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Customs and Tax Consultancy LLC v. The Democratic Republic of Congo

United States District Court, District of Columbia

September 23, 2019

CUSTOMS AND TAX CONSULTANCY LLC, Petitioner,
v.
THE DEMOCRATIC REPUBLIC OF THE CONGO, Respondent.

          MEMORANDUM OPINION [DKT. ##S 1, 11]

          Richard J. Leon, Judge

         Before the Court is the petitioner's Motion for Default Judgment [Dkt. #11] and its Petition to Confirmation Arbitration Award and to Enter Judgment ("Pet.") [Dkt. #1] under the Foreign Sovereign Immunities Act of 1976 ("FSIA"), 28 U.S.C. §§ 1330, 1441(d), 1602 et seq. This is an action by Customs and Tax Consultancy LLC ("CTC" or "the petitioner") against the Democratic Republic of the Congo ("the DRC"), to confirm an arbitral award in accordance with the United States Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 9 U.S.C. 201 et seq., also known as the "New York Convention." As the petitioner has satisfied the jurisdictional and procedural requirements for confirmation of its claimed arbitral award, the Court GRANTS the petitioner's motion for default judgment and its petition to confirm the award.

         BACKGROUND

         In 2008, the DRC and CTC entered into a Technical Assistance Contract ("the Contract") under which the DRC hired CTC to assist in auditing, reforming, and modernizing the DRC's customs agency, OFIDA.[1] Pet. ¶¶ 18-25; Decl. of Jean- Christophe Honlet ("Honlet Decl."), Pet. Ex. A [Dkt. # 1 -1 ] ¶ 13; Award of July 22, 2015 ("Translated Partial Award"), Honlet Decl. Ex. 2 [Dkt. # 1-2] at 21-28 ¶¶ 57, 60-66.

         Under Clause twenty-four of the Contract:

Any dispute that may arise concerning the formation, performance, construction or termination of this Contract shall be first resolved amicably by direct negotiations between the two contracting Parties.
If at the end of a three (3) month period from the date notice of a dispute is given by one party to the other party the two contracting parties have not reached an agreement to resolve their dispute, either party may submit the dispute to arbitration by an Arbitral Tribunal appointed in accordance with the Rules of Arbitration of the International Chamber of Commerce (ICC). The Arbitral Tribunal shall comprise three arbitrators appointed in accordance with said Rules. The seat of arbitration shall be Paris and the language of such arbitration shall be French. The parties shall comply with any arbitration award and, accordingly, the State expressly waives any immunity of any kind whatsoever.

Pet. ¶ 30; Translated Partial Award at 10 ¶ 4.

         On May 31, 2013 CTC submitted a request for arbitration against the DRC to the International Chamber of Commerce ("ICC"). Pet. ¶ 32; Translated Partial Award at 11 ¶ 6. By March 20, 2014, the parties had retained counsel, nominated arbitrators, and agreed to terms of reference, and the Arbitral Tribunal ("the Tribunal") had set a procedural timeline. Pet. ¶¶ 33-35, 37; Translated Partial Award at 11-15; ¶¶ 7-20, 23-29. CTC asserted claims and the DRC asserted counterclaims.[2] Pet. ¶¶ 36; Translated Partial Award at 13 ¶ 16. The parties submitted memoranda and supporting documents over the course of 2014. See Pet. ¶¶ 39-42; Translated Partial Award at 15-16 1]¶ 32-37. On October 27, 2014, the Tribunal heard testimony and argument from both CTC and the DRC at the ICC Hearing Center in Paris. Pet. ¶ 43; Translated Partial Award at 20 ¶ 52. By the end of 2014, both parties had submitted costs and fees memoranda, and the Tribunal closed proceedings on January 23, 2015. Pet. ¶¶ 45-46; Translated Partial Award at 20 ¶¶ 53-54.

         On July 22, 2015, the Tribunal rendered the Partial Award. Pet. ¶ 47; Translated Partial Award at 117. The Tribunal rejected the DRC's various arguments that the contract was void and found in favor of CTC on most its claims. See Pet. ¶¶ 48-59; Translated Partial Award at 35-114 ¶¶ 73-237. In total, the Partial Award awarded CTC $91, 696, 347, plus interest, in compensation for various unpaid invoices and $3, 750, 000, plus interest, in compensation for demobilization, indemnity, and repatriation of its personnel. See Pet. *|ff 58-59; Translated Partial Award at 115 ¶ 239. Thereafter, on November 19, 2015, the Tribunal rendered an Addendum, correcting a clerical error in the Partial Award and adding $853, 751 to the compensation for unpaid invoices. Pet. ¶ 61; Addendum of November 19, 2015 ("Translated Addendum"), Honlet Decl. Ex. 4 [Dkt. #1-6] ¶27.

         CTC ultimately waived the second phase of the arbitration and the DRC did not object, so the Tribunal issued a Final Award allocating arbitration costs and legal fees on February 22, 2016. See Pet. ¶¶ 62-64; Final Award of February 22, 2016 ("Translated Final Award"), Honlet Decl. Ex. 6 [Dkt. #1-8] at 9-10 ¶¶ 17-24, 16 ¶ 48. The Final Award ordered the DRC to pay CTC $162, 500, plus interest, for its portion of the arbitration fees, and €200, 000, plus interest, as compensation for CTC's legal fees. Pet. ¶ 64; Translated Final Award at 16 ¶ 48.

         CTC filed its petition to confirm the Partial Award, Addendum, and Final Award on June 14, 2018. See Pet. On July 17, 2018, the Clerk of the U.S. District Court for the District of Columbia sent copies of the summons and petition via commercial courier. along with a translation into French, with tracking and signature confirmation, to the DRC's minister of foreign affairs in Kinshasa, pursuant to 28 U.S.C. § 1608(a)(3). See [Dkt. ##s 6, 7]. Information from the commercial carrier confirms that the summons and petition were received and signed for on July 23, 2018. See [Dkt. #8-1]. Once service had been made, the DRC was required to serve an answer or other responsive pleading within sixty days. 28 U.S.C. § 1608(d). The DRC neither responded, nor entered an appearance. The Clerk of the Court entered default on September 26, 2018. [Dkt. #10]. On November 20, 2018, CTC filed a motion for default judgment. See Mot. for Default J. ("Mot.") [Dkt. 11]. Once again, the DRC failed to respond. That motion is now ripe for decision.

         LEGAL STANDARD

         A court shall not enter a default judgment against a foreign state "unless the claimant establishes his claim or rights to relief by evidence satisfactory to the court." 28 U.S.C. § 1608(e). This standard "mirrors" Federal Rule of Civil Procedure 55(d), Owens v. Republic of Sudan, 864 F.3d 751, 785 (D.C. Cir. 2017), which provides that default judgment may be entered against the United States "only if the claimant establishes a claim or right to relief by evidence that satisfies that court, " Fed.R.Civ.P. 55(d). Both provisions give an unresponsive sovereign some protection against an unfounded default judgment, but neither provision "relieves the sovereign from the duty to defend cases." Owens, 864F.3dat785.

         In evaluating whether a plaintiff has sufficiently established its claim, section 1608(e) "imposes a duty on FSIA courts to not simply accept a complaint's unsupported allegations as true, and obligates courts to inquire further before entering judgment against parties in default." Firebird Glob. Master Fund II Ltd. v. Republic of Nauru, 915 F.Supp.2d 124, 126 (D.D.C. 2013) (internal quotation marks omitted). But the standard does not "require the court to demand more or different evidence than it would ordinarily receive." Owens, 864 F.3d at 785. Thus, "[i]n evaluating whether a plaintiff has sufficiently established its claim, courts may accept the plaintiffs 'uncontroverted factual allegations, which are supported by . . . documentary and affidavit evidence."" Firebird Glob. Master Fund II Ltd., 915 F.Supp.2d at 126 (quoting Oveissi v. Islamic Republic of Iran, 879 F.Supp.2d 44, 49 (D.D.C.2012)).

         DISCUSSION

         1) The Court has subject matter jurisdiction over this dispute under the FSIA and Federal Arbitration Act.

         Before I may consider whether CTC is entitled to a default judgment in this matter, I must first determine whether I have subject matter jurisdiction over this dispute. Federal courts are courts of limited jurisdiction and the law presumes that "a cause lies outside this limited jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377(1994).

         The FSIA allows the enforcement of certain foreign arbitral awards against foreign sovereigns in U.S. courts. Under the FSIA, a "foreign state is presumptively immune from the jurisdiction of United States courts." Saudi Arabia v. Nelson, 507 U.S. 349, 355 (1993). But the FSIA enumerates several exceptions to this immunity. See generally 28 U.S.C. § 1605. Among these exceptions is one that applies when a party seeks to confirm certain types of foreign arbitral awards:

A foreign state shall not be immune from the jurisdiction of courts of the United States ... in any case ... 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, whether contractual or not, concerning a subject matter capable of settlement by arbitration under the laws of the United States, 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 ....

28 U.S.C. § 1605(a)(6).

         Awards governed by the New York Convention[3] fall within the FSIA's arbitration exception. The New York Convention is a multilateral treaty providing for "the recognition and enforcement of arbitral awards" across international borders. New York Convention Art. 1(1). In the United States, Congress has codified the Convention in the Federal Arbitration Act ("FAA"). 9 U.S.C. §§ 202 et seq., which provides that any "action or proceeding falling under the Convention shall be deemed to arise under the laws and treaties of the United States" and that the "district courts of the United States . . . shall have original jurisdiction over such an action or proceeding, regardless of the amount in controversy, " id. § 203. Thus, foreign arbitral awards governed by the New York Convention fall within the FSIA's arbitration exception. Sterling Merchant Fin. Ltd. v. Republic of Cabo Verde,261 F.Supp. 3d 48, 51 (D.D.C. 2017); see also Creighton Ltd. V. Gov't ...


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