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.
BERMAN JACKSON UNITED STATES DISTRICT JUDGE
Anatolie Stati, Gabriel Stati, Ascom Group, S.A., and Terra
Raf Trans Traiding Ltd. (“Stati
parties”) have brought this action to enforce an
international arbitration award against the respondent, the
Republic of Kazakhstan (“Kazakhstan”), in the
United States. The matter is fully briefed and ripe for
decision, but before the Court can turn to the merits of the
dispute, it must address respondent's motion for
reconsideration of the Court's May 11, 2016, Order
denying respondent's motion for leave to submit
additional defense grounds in opposition to the motion to
confirm the arbitral award. For the reasons that follow, the
Court will deny respondent's motion and it will confirm
have been involved in the oil and gas business in Kazakhstan
for approximately 17 years. Between 1999 and 2000,
petitioners purchased controlling shares in two Kazakh
companies, Kazpolmunay LLP (“KPM”) and
Tolkynneftagaz LLP (“TNG”). Pet. ¶¶
28-30. The companies owned the subsoil use rights to the
Borankol oil field, the Tolkyn gas field, and the Tabyl
exploration block in Kazakhstan. Id. ¶¶
29-30. Petitioners eventually came to own 100% of KPM and
TNG, and in 2000, those companies obtained approval from
Kazakhstan to explore and develop various oil and gas fields
located in the country. Id. ¶ 31; 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.
2008, Kazakhstan began a government investigation of Anatolie
Stati and his companies, including his compliance with export
tax laws. Award ¶¶ 296-99. Petitioners and
respondent disagree on what followed. According to
petitioners, the government of Kazakhstan began to intimidate
and harass petitioners into selling their investments to the
state-owned company 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 on July 21, 2010, Kazakhstan terminated
petitioners' subsoil use contracts. Award ¶ 611.
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 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 with
the Stockholm Chamber of Commerce (“SCC”) in
Sweden. Req. for Arb., Ex. C. to Decl. of Charlene C. Sun
[Dkt. # 2-6] (“Req. for Arb.”). The request
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. Petitioners further alleged 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. The request invoked the Energy Charter
Treaty (“ECT”), an international agreement signed
by the respondent, which allows investors to submit disputes
to the SCC for arbitration. Energy Charter Treaty, art.
26(4)(c), Dec. 17, 1994, 2080 U.N.T.S. 95, 121-22.
Accordingly, the arbitral proceedings were governed by the
SCC's Arbitration Rules. Pet. ¶ 22.
December 19, 2013, the SCC tribunal issued an award in favor
of petitioners and against respondent. Pet. ¶ 27. The
tribunal determined that Kazakhstan breached its obligation
to provide fair and equitable treatment under Article 10(1)
of the ECT. Award ¶¶ 1085-95. It awarded
petitioners $497, 685, 101 for the alleged expropriation of
petitioners' assets in Kazakhstan. Id. ¶
1859. 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 liquefied petroleum
gas plant (“LPG plant”), and $8, 975, 496.40 in
legal costs. Id. ¶¶ 1856-61,
September 30, 2014, petitioners asked this Court to confirm
the arbitral award in the United States 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, commonly
known as the “New York Convention.” Pet. ¶
1. The Stati parties sought to enforce the foreign arbitral
award here on the grounds that Kazakhstan maintains assets in
the United States. Id. ¶ 46. Respondent opposed
the petition to confirm based on five grounds under the New
York Convention, focusing primarily on the SCC's
appointment of respondent's arbitrator and its alleged
failure to enforce the requirement that there be a
three-month settlement period prior to the initiation of an
arbitration. Resp't's Opp. to Pet. [Dkt. # 20]
(“Resp't's Opp.”). Petitioners filed a
reply, Pet'rs' Reply Mem. in Supp. of Pet. [Dkt. #
24] (“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”). By
May 26, 2015, the parties had completed briefing on the
Respondent's motion for leave to include additional
to respondent, in June of 2015, it became aware of “new
evidence” that petitioners had “obtained the
[arbitral] [a]ward through fraud.” Resp't's
Mot. for Leave to Submit Additional Grounds in Supp. of Opp.
to Pet. [Dkt. # 32] (“Initial Mot.”) at 4, 6.
Respondent waited till April 5, 2016, though - nearly a year
after learning about the alleged fraud and completing the
merits briefing in this case - to file a motion seeking leave
to submit additional defenses to enforcement of the arbitral
award. Id. at 1, 4.
motion, respondent argued that petitioners procured the award
through fraud by submitting “false testimony and
evidence to the SCC Arbitration tribunal” that
“materially misrepresented the LPG Plant construction
costs for which they claimed reimbursement in the
[arbitration].” Id. at 4. Respondent contended
that the newly discovered fraud afforded it two additional
defenses under Article V(2)(b) and Article V(1)(b) of the New
York Convention. Id. at 4-6. Under Article V(2)(b)
the Court could refuse recognition of the award because
enforcement of a fraudulently obtained arbitral award would
be contrary to United States public policy. Id. at
4-5. And respondent also asserted that “the intentional
giving of false evidence” during the arbitration
“denied [respondent] the opportunity to present its
case, ” thus rendering the arbitral award unenforceable
under Article V(1)(b) of the New York Convention.
Id. at 5-6.
absence of an applicable rule setting forth the standard to
be applied to respondent's motion, the Court considered
whether justice required permitting respondent to “add
new grounds to its opposition to the petition to confirm the
award, more than a year after the original opposition was
filed.” Order (May 11, 2016) [Dkt. # 36] at 2-3
(“Order”). The Court reviewed the SCC arbitration
award and denied the motion, reasoning that “it [would]
not be in the interest of justice to conduct a mini-trial on
the issue of fraud here when the arbitrators expressly
disavowed any reliance on the allegedly fraudulent
material.” Id. at 4. In other words, the
evidence respondent sought to discredit was not material to
Court derived this conclusion based on its own detailed
review of the award, which stated in relevant part:
Regarding the value of damages caused by Respondent's
action, the Tribunal has taken note of the various extensive
arguments submitted by the Parties relying on their
respective experts' reports. However, the Tribunal
considers that it does not have to evaluate these reports and
the very different results they reach. In the view of the
Tribunal, the relatively best source for the valuation . . .
are the contemporaneous bids that were made for the LPG Plant
by third parties after Claimants' efforts to sell the LPG
Plant . . . .
Award ¶ 1746. The panel concluded:
[T]he Tribunal considers it to be of particular relevance
that an offer was made for the LPG Plant by state-owned KMG
at that time for USD 199 million. The Tribunal considers that
to be the relatively best source of information for the
valuation of the LPG Plant among the various sources of
information submitted by the Parties regarding the valuation
for the LPG Plant during the relevant period . . . .
Therefore, this is the amount of damages the Tribunal accepts
in this context.
Id. ¶¶ 1747-48.
then filed the instant motion for reconsideration,
Resp't's Mot. for Recons. of May 11, 2016, Order
[Dkt. # 37] (“Mot. for Recons.”), and petitioners
opposed the motion. Pet'rs' Mem. of P. & A. in
Opp. to Resp't's Mot. for Recons. [Dkt. # 38]
(“Pet'rs' Opp.”). Petitioners pointed out
that Kazakhstan “has the opportunity to litigate the
very same fraud allegations in the courts of Sweden, which is
the seat of the arbitration and primary jurisdiction in this
case.” Id. at 5. Respondent confirmed that the
parties were litigating the fraud issue in Sweden, where it
was seeking to vacate the award, but it argued that the
Swedish proceeding should not affect the Court's review
of the petition to confirm, or the motion for
reconsideration. See Reply in Supp. of Mot. for
Recons. [Dkt. # 39] at 3-5.
The Swedish proceedings to vacate the arbitral
light of the pendency of the Swedish proceedings to vacate
the award, this Court exercised its discretion to stay this
case pending the resolution of the proceedings before the
Svea Court of Appeal in Sweden, noting that they “could
have a dramatic impact on the petition to confirm the
arbitration award.” Stati, 199 F.Supp.3d at
193. It observed that if “respondent [was] successful
in the set-aside proceeding [in Sweden], confirmation of the
award [would] be unlikely” in the United States.
Id., citing New York Convention, art. V(1)(e)
(providing that enforcement of an award may be refused when
the “award . . . has been set aside . . . by a
competent authority of the country in which, or under the law
of which, that award was made”). In that same ruling,
the Court found that it had subject matter jurisdiction over
the dispute under the FAA and the Foreign Sovereign
Immunities Act. Id. at 184-190.
December 9, 2016, the Svea Court of Appeal issued its
decision upholding the Award and rejecting Kazakhstan's
arguments, including the argument that the Award should be
vacated in light of the alleged fraud. Svea Court of Appeal
J., Exs. 1-3 to Joint Report (Dec. 30, 2016) [Dkt. # 45-1,
45-2, 45-3] § 5.3.1 (“Svea Court of Appeal
Opinion”). Kazakhstan presented at least two theories
of fraud before the Svea Court of Appeal. First, it argued,
much as it had before this Court, that the Stati parties had
submitted false evidence on the value of the LPG plant in the
form of sworn testimony and expert reports during the
arbitration. Id. § 184.108.40.206. Second, respondent
argued that the award was tainted by fraud that took place
prior to the start of the arbitration. Id. It
alleged that representatives for the Stati parties presented
financial statements that falsely inflated the amounts
invested in the LPG plant to a third-party company, KMG, and
that KMG was fraudulently induced into bidding $199 million
for the LPG plant. Id. According to respondent,
since it was the KMG bid that was used by the tribunal to
value the LPG plant, the arbitral award was procured by
a review of the full record, the Svea Court of Appeal
rejected all of Kazakhstan's contentions. First, it
concluded that “[s]ince the arbitral tribunal based its
assessment [of the LPG plant] on the indicative bid”
and not the allegedly false “witness testimony, witness
affidavits, and expert reports” submitted by the Stati
parties during the arbitration, this evidence did not have
“immediate importance for the outcome.” Svea
Court of Appeal J., Ex. 3 to Joint Report (Dec. 30, 2016)
[Dkt. # 45-3] at 45. The Svea Court of Appeal recited the legal
principle that “there can be no question of declaring
an arbitral award invalid solely on the ground that false
evidence or untrue testimony has occurred, when it is not
clear that such have been directly decisive for the
outcome.” Id. Since “even if [the
evidence] were proven to be false, ” it would not have
changed the outcome of the arbitration, the court deemed it
insufficient to invalidate the award. Id.
the Svea Court of Appeal concluded that because the KMG
indicative bid was made “prior to the initiation of the
arbitration, ” the bid did not constitute
“per se” false evidence, even if
“possibly incorrect information regarding the amount
invested in the LPG plant was among the factors that KMG took
into account when calculating the size of its offer.”
Id. at 46. It concluded that the allegedly false
financial statements “did not directly constitute any
basis for the arbitral tribunal's assessment of the value
of the LPG plant.” Id. In other words, any
alleged dishonesty in business transactions that preceded the
arbitration proceedings did not constitute a fraud on the
tribunal and was too remote to warrant annulment of the
then challenged the decision in the Swedish Supreme Court,
arguing that the Svea Court of Appeal committed “grave
procedural error” when it issued its decision. Ex. B.
to Decl. of Alexander Foerster [Dkt. # 46-2] ¶ 3. This
Court continued its stay pending the resolution of that
proceeding, Min. Order (Apr. 3, 2017); Min. Order (Aug. 15,
2017), and petitioners moved to lift the stay on September
29, 2017. Pet'rs' Mot. to Lift Stay [Dkt. # 60].
Before this Court ruled on that motion, the Swedish Supreme
Court ruled in favor of the Stati parties on October 24,
2017. Pet'rs' Suppl. Status Report Concerning Status
of Proceedings in Sweden [Dkt. # 64]. This marked the end of
Kazakhstan's efforts to set aside the arbitral award in
the jurisdiction with the sole authority to vacate the
the Swedish award was now final and binding, the Court
granted petitioners' motion to lift the stay on November
6, 2017, and it invited the parties to file supplemental
briefs discussing what impact, if any, the decisions by the
Swedish authorities should have on the resolution of
Kazakhstan's pending motion for reconsideration of the
Court's May 11, 2016, Order denying respondent's
request to introduce additional defense grounds based upon
its fraud allegations. Min. Order (Nov. 6, 2017).
argued that the decisions by the Svea Court of Appeal and the
Swedish Supreme Court based on Swedish law should have no
impact on the issue presented in its motion for
reconsideration because “neither of these decisions
made factual findings regarding the merits of
Kazakhstan's fraud allegations, nor did they apply the
New York Convention, ” as this Court is required to do.
Kazakhstan's Resp. to Nov. 6, 2017, Min. Order [Dkt. #
65] (“Resp't's Resp. to Nov. 6 Min.
Order”). Meanwhile, petitioners emphasized that
respondent presented its “fraud case in full” to
the Svea Court of Appeal, the seat of the arbitral award,
which concluded “[t]hat the Award was not the product
of fraud, ” and its ruling was left undisturbed by the
Swedish Supreme Court. Pet'rs' Suppl. Submission in
Opp. to Mot. for Recons. [Dkt. # 66] at 1-2. Petitioners also
argued that the Court should deny respondent's motion
based on the principles of preclusion and comity,
id. at 3-10, and respondent argued in a sur-reply
that the principles of preclusion and comity are
inapplicable. Kazakhstan's Resp. to Pet'rs'
Suppl. Submission in Opp. to Mot. for Recons. [Dkt. # 68] at
MOTION FOR RECONSIDERATION
Court evaluates respondent's motion for reconsideration
under Rule 54(b) of the Federal Rules of Civil Procedure,
which governs reconsideration of non-final decisions. The
rule states that “any order . . . that adjudicates
fewer than all the claims or the rights and liabilities of
fewer than all the parties . . . may be revised at any time
before the entry of a judgment adjudicating all the claims
and all the parties' rights and liabilities.”
Fed.R.Civ.P. 54(b). The Court may grant relief under Rule
54(b) “as justice requires.” Capitol
Sprinkler Inspection, Inc. v. Guest Servs., Inc., 630
F.3d 217, 227 (D.C. Cir. 2011) (internal citations omitted);
see also Parker v. John Moriarty & Assocs., 221
F.Supp.3d 1, 2 (D.D.C. 2016). While this standard
“affords considerable discretion to the district
courts, ” Bldg. Indus. Ass'n of Superior Cal.
v. Babbitt, 161 F.3d 740, 743 (D.C. Cir. 1998), it is
limited by the principle that once the parties have
“battled for the court's decision, they should
neither be required, nor without good reason permitted, to
battle for it again.” Wannall v. Honeywell
Int'l, Inc., 292 F.R.D. 26, 30-31 (D.D.C. 2013),
quoting Elec. Privacy Info. Ctr. v. U.S. Dep't of
Homeland Sec., 811 F.Supp.2d 216, 224 (D.D.C. 2011).
“In this Circuit, it is well-established that
‘motions for reconsideration, ' whatever their
procedural basis, cannot be used as ‘an opportunity to
reargue facts and theories upon which a court has already
ruled, nor as a vehicle for presenting theories or arguments
that could have been advanced earlier.'”
Loumiet v. United States, 65 F.Supp.3d 19, 24
(D.D.C. 2014), quoting Estate of Gaither ex rel. Gaither
v. Dist. of Columbia, 771 F.Supp.2d 5, 10 (D.D.C. 2011).
“as justice requires” standard under Rule 54(b)
involves concrete considerations of whether the court
“has patently misunderstood a party, has made a
decision outside the adversarial issues presented to the
[c]ourt by the parties, has made an error not of reasoning,
but of apprehension, or where a controlling or significant
change in the law or facts [has occurred] since the
submission of the issue to the [c]ourt.” Cobell v.
Norton, 224 F.R.D. 266, 272 (D.D.C. 2004) (internal
citations omitted). Other courts in this district have read
the standard to require that the court grant a motion for
reconsideration “only when the movant demonstrates: (1)
an intervening change in the law; (2) the discovery of new
evidence not previously available; or (3) a clear error in
the first order.” Stewart v. Panetta, 826
F.Supp.2d 176, 177 (D.D.C. 2011), quoting Zeigler v.
Potter, 555 F.Supp.2d 126, 129 (D.D.C. 2008).
respondent does not point to a change in the law. Nor does it
argue that it discovered new evidence after it had already
filed its motion. It simply repeats arguments made
unsuccessfully before and couples them with arguments it
chose not to raise at that time, and it suggests that the
Court's ruling was erroneous. But none of the reasons
advanced at this time requires a change in the outcome.
argues first that the Court's conclusion that the
“arbitrators did not rely upon” the alleged fraud
is “factually incorrect.” Mot. for Recons. at 1.
Second, it maintains that the Court applied the wrong legal
standard when it interpreted respondent's public policy
defense under Article V(2)(b) of the New York Convention.
Id. at 10-11. And third, it contends that the May
11, 2016, Order failed to consider its alternate defense
under Article V(1)(b) of the New York Convention.
Id. at 11-12.
The Court did not err as a matter of fact.
Court did not err as a matter of fact in its May 11, 2016,
Order for the simple reason that respondent did not present
the facts it now seeks to introduce in its motion for
reconsideration. And because respondent does not claim that
these facts were not available to it at the time it filed its
initial motion to include additional defenses, they are
improperly raised now. Furthermore, the Court did not err in
evaluating the facts ...