United States District Court, District of Columbia
ANATOLIE STATI; GABRIEL STATI; ASCOM GROUP, S.A.; TERRA RAF TRANS TRAIDING LTD., Petitioners,
REPUBLIC OF KAZAKHSTAN, Respondent.
MEMORANDUM OPINION & ORDER
BERMAN JACKSON JUDGE
petitioners in this action are Anatolie Stati and Gabriel
Stati ("Stati"); Ascom Group, SA.
("Ascom"), a company incorporated in Moldova and
owned by Anatolie Stati; and Terra Raf Trans Traiding Ltd.
("Terra Raf), a company incorporated in Gibraltar, and
owned in equal shares by Anatolie and Gabriel Stati. They
have filed a petition to confirm a December 19, 2013
arbitration award against respondent, the Republic of
Kazakhstan ("Kazakhstan"), related to
Kazakhstan's alleged violation of the Energy Charter
Treaty, an international agreement signed by the respondent.
Pet. to Confirm Arbitral Award ("Pet.") [Dkt. # 1]
¶¶ 11, 34, 36. Petitioner seeks to confirm the
award pursuant to the Federal Arbitration Act
("FAA"), 9 U.S.C. § 201 et seq.,
which codifies the United Nations Convention on the
Recognition and Enforcement of Foreign Arbitral
Awards, June 10, 1958, 330 U.N.T.S. 38. Pet.
¶ 1. The Court finds as a preliminary matter that it has
jurisdiction under both the FAA and the Foreign Sovereign
Immunities Act. But given the pendency of a proceeding to set
aside the arbitral award and the status of that proceeding,
the Court believes that it is prudent to stay the instant
action pending resolution of that challenge. Therefore, this
matter will be stayed, and the parties will be ordered to
file a status report advising the Court of the status of the
currently pending petition in the Svea Court of Appeal within
seven days of any decision by that court.
have been engaged in the oil and gas business in Kazakhstan
for approximately 17 years. In 1999, petitioner Ascom,
Anatolie Stall's company, purchased a 62% share in KPM, a
company that owned the subsoil use rights to the Borankol oil
field in Kazakhstan. Pet. ¶ 29. In 2000, petitioners
acquired a 75% interest in TNG, a company that owned the
subsoil use rights to the Tolkyn gas field and the Tabyl
exploration block ("Tabyl Block"). Id.
¶ 30. Ascom ultimately acquired 100% of KPM, and Terra
Raf allegedly came to own 100% of TNG. Id.
¶ 31. In 2000, KPM and TNG obtained approval from
Kazakhstan to explore and develop various oil and gas fields
located in Kazakhstan. Arb. Award [Dkt. # 2-1, 2-2, 2-3, 2-4]
("Award") ¶ 229. A year later, in 2001,
petitioners, through KPM and TNG, invested more than one
billion dollars in the development of the Borankol and Tolkyn
fields, and the Tabyl Block. Pet. ¶ 32.
2008, the President of Moldova contacted the President of
Kazakhstan and accused Anatolie Stati of illegally concealing
profits in offshore territories and illegally using the
proceeds from his Kazakhstan operations to invest in states
subject to sanctions by the United Nations. Award ¶ 291.
Kazakhstan subsequently began a government investigation of
Stati and his companies.
Id.¶¶296, 301. Petitioners and
respondent disagree on what followed. Accordingto
petitioners, the government of Kazakhstan began to intimidate
and harass petitioners into selling their investments to the
state-owned KazMunaiGas at a substantial discount. Pet.
¶ 33. Specifically, petitioners claim that Kazakhstan
"baselessly" accused petitioners of fraud and
forgery, levied more than $70 million dollars in back taxes,
arrested KPM's general manager for "illegal
entrepreneurial activity, " and ultimately seized all of
KPM and TNG's assets. Id. And, in July of 2010,
Kazakhstan terminated petitioners' subsoil use contracts.
Award ¶ 611.
assert that in 2009 they contacted respondent in response to
the alleged harassment. On March 18, 2009, Stati wrote to
Kazakhstan's Ministry of Energy and Mineral Resources,
and requested an amicable resolution to the Ministry's
rescission of its prior approval of TerraRafs acquisition of
its Kazakh subsidiary. Award¶412. The next day, March
19, 2009, the executives from Terra Raf and Ascom met with
the Ministry's executive secretary to discuss resolution
of that issue and other alleged harassment. Id.
¶ 414. Just under two months later, on May 7, 2009,
Stati wrote a letter to the president of Kazakhstan that set
forth petitioners' intention to bring arbitration claims
against Kazakhstan for the diminution of the value of their
investments. Award ¶ 444.
version of events is that the Kazakh Tax and Customs
Committee properly assessed $62 million dollars in taxes to
petitioners, and that a lawful criminal investigation by the
Kazakh authorities led to in the arrest and imprisonment of
KPM's General Director. Award ¶¶ 394, 430, 440,
492. Respondent maintains that it was the investigation that
led to the termination of KPM and TNG's subsoil use
contracts on July 21, 2010, and it disputes the claim that
Kazakhstan expropriated petitioners' assets. Id.
¶¶ 591-611. Instead, respondent takes the
position that the Kazakh state oil company and its subsidiary
placed petitioners' oil and gas fields into trust
management on a temporary basis only. Id. ¶611.
26, 2010, petitioners filed a request for arbitration. Req.
for Arb., Ex. C. to Decl. of Charlene C. Sun [Dkt. # 2-6]
("Req. for Arb."). The request states:
Over the past two years, Kazakhstan has engaged in a campaign
of harassment and illegal acts against [petitioners] that
culminated on July 21, 2010 with the State's notice of
unilateral termination of the companies' Subsoil Use
Contracts, the illegal expropriation of [petitioners']
Kazakh investments, and the subsequent commandeering of
[petitioners'] offices by personnel of State-owned
KazMunaiGas and the Kazakh Ministry of Oil and Gas.
Id. ¶ 4. The request invoked the Energy Charter
Treaty and asserted that Kazakhstan's harassment
"clearly had expropriation as its ultimate goal, and it
had the effect in the process of destroying both the market
value and alienability of [petitioners']
investments." Id. ¶¶ 4, 8.
parties arbitrated the dispute before the Arbitration
Institute of the Stockholm Chamber of Commerce
("SCC"). On December 19, 2013 the Tribunal
determined that Kazakhstan breached its obligation to provide
fair and equitable treatment under article 10(1) of the ECT.
Award ¶¶ 1085-95. The Tribunal awarded petitioners
$497, 685, 101. This total included $277.8 million for the
Borankol and Tolkyn oil and gas fields, $31.3 million for the
subsoil use contracts, $199 million for an unfinished plant,
and $8, 975, 496.40 in legal costs. Id. ¶¶
1085-95, 1856-61, 1885.
September 30, 2014, petitioners commenced this proceeding to
confirm the arbitration award under the New York Convention
and the FAA. Pet. Respondent opposed the motion,
Resp't's Opp., petitioners filed a reply,
Pet'rs' Reply, and the Court granted respondent leave
to file a sur-reply, Resp't's Sur-Reply in Supp. of
Resp't's Opp. [Dkt. # 28] ("Resp't's
Sur-Reply"). On October 21, 2015, the Court ordered the
parties to brief the question of subject matter jurisdiction
under both the FAA and the Foreign Sovereign Immunities Act.
Min. Order (Oct. 21, 2015). Both parties responded to the
Court's Order. See Pet'rs' Mem. of Law
re Court's Order [Dkt. # 30] ("Pet'rs'
Juris. Mem."); Resp't's Mem. on Subject Matter
Jurisdiction [Dkt. # 31] ("Resp't's Juris.
the Court may turn to the merits of petitioners' argument
that the arbitral award in this case should not be confirmed
in the United States under the New York Convention, it must
first ensure that it has jurisdiction to hear this case.
Federal courts are courts of limited jurisdiction. They
possess only that power authorized by Constitution and
statute, which is not to be expanded by judicial decree. It
is to be presumed that a cause lies outside this limited
jurisdiction, and the burden of establishing the contrary
rests upon the party asserting jurisdiction.
Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S.
375, 377 (1994) (internal citations omitted). In addition,
'"[i]t is axiomatic that subject matter jurisdiction
may not be waived, and that courts may raise the issue
sua sponte.- NetworkIP, LLC v. FCC, 548 F.3d 116,
120 (D.C. Cir. 2008), quoting Athens Cmty. Hosp., Inc. v.
Schweiker, 686 F.2d 989, 992 (D.C. Cir. 1982). Indeed, a
federal court must raise the issue because it is
"forbidden - as a court of limited jurisdiction - from
acting beyond [its] authority." Id., citing
Akinseye v. District of Columbia, 339 F.3d 970, 971
(D.C. Cir. 2003).
Federal Rule of Civil Procedure 12(b)(1), petitioner bears
the burden of establishing jurisdiction by a preponderance of
the evidence. See Lujan v. Defs. of Wildlife, 504
U.S. 555, 561 (1992); Shekoyan v. Sibley Int’l
Corp., 217 F.Supp.2d 59, 63 (D.D.C. 2002). Because
"subject-matter jurisdiction is an ' Art[icle] III
as well as a statutory requirement... no action of the
parties can confer subject-matter jurisdiction upon a federal
court.'" Akinseye, 339 F.3d at 971, quoting
Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de
Guinee, 456 U.S. 694, 702 (1982).
determine whether a district court has subject matter
jurisdiction over the type of case presented here - an action
to enforce a foreign arbitral award against a foreign
sovereign - two requirements must be satisfied. "First,
there must be a basis upon which a court in the United States
may enforce a foreign arbitral award; and second, [the
foreign state] must not enjoy sovereign immunity from such an
enforcement action." Creighton Ltd. v. Gov’t
of Qatar, 181 F.3d 118, 121 (D.C. Cir. 1999). For the
reasons that follow, the Court finds that the New York
Convention provides a basis for the Court to enforce the
award, and that Kazakhstan does not enj oy sovereign immunity
in this instance.
The Court has subject matter jurisdiction under the Federal
Federal Arbitration Act is the statute that codifies the New
York Convention into U.S. law. 9 U.S.C. §201et
seq. Section 202 of the FAA specifies that: "[a]n
arbitration agreement or arbitral award arising out of a
legal relationship, whether contractual or not, which is
considered as commercial . . . falls under the [New York]
Convention." 9 U.S.C. § 202. The "district
courts of the United States . . . shall have original
jurisdiction over [an action or proceeding falling under the
Convention], regardless of the amount in controversy." 9
U.S.C. § 203.
Second Circuit has explained, a court will have subject
matter jurisdiction under the FAA when: "(1) there is a
written agreement; (2) the writing provides for arbitration
in the territory of a signatory of the convention; (3) the
subject matter is commercial; and (4) the subject matter is
not entirely domestic in scope." U.S. Titan, Inc. v.
Guangzhou Zhen Hua Shipping Co., 241 F.3d 135, 146 (2d
Kazakhstan agreed to arbitrate for purposes of the
argues that it did not consent to the arbitration, and thus
no agreement to arbitrate exists under the FAA.
Resp't's Opp. at 29-30. The arbitration award in this
case arises out of the Energy Charter Treaty. See
Pet. ¶ 27. Kazakhstan's argument is based on Article
26 of that treaty, which outlines how disputes that arise
under the treaty will be handled:
(1) Disputes between a Contracting Party and an Investor of
another Contracting Party . . . shall, if possible, be settled
(2) If such disputes can not be settled according to the
provisions of paragraph (1) within a period of three months
from the date on which either party to the dispute requested
amicable settlement, the Investor party to the dispute may
choose to submit it for resolution:
(a) to the courts or administrative tribunals of the
Contracting Party party to the dispute;
(b) in accordance with any applicable, previously agreed