)). Because the arbitration in this matter was conducted at The Hague and the Netherlands is a party to the New York Convention, the Final Award here is governed by the Convention. See Pet., ¶ 10; U.S. Dept. of State, Treaties in Force: A List of Treaties and Other International Agreements of the United States in Force on January 1, 2007, § 2 at 12, available at

Under the law of this Circuit, moreover, the arbitration exception in § 1605(a)(6) “by its terms” applies to actions to confirm arbitration awards under the New York Convention. Creighton, 181 F.3d at 123. “Indeed, it has been said with authority that the New York Convention ‘is exactly the sort of treaty Congress intended to include in the arbitration exception.’” Id. at 123-24 (quoting Cargill Int’l S.A. v. M/T Pavel Dybenko, 991 F.2d 1012, 1018 (2d Cir. 1993)). The Court thus finds that Chevron has satisfied the requirements of the FSIA’s arbitration exception.

Ecuador nonetheless raises a novel argument in contesting the applicability of the exception here. It contends that it never consented to arbitrate the underlying dispute in this matter, meaning the award was not rendered “pursuant to . . . an agreement to arbitrate, ” and that the Court must satisfy itself of the arbitrability of the underlying dispute before finding subject-matter jurisdiction over this enforcement proceeding. See Resp. Opp. to Pet. at 10-11 (citing 28 U.S.C. § 1605(a)(6)). Ecuador, however, points to no authority – nor can the Court identify any – suggesting that the Court must conduct such an independent, de novo determination of the arbitrability of a dispute to satisfy the FSIA’s arbitration exception.

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.’” Creighton, 181 F.3d at 124 (quoting Landgraf v. USI Film Prods., 511 U.S. 244, 274 (1994)). Likewise, “§ 1605(a)(6) 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.” Id. (citing McGee v. International Life Ins. Co., 355 U.S. 220, 224 (1957)). 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.

In contrast to the unprecedented merits-based review Ecuador seeks, the Court’s approach here is consistent with those of numerous other federal courts, which have engaged in only these two jurisdictional inquiries – namely, whether the award was made pursuant to an appropriate arbitration agreement with a foreign state and whether the award “is or may be” governed by a relevant recognition treaty. See, e.g., Blue Ridge Investments, LLC v. Republic of Argentina, 902 F.Supp.2d 367, 375 (S.D.N.Y. 2012) (“Here, Blue Ridge instituted the instant action ‘to confirm an award made pursuant to [Argentina’s] agreement to arbitrate.’ The Award is governed by the ICSID Convention, ‘a treaty or other international agreement in force for the United States calling for the recognition and enforcement of arbitral awards. Argentina and the United States are both signatories to the Convention. . . . Accordingly, this Court has subject matter jurisdiction under . . . Section 1605(a)(6).”) (alterations in original); Continental Casualty Co. v. Argentine Republic, 893 F.Supp.2d 747, 751 n.11 (E.D. Va. 2012) (collecting cases); In the Matter of the Arbitration Between Monegasque de Reassurances S.A.M. v. Nak Naftogaz of Ukraine, 311 F.3d 488, 494-95 (2d Cir. 2002) (finding jurisdiction under the FSIA in proceeding to confirm arbitration award under the New York Convention); G.E. Transp. v. Republic of Albania, 693 F.Supp.2d 132, 136 (D.D.C. 2010) (same); Agrocomplect, AD v. Republic of Iraq, 524 F.Supp.2d 16, 33-34 (D.D.C. 2007) (denying jurisdiction because Iraq, where arbitration took place, “was not a signatory to the New York Convention or (to the best of the Court’s knowledge) any other ‘treaty or international agreement in force for the United States calling for the recognition and enforcement of arbitral awards’ when it entered into the contract with the plaintiff”) (quoting 28 U.S.C. § 1605(a)(6)).

In any event, the Court’s analysis in Section III.B, infra, affirms – albeit under a somewhat deferential standard of review – that Ecuador did consent to arbitration. Respondent’s FSIA argument would thus be unlikely to prevail even if reviewed on its merits. Indeed, in any dispute where a respondent argues under the New York Convention that the award was beyond the arbitrator’s power, such merits inquiry will always occur. See New York Convention, art. V(1)(c) (Court may deny confirmation where award beyond scope of ...

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