United States District Court, District of Columbia
LLC KOMSTROY, as successor in interest to LLC ENERGOALLIANCE, Petitioner,
v.
REPUBLIC OF MOLDOVA, Respondent.
MEMORANDUM OPINION
CHRISTOPHER R. COOPER UNITED STATES DISTRICT JUDGE
Ukraine-based
LLC Komstroy, as successor in interest to LLC Energoalliance,
petitions this Court to confirm an arbitral award issued in
the latter's favor and against the Republic of Moldova.
The award stemmed from a dispute over a series of contracts
from 1999 and 2000 to supply electric power to a Moldovan
state-owned utility, with payments passing through a third
party. After the utility defaulted, the third party
transferred its interest in the debt to Energoalliance, which
eventually initiated arbitration proceedings against Moldova
under the Energy Charter Treaty (“ECT”). In 2013,
an arbitral tribunal in Paris concluded it had jurisdiction
over the dispute by construing the debt originating from the
contracts as an “investment” under the ECT. It
then determined that Moldova had violated the treaty by
denying Energoalliance the benefits of that investment and
awarded Energoalliance almost $46.5 million.
Award
in hand, Energoalliance commenced confirmation proceedings in
a number of jurisdictions, including this Court in 2014. At
the same time, Moldova filed an action to set aside the award
with the Paris Court of Appeal, which in 2016 concluded that
the tribunal had misinterpreted the subject debt as an
“investment” under the ECT. Energoalliance then
appealed that ruling to the highest civil court in France-the
Court of Cassation-which reinstated the award in 2018 after
finding that the intermediate court had introduced an
additional requirement for “investment” not
contained in the ECT. The case is now back before the Paris
Court of Appeal to consider alternative arguments advanced by
Moldova to set aside the award.
Meanwhile,
in November 2018, this Court determined that because the
award is presently enforceable under French law
notwithstanding the pendency of the set-aside proceedings, it
would be appropriate to lift a stay-which it had imposed when
Moldova initiated the set-aside action-and proceed to the
merits of the confirmation petition. See LLC Komstroy v.
Republic of Moldova, No. 14-cv-1921 (CRC), 2018 WL
5993437 (D.D.C. Nov. 13, 2018). The Court does so now. In
what follows, the Court first ensures that it has subject
matter jurisdiction under the Foreign Sovereign Immunities
Act before considering Moldova's objections to confirming
the award. Concluding that the country has not met its
substantial burden of resisting confirmation under the
applicable treaty, the Court will grant the petition to
confirm the award and deny Moldova's motion to dismiss.
I.
Background
This
case began in November 2014, when Energoalliance filed a
Petition to Confirm Foreign Arbitral Award pursuant to the
United Nations Convention on the Recognition and Enforcement
of Foreign Arbitral Awards, also known as the New York
Convention, as implemented by Chapter 2 of the Federal
Arbitration Act. See Petition, ECF No. 1. The
petition seeks recognition of a final arbitral award issued
in October 2013 by an ad hoc tribunal in Paris,
France in favor of Petitioner and against the Republic of
Moldova. Id. ¶ 1.
The
parties' dispute goes back decades.[1] Before the
collapse of the Soviet Union, Moldova received its
electricity from Ukraine pursuant to economic plans approved
by Moscow. See Ex. B, Part I to Decl. of Viacheslav
Lych (“Award”), ECF No. 8-4, ¶ 187 (filed
under seal). After the collapse, Energoalliance-a private
Ukrainian company-undertook the task of providing power to
Moldova pursuant to a series of supply contracts dating from
February 1999. As relevant here, Agreement No. 1/01 provided
that Energoalliance would purchase electricity from
Ukraine's state-owned electricity producer for export to
Moldova's state-owned utility, Moldtranselectro.
Id. ¶ 69. Under Agreement No. 24/02,
Energoalliance would sell the Ukrainian electricity to a
third-party British Virgin Islands entity, Derimen, which
would then resell the electricity to Moldtranselectro.
Id. ¶¶ 70-71. The agreements were
structured this way because if Energoalliance were to sell
electricity directly to Moldtranselectro, it would bear the
risk of steep regulatory fines pursuant to Ukrainian currency
controls should the Moldovan entity fail to make timely
payments. Id. ¶¶ 203-04, 217; see
also Declaration of Viacheslav Lych (“Lych
Decl.”) in Supp. of Petition, ECF No. 1-3, ¶ 7. As
it turned out, Moldova did fall behind on its payments to
Derimen, leading Derimen in May 2000 to assign the debt to
Energoalliance pursuant to Agreement No. 06/20. See
Award ¶¶ 72-74.
Energoalliance's
efforts to collect the debt directly from Moldtranselectro
proved fruitless due in large part to interference by the
Moldovan government. For instance, the government in October
2000 reorganized Moldtranselectro by transferring its assets
and functions to a new state-owned company while leaving its
obligations intact. Id. ¶¶ 87-88. In 2002,
the Moldovan auditing chamber, in a quasi-judicial, ex
parte proceeding, concluded that it could not be proven
that Energoalliance had provided electricity to
Moldtranselectro, id. ¶ 101, and ordered the
utility “to cancel its debts related to said
electricity supplies, ” id. ¶ 102.
Energoalliance's appeal of that determination was
unsuccessful. Id. ¶ 106. Other efforts in
Moldovan courts were similarly futile. Id.
¶¶ 113-16.
After a
decade of unsuccessful collection efforts, Energoalliance
instituted arbitration proceedings before an ad hoc
tribunal in Paris, France in July 2010. Petition ¶¶
17-18. The arbitration arose under the Energy Charter Treaty
(“ECT”), 2080 U.N.T.S. 100-a multilateral treaty
to which Moldova and Ukraine are parties-and was conducted
under the United Nations Commission on International Trade
Law (“UNCITRAL”) Arbitration Rules. Id.
¶ 18. After a full exchange of written evidence and
pleadings as well as a three-day hearing in July 2012,
see Award ¶¶ 15-17, 19-20, 24, 37-39,
41-42, a majority of the tribunal concluded in October 2013
that it had jurisdiction under the ECT[2] and that Moldova
had breached its obligations under the treaty.[3] It ordered
Moldova to pay Energoalliance the following:
1. 195, 547, 212 Moldovan Lei (“MLD”) as the
amount of Energoalliance's lost investment;
2. MLD 357, 916, 008 in interest for the period up to May 31,
2012;
3. MLD 39, 417, 175 in interest for the period between June
1, 2012 and the date of the Award;
4. $200, 000 U.S. Dollars (“USD”) for
Energoalliance's attorneys' fees in the arbitration;
5. $340, 000 USD in arbitration costs.
Id. ¶ 436. These items totaled almost $46.5
million based on the exchange rate on that date.
In
November 2014, Moldova made a formal application to the Paris
Court of Appeal to set aside the Award on grounds similar to
those it advanced before the ad hoc tribunal-that
the tribunal lacked jurisdiction over the claims under the
ECT and that the Award violated public order. Petition ¶
28. During the pendency of the set-aside proceeding before
the Paris Court of Appeal, Petitioner requested and received
from the High Court of Paris an “exequatur,
” or order to enforce the Award. Lych Decl. ¶ 16.
As
previously noted, Petitioner initiated this case in November
2014. Moldova-acting through its Ministry of Justice and
without entering an appearance by counsel[4]-submitted a
document titled “Reference” received by this
Court in July 2015. See ECF No. 12. The Court
construed this submission as a motion to dismiss and directed
Petitioner to respond, which it did. See ECF Nos.
14, 16, 17. Moldova then requested a stay pending resolution
of the set-aside proceeding before the Paris Court of Appeal.
See ECF No. 20. But before the Court could rule on
that request, Petitioner informed the Court that the Paris
Court of Appeal had, in April 2016, vacated the 2013 Award
for lack of jurisdiction. See Pet'r Notice, ECF
No. 21, at 1. The Paris court did not reach Moldova's
argument regarding international public order. Petitioner
informed this Court that it intended to appeal the adverse
decision to the Cour de Cassation (“Court of
Cassation”), the highest civil court in France, and
requested a stay of this matter pending resolution of that
appeal. Id. Moldova concurred in this stay request.
See ECF No. 22. The Court thus stayed the case.
See Apr. 22, 2016 Minute Order. Despite the stay,
both parties continued to litigate the case-at least in part.
Petitioner filed a more extensive reply to Moldova's
motion to dismiss the petition, see ECF No. 27, and
Moldova filed a renewed motion to dismiss, see
Renewed Mot. to Dismiss (“Renewed MTD”), ECF No.
37.
A few
years later, Petitioner informed the Court that in March
2018, the Court of Cassation had issued a decision in its
favor. See Status Report re: Cour de Cassation
Proceedings, ECF No. 32 at 2. That decision reversed and
voided the 2016 Paris Court of Appeal's jurisdictional
decision and remanded the case to a “differently
composed” panel to consider Moldova's remaining
arguments. See Ex. A to Status Report re: Cour
de Cassation Proceedings (“Court of Cassation
Decision”), ECF No. 32-1, at 2-3. Petitioner submitted
that it was finally time for the Court to consider the
confirmation petition on the merits. See Pet'r
Mot. to Lift Stay, ECF No. 33. Moldova objected, asking the
Court to extend the stay pending the renewed proceedings in
the Paris Court of Appeal. See Motion to Extend
Stay, ECF No. 35.
In
light of the Court of Cassation's decision and finding
that the exequatur made the Arbitral Award presently
enforceable under French law, this Court lifted the stay in
November 2018. See LLC Komstroy v. Republic of
Moldova, No. 14-cv-1921 (CRC), 2018 WL 5993437 (D.D.C.
Nov. 13, 2018). After proceeding without counsel for four
years, Moldova finally retained representation. See
ECF Nos. 46, 47. Counsel for Moldova then requested leave to
withdraw the country's previous submissions,
acknowledging the Court's prior observation that the
materials “do not conform to the Federal Rules of Civil
Procedure and are generally lacking in legal analysis,
including citations of law.” Mot. for Leave to
Withdraw, ECF No. 48, at 1. The Court denied that request,
reasoning that because Moldova was a sophisticated party and
had made an informed decision to proceed unrepresented, the
Court would not “undo all that has come before simply
because Moldova has now changed its mind and retained
counsel.” Order Denying Motion to Withdraw, ECF No. 52,
at 2. That said, it allowed Moldova to file a reply in
support of its renewed motion to dismiss. Id. at
2-3. After Petitioner filed its surreply, see
Pet'r Surreply in Opp. to Renewed MTD, ECF No. 54, the
Court granted Moldova leave to file a supplemental reply, and
Petitioner the opportunity to file one final reply,
see Mar. 7, 2019 Minute Order.
With
that, Moldova has now had a full opportunity to lodge its
objections to confirmation, and the petition and the renewed
motion to dismiss are at last ripe for this Court's
review. Through its string of filings in support of the
motion to dismiss, Moldova has raised the following grounds
for dismissal: (1) the Court lacks subject matter
jurisdiction because Moldova enjoys sovereign immunity from
suit; (2) the Court should dismiss the petition under the
doctrine of forum non conveniens; and (3) the Court
should deny confirmation of the Award pursuant to two
defenses under the New York Convention. See Renewed
MTD at 3-4, 9, 13; Reply in Further Support of Renewed Motion
to Dismiss (“Reply in Supp. of Renewed MTD”), ECF
No. 53, at 4, 11; Supplemental Reply in Further Support of
Renewed Motion to Dismiss (“Suppl. Reply in Supp. of
Renewed MTD”), ECF No. 56, at 1-4, 10. Should these
arguments fail, Moldova also disputes the terms by which the
Award should be confirmed, contending that (1) the Court
should not convert the Award into U.S. dollars (2) but if it
does, it should use the currency exchange rate from the date
of this Court's judgment; and (3) the Court should not
award pre or postjudgment interest. Renewed MTD at 19; Reply
in Supp. of Renewed MTD at 21-25; Suppl. Reply in Supp. of
Renewed MTD at 11-15.
II.
Legal Standards
Before
addressing the parties' arguments, the Court briefly sets
out the legal authorities underlying the Court's
analysis: the Foreign Sovereign Immunities Act, which governs
this Court's jurisdiction over Respondent Moldova, and
the New York Convention, which governs enforcement of foreign
arbitral awards.
A.
Foreign Sovereign Immunities Act
The
Foreign Sovereign Immunities Act of 1976 (“FSIA”)
is the “sole basis for obtaining jurisdiction over a
foreign state in the courts” of the United States.
Belize Soc. Dev. Ltd. v. Gov't of Belize, 794
F.3d 99, 101 (D.C. Cir. 2015) (internal quotation omitted).
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 depends on the existence of one of the
specified exceptions, a threshold determination of every
action in a district court against a foreign state is whether
one of the exceptions applies. See Verlinden B.V. v.
Cent. Bank of Nigeria, 461 U.S. 480, 493-94 (1983). The
Court addresses relevant exceptions below.
A
petitioner “bears the initial burden of supporting its
claim that an FSIA exception applies.” Chevron
Corp. v. Ecuador (“Ecuador”), 795
F.3d 200, 204 (D.C. Cir. 2015). The burden then shifts to the
respondent-here, Moldova-to prove by a preponderance of the
evidence that the petitioner'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) (citation
omitted); see also Ecuador, 795 F.3d at 204.
B.
The New York Convention
The
1958 Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, also known as the New York Convention, is a
multilateral treaty providing for “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
(“New York Convention”), opened for
signature June 10, 1958, art. 1.1, 21 U.S.T. 2517. The
Convention has been incorporated into United States law
through the Federal Arbitration Act (“FAA”). 9
U.S.C. §§ 201 et seq. Federal court review
of foreign arbitral awards is extremely deferential under
both the FAA and the Convention. “Consistent with the
‘emphatic federal policy in favor of arbitral dispute
resolution' recognized by the Supreme Court[, ] . . . the
FAA affords the district court little discretion in refusing
or deferring enforcement of foreign arbitral awards.”
Belize Soc. Dev. Ltd. v. Gov't of Belize, 668
F.3d 724, 727 (D.C. Cir. 2012) (quoting Mitsubishi Motors
Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614,
631 (1985)). And under the New York Convention, the Court
must “confirm the award unless it finds one of
the grounds for refusal or deferral of recognition or
enforcement of the award specified in [Article V of the]
Convention.” 9 U.S.C. § 207. “The party
resisting confirmation”-here, Moldova-“bears the
heavy burden of establishing that one of the grounds for
denying confirmation in Article V applies.” Gold
Reserve, Inc. v. Bolivarian Republic of Venezuela, 146
F.Supp.3d 112, 120 (D.D.C. 2015).
III.
Analysis
These
provisions in mind, the Court first considers its subject
matter jurisdiction before addressing Moldova's two
challenges to confirmation of the Award under Article V of
the New York Convention. The Court also addresses
Moldova's forum non conveniens argument. The
Court concludes by considering whether to convert the Award
into U.S. dollars and whether to award prejudgment interest.
A.
Subject Matter Jurisdiction
“[T]wo
conditions must be satisfied” for this Court to
exercise subject matter jurisdiction “over a foreign
sovereign for the enforcement of an arbitral award”:
“‘First, there must be a basis upon which a court
in the United States may enforce a foreign arbitral award;
and second, [the foreign sovereign] must not enjoy sovereign
immunity from such an enforcement action.'”
Diag Human, S.E. v. Czech Republic-Ministry of
Health, 824 F.3d 131, 134 (D.C. Cir. 2016) (alteration
in original) (quoting Creighton Ltd. v. Gov't of the
State of Qatar, 181 F.3d 118, 121 (D.C. Cir. 1999)).
Following the D.C. Circuit's lead in Diag Human,
the Court takes these requirements in reverse, see
id., first considering the applicability of any
exceptions to sovereign immunity before examining whether the
New York Convention provides a basis upon which the Court may
enforce the Award. The Court finds both conditions satisfied.
Petitioner
asserts that the Court may exercise subject matter
jurisdiction pursuant to what are known as the arbitration
and waiver exceptions under the FSIA. Petition ¶¶
5-6. The Court need only address the first to conclude that
it has subject matter ...