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TECO Guatemala Holdings, LLC v. Republic of Guatemala

United States District Court, District of Columbia

October 1, 2019



          RANDOLPH D. MOSS, United States District Judge.

         Petitioner TECO Guatemala Holdings, LLC (“TECO”) commenced this action by filing a “Petition to Confirm an Arbitration Award” rendered by the International Centre for Settlement of Investment Disputes (“ICSID”) against the Republic of Guatemala (“Guatemala”). Dkt. 1. In response, Guatemala filed a motion to dismiss for failure to state a claim, Dkt. 23, which the Court denied, Dkt. 34. The case is now before the Court on TECO's motion for judgment on the pleadings, or in the alternative, motion for summary judgment, Dkt. 36, and Guatemala's cross-motion for summary judgment, for limited discovery, and for a stay, Dkt. 39. For the reasons explained below, the Court will GRANT TECO's motion for summary judgment and will DENY Guatemala's cross-motion.

         I. BACKGROUND

         Because the relevant facts are set forth in detail in the Court's prior opinion, TECO Guatemala Holdings, LLC v. Republic of Guatemala, No. 17-102 (RDM), 2018 WL 4705794, at *1-4 (D.D.C. Sept. 30, 2018) (“TECO I”), the Court will only briefly summarize them here.

         A. ICSID Convention Structure and Award Enforcement

         The International Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“ICSID Convention”), Mar. 18, 1965, 17 U.S.T. 1270, is a “multilateral treaty aimed at encouraging and facilitating private foreign investment in developing countries, ” Mobil Cerro Negro, Ltd. v. Bolivarian Republic of Venezuela, 863 F.3d 96, 100 (2d Cir. 2017) (citing Anthony R. Parra, The History of ICSID 11-12, 24-26 (2012)), to which the United States is a signatory, see Convention on the Settlement of Investment Disputes Act of 1966, Pub. L. No. 89-532, 80 Stat. 334 (codified at 22 U.S.C. §§ 1650 and 1650a) (the treaty's implementing statute). The ICSID Convention provides an international framework for adjudicating and enforcing investor-state disputes. Under the Convention, any “Contracting State or any national of a Contracting State” may request that ICSID convene an arbitration tribunal. See ICSID Convention art. 36(1). The tribunal then considers the dispute and issues a written award, that “deal[s] with every question submitted to the [t]ribunal, and state[s] the reasons upon which it is based.” Id. art. 48(3).

         The Convention also establishes procedures for parties to challenge or otherwise seek relief from an award entered by an ICSID tribunal. Either party may request “revision of the reward” based on the “discovery of” a material fact that “was unknown to the [t]ribunal and to the applicant” at the time “the award was rendered, ” see id. art. 51(1), or an “annulment of the award” based on specified grounds, including “that the [t]ribunal . . . manifestly exceeded is powers, ” “that there was corruption on the part of a member of the [t]ribunal, ” that the proceeding “serious[ly] depart[ed] from a fundamental rule of procedure, ” or “that the award . . . failed to state the reasons on which it [was] based, ” id. art. 52(1). When a party seeks annulment, ICSID convenes an ad hoc committee of three members, which is authorized “to annul the award or any part thereof” on one or more of the specified grounds. Id. art. 52(3). The committee may, if appropriate, “stay enforcement of the award pending its decision and, at a party's request, enforcement of the award is “stayed provisionally until the [c]ommittee” renders its decision on that request. Id. art. 52(5). But, “[e]xcept to the extent that enforcement” has been stayed, the tribunal's award remains “binding on the parties and shall not be subject to any appeal or to any other remedy” other than those set forth in the ICSID Convention. Id. art. 53(1). Following an annulment, either partial or full, either party may request resubmission of the dispute to a new tribunal, id. art. 52(6)-although if an award had been annulled only in part, the new tribunal is prohibited from reconsidering any non-annulled portion of the award. Rule 55(3), ICSID Rules of Procedure for Arbitration Proceedings. The new tribunal may, if appropriate, “stay . . . the enforcement of the unannulled portion of the award until the date its own award is rendered, ” id. at Rule 55(3), but, as Guatemala acknowledges, in the absence of such a stay, “[p]artially annulled awards can be enforced, ” Dkt. 23-1 at 22.

         ICSID is not empowered to enforce awards. Instead, prevailing parties must seek “recognition or enforcement” of their awards with a court of a member state. ICSID Convention art. 54. The courts of member states, however, play only a limited role. The Convention requires member-state courts to “recognize an award . . . as binding and [to] enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that [s]tate, ” or, for a member-state with “a federal constitution, ” to “treat the award as if it were a final judgment of the courts of a constituent state.” Id. art. 54(1). Under the U.S. implementing statute, an ICSID award “shall create a right arising under a treaty of the United States, ” and, as required by the treaty, “[t]he pecuniary obligations imposed by such an award shall be enforced and shall be given the same full faith and credit as if the award were a final judgment of a court of general jurisdiction of one of the several States.” 22 U.S.C. § 1650a(a). The statute further specifies that the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., which permits courts to vacate FAA awards “procured by corruption, fraud, or undue means, ” id. at § 10, does “not apply to enforcement of [ICSID] awards.” 22 U.S.C. § 1650a(a). As a result, under both the ICSID Convention and the U.S. implementing legislation, a U.S. court is “not permitted to examine an ICSID award's merits, its compliance with international law, or the ICSID tribunal's jurisdiction to render the award;” all the court may do is “examine the judgment's authenticity and enforce the obligations imposed by the award.” Mobil Cerro Negro, Ltd., 863 F.3d at 102.

         B. Guatemala and TECO's Dispute

         The ICSID arbitration at issue in this case involved a dispute between TECO, which is an energy company incorporated in the United States, and the Republic of Guatemala. Dkt. 1 at 2 (Pet. ¶¶ 2-3). The dispute began with Guatemala's decision in 1997 to privatize Empresa Eléctrica de Guatemala, S.A. (“EEGSA”), the largest electricity distribution company in the country. Id. at 4 (Pet. ¶ 9). A consortium of energy companies, including a subsidiary of TECO Energy, created an investment company that acquired a controlling interest in EEGSA in July 1998. Id. (Pet. ¶ 10). The TECO Energy subsidiary held a substantial interest in the consortium, and from 1998 until the sale of the consortium in 2010, the consortium maintained a “controlling interest in EEGSA.” Id. (Pet. ¶ 10). In 2005, the TECO Energy subsidiary's shares in the consortium were transferred to TECO. Id. (Pet. ¶ 11).

         The arbitration between TECO and Guatemala concerned the electricity rates paid to EEGSA and other distribution companies. Among other components, the applicable rates incorporated a Value Added for Distribution-or “VAD”-which was intended to compensate the distributors for operating expenses and infrastructure and “to provide a fair return on investment.” Id. (Pet. ¶ 12). The VAD was recalculated every five years by a Guatemalan regulatory agency, the National Electric Energy Commission (“CNEE”), which published the electricity rates for EEGSA and other electricity distributors in accordance with Guatemalan law. Id. According to TECO, the process by which CNEE set the VAD for the 2008-2013 period was unlawful in various respects and, as a result, violated Guatemala's obligation under the Dominican Republic-Central America Free Trade Agreement (“DR-CAFTA”), 43 I.L.M. 514 (2004), “to afford protected investments fair and equitable treatment.” Dkt. 1 at 5 (Pet. ¶ 14). The United States is a party to the DR-CAFTA.

         CNEE's actions resulted in “cash flow losses” for TECO and, according to TECO, ultimately led to the sale of the company “at a depreciated value” in 2010. Id. at 5 (Pet. ¶¶ 13- 14). Pursuant to the DR-CAFTA, TECO filed a claim in arbitration against Guatemala in October 2010. Id. at 5-6 (Pet. ¶¶ 15-16). That arbitration was governed by the ICSID Convention. Id. at 5 (Pet. ¶ 15).

         C. Procedural History before the ICSID

         In the arbitration, TECO sought damages in the amount of $243, 585, 335. Id. at 6 (Pet. ¶ 17). That total was the sum of two distinct claims for relief: First, TECO sought $21, 100, 552 to compensate it for the “portion of the cash flow . . . lost from August 1, 2008, when the [disputed rates] took effect, until October 21, 2010, when [TECO] sold its ownership interest in EEGSA.” Id. (Pet. ¶ 17). TECO refers to this claim as its “historical loss” or “cash flow value” claim. Second, TECO sought $222, 484, 783 to compensate it for “the damages [it] suffered . . . as a result of the impaired value at which [TECO] sold its ownership interest.” Id. at 7 (Pet. ¶ 17). TECO refers to this claim as its “loss of value” claim. Id. at 6-7 (Pet. ¶ 17). On December 19, 2013, the ICSID arbitration tribunal found that Guatemala had violated the DR-CAFTA. See Id. (Pet. ¶ 18); see also Dkt. 1-2 at 3 (Tribunal Award).

         TECO's success on its damage claims, however, was mixed. The tribunal found that TECO had presented sufficient evidence to establish a “historical loss” of $21, 100, 552. Dkt. 1-2 at 146 (Tribunal Award ¶ 742). But the tribunal was not persuaded that TECO had offered evidence sufficient to prevail on its “loss of value” claim for $222, 484, 783. Id. at 146-47 (Tribunal Award ¶ 749). As to that claim, the tribunal found that there was not “sufficient evidence of the existence and quantum of the losses that were allegedly suffered as a consequence of the sale” of the consortium at a depreciated price. Id. On April 18, 2014, TECO filed an application with ICSID to annul the tribunal's award in part, and, that same day, Guatemala filed a petition seeking to annul the award in full. Dkt. 1 at 7 (Pet. ¶ 20). TECO sought to annul the award only to the extent that it denied the company's “loss of value” claim, denied its request for interest on its “historical losses” claim for the period from August 1, 2009 until October 21, 2010, and denied its “claimed interest rate applicable to pre-award interest.” Id. (Pet. ¶ 20). Guatemala, on the other hand, sought to annul the Tribunal's award in its entirety. Id. (Pet. ¶ 20).

         In response, ICSID convened an ad hoc committee to consider the annulment requests. Dkt. 1 at 7 (Pet. ¶ 21); see also Dkt. 1-3 (Annulment Decision). The committee rejected each of Guatemala's challenges to the tribunal's finding that it had violated the DR-CAFTA. See Dkt. 1-3 at 88-95 (Annulment Decision ¶¶ 274-300); id. at 98-103 (Annulment Decision ¶¶ 308-323); id. at 104-106 (Annulment Decision ¶¶ 327-331). In contrast, the committee was persuaded by TECO's contention that the tribunal's “decision on the [company's] loss of value claim [did] not meet the standards” required by the ICSID convention, id. at 42 (Annulment Decision ¶ 127), because “the [t]ribunal's reasoning . . . [was] not clear at all, ” id. (Annulment Decision ¶ 128). It, accordingly, decided that the tribunal's decision on TECO's “loss of value claim . . . need[ed] to be annulled.” Id. (Annulment Decision ¶ 127). The committee also concluded that the tribunal erred in declining to award TECO “interest on historical damages for the period before EEGSA's sale.” Id. at 63 (Annulment Decision ¶ 198). Finally, the committee noted that the automatic stay of enforcement terminated as of the date of its decision. Id. at 120-21 (Annulment Decision ¶ 382).

         D. Proceedings in this Court

         On January 16, 2017, TECO initiated this action, seeking to “confirm and recognize” the “Final Award” and the entry of judgment against Guatemala “in the amounts stated in the Award and the Annulment decision.” Dkt. 1 at 9 (Pet. ¶ 27). TECO contends that it “is entitled to damages in the amount of . . . $21, 100, 552 [for its historical loss], plus interest on that amount at the U.S. Prime rate plus two percent as from October 21, 2010 until the date of full payment, compounded annually.” Id. (Pet. ¶ 28). TECO also seeks entry of judgment awarding it (1) “half of its costs of ICSID's administrative expenses and fees related to its application for ...

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