Entes Industrial Plants Construction and Erection Contracting Co. Inc. v. The Kyrgyz Republic

          MEMORANDUM OPINION RE DOCUMENTS NOS. 1, 19

          RUDOLPH CONTRERAS UNITED STATES DISTRICT JUDGE

         Denying Respondents' Motion to Dismiss the Petition to Confirm Foreign Arbitration Award for Forum non conveniens; Confirming the Petition as to The Ministry of Transport and Communications of the Kyrgyz Republic; and Ordering Supplemental Briefing

         I. INTRODUCTION

         Petitioner Entes Industrial Plants, Construction and Erection Contracting Co. Inc., (“Entes”), a Turkish corporation, has filed a Petition to Confirm and Enforce a foreign arbitration award that it obtained by arbitrating against the Ministry of Transport and Communications of the Kyrgyz Republic (“the Ministry”) in the Kyrgyz Republic (“the Republic”). Pet. to Confirm and Enforce Foreign Arbitral Award, ECF No. 1. Respondents the Kyrgyz Republic and the Ministry do not challenge the award or its confirmation on the merits but instead make two procedural arguments. First, they argue that the petition ought to be dismissed from this Court on grounds of forum non conveniens. Second and alternatively, they argue that if the petition is to be confirmed it should be confirmed only against the Ministry and not against the Republic because the Republic was not a party to the arbitration proceedings. For the reasons set forth below, the Motion to Dismiss for forum non conveniens is denied, and the petition is confirmed only against the Ministry. The Court orders supplemental briefing on the application of this Circuit's caselaw to the question of whether the award should also be confirmed against the Kyrgyz Republic.

         II. FACTUAL BACKGROUND

         In 1999, the Ministry of Transport and Communications of the Kyrgyz Republic entered into a contract with Entes to rehabilitate approximately 620 kilometers of road connecting the two largest cities in the Kyrgyz Republic-Bishkek and Osh. See Uncitral Arbitration, Final Award (“Award”) ¶¶ 1, 24, ECF No. 1-3. The Bishkek-Osh road traverses the Tien Shan (or Tien Chan) Mountains and has “numerous tight curves and steep gradients.” Id. ¶ 28. Entes was tasked with rehabilitating and improving “the carriageway, shoulders, slope stability, drainage system, structures and road furniture” along with “construction of new alignments in some sections, ” “repair of many existing bridges and widening them, ” “rehabilitation of two tunnels, ” plus “installation of new kilometre posts and traffic signs as well as the installation of road safety features.” Id. ¶ 29. The total contract amount, including 20% VAT, was in excess of $52 billion U.S. dollars. Id. ¶ 2. The contract included a written agreement to arbitrate. Conditions of Contract for Works of Civil Engineering Construction ¶ 67.3, ECF No. 1-4 at 44-45.

         Just under three years were allotted for completion of the project, with a target completion date set for December 2002. Award ¶ 3. Unfortunately, serious problems arose which extended the project and drove up costs. Id. ¶ 34. These included “design changes, additional works and late instructions, shortages of materials . . . inclement weather in particular harsh winters and political unrest, in particular the ‘Tulip Revolution' in March - April 2005.” Id. ¶ 35. The project was finally completed in October 2005. Id. ¶ 40. This litigation primarily concerns the additional costs incurred by Entes by these delays. See Id. ¶ 36. Entes claimed that it was owed an additional $22, 982, 039.25, but it was only awarded $1, 161, 870.19. Id. ¶¶ 48-49.

         In an attempt to obtain the full amount it was owed under the contract, Entes initiated arbitration proceedings in Bishek in January 2009. Id. ¶¶ 52, 779. The Respondent in the arbitration was the Ministry; the Kyrgyz Republic itself was not a party. Id. ¶ 2. Six years later, on September 29, 2015, the Aribtral Tribunal issued an award, unanimously finding for Entes. Id. ¶ 779. The Ministry was ordered to pay a total of $16, 613, 631.59. Id. The vast majority of the award would “bear interest at one month LIBOR plus 2% from May 13, 2006 until full settlement.” Id.

         Subsequently, Entes began seeking confirmation and enforcement of the Award, but this Court was not the first place it turned. In November 2016, Entes obtained a decision confirming the Award from the Superior Court of Justice for Ontario, Canada. See Entes Indus. Plants Constr. & Erection Contracting Co. v. The Kyrgyz Republic, 2016 CarswellOnt 18228 (Can. Ont. Sup. Ct. J.) (WL). It also sought confirmation in Russian courts.^[1] See, e.g., Decl. of Kanybek Taalaibekovich Koshokov at Tab 6, ECF No. 19-5 at 87.

         It was not until September 26, 2018, that Entes filed a Petition to Confirm and Enforce Foreign Arbitral Award in this Court. Pet. Entes named both the Ministry and the Kyrgyz Republic itself as respondents. Id. In the Petition, Entes calculated the total amount due and owing after interest was added as “nearly $2 billion.” Id. ¶ 39. The Republic and the Ministry oppose confirmation of the Award and accordingly filed a motion to dismiss Entes's petition. Mot. to Dismiss Pet. to Confirm Foreign Arbitral Award, ECF No. 19. They challenged Entes's calculation of interest on the Award, and Entes has since conceded the issue. See Opp'n at 2, ECF No. 21. The parties are now in agreement that the total amount of the Award-principal and interest-is only approximately $25 million. Id. Respondents also argued, and still maintain, that the Petition ought to be dismissed for forum non conveniens. Alternatively, they argue that if the Award is to be confirmed, it should only be confirmed against the Ministry, not against the Kyrgyz Republic. These issues have been briefed and the matter is now ripe for adjudication by this Court.

         III. LEGAL STANDARD

         First, this Court addresses its jurisdiction and concludes that jurisdiction is proper under the Foreign Sovereign Immunities Act (FSIA). Under 28 U.S.C. § 1330, “[t]he district courts shall have original jurisdiction . . . of any nonjury civil action against a foreign state . . . with respect to which the foreign state is not entitled to immunity either under sections 1605-1607 of this title or under any applicable international agreement.” Both the Ministry and the Kyrgyz Republic qualify as a “foreign state” under the language of the FSIA. Id. § 1603(a) (“A ‘foreign state' . . . includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state . . . .). But jurisdiction over actions against foreign states is limited to the enumerated exceptions to immunity in the FSIA. See Saudi Arabia v. Nelson, 507 U.S. 349, 355 (1993). Because of this limitation, a court must “satisfy itself that one of the exceptions applies” at “the threshold of every action in a District Court against a foreign state.” Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 493-94 (1983).

         Here, the arbitration exception in § 1605(a)(6) applies. Section 1605(a)(6) grants jurisdiction over actions “to confirm an award made pursuant to an arbitration agreement governed by an international treaty.” Chevron Corp. v. Ecuador, 795 F.3d 200, 203 (D.C. Cir. 2015). For an action to qualify for this exception, the petitioner must show that “(1) a foreign state has agreed to arbitrate; (2) there is an award based on that agreement; and (3) the award is governed by a treaty signed by the United States calling for the recognition and enforcement of arbitral awards.” Id. at 204 (calling these “the relevant jurisdictional facts”) (internal quotation marks and citations omitted).

         In this action, Entes seeks to confirm an award made pursuant to its contract with the Ministry and governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), June 10, 1958, 21 U.S.T. 2517; see also 9 U.S.C. §§ 201 et seq. (implementing the treaty through amendments to the Federal Arbitration Act). Entes has produced a contract containing an arbitration agreement between itself and the Ministry, ECF No. 1-4, which is a “foreign state” for purposes of FSIA. (Whether the Kyrgyz Republic is also properly joined as a respondent is a major issue in this case, and the Court addresses it at length below.) Entes has also produced the Award against the Ministry that it obtained as the result of arbitration proceedings that took place pursuant to the agreement to arbitrate in the contract. The New York Convention, by its terms, governs the Award, as it is an “award made in the territory of a State [the Kyrgyz Republic] other than the state [the United States] where the recognition and enforcement . . . are sought.”^[2] New York Convention art. I; Creighton Ltd. v. Gov't of State of Qatar, 181 F.3d 118, 123 (D.C. Cir. 1999). This Court therefore has jurisdiction under § 1605(a)(6).

         Second, the Court addresses the appropriate standard of review to apply in an action to enforce an arbitral award. In general, courts apply a deferential standard when reviewing arbitral awards. “Consistent with the ‘emphatic federal policy in favor of arbitral dispute resolution' . . . 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)).

         This deferential standard is akin to the deferential standard used when reviewing domestic arbitral awards. See Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 568-69 (2013) (“Under the FAA, courts may vacate an arbitrator's decision ‘only in very unusual circumstances.' . . . If parties could take ‘full-bore legal and evidentiary appeals,' arbitration would become ‘merely a prelude to a more cumbersome and time-consuming judicial review process.'” (first quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 942 (1995), then quoting Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008))). The Supreme Court has described the deferential standard as allowing vacatur of an award not if “the panel committed an error-or even a serious error” but “only when [an] arbitrator strays from interpretation and application of the agreement and effectively dispense[s] his own brand of industrial justice.” Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 671-72 (2010) (internal quotation marks and citations omitted). Similarly, the D.C. Circuit has held that “[a]s long as the arbitrator is even arguably construing or applying the contract and acting within the scope of [her] authority, that a court is convinced [she] committed serious error does not suffice to overturn [her] decision.” Kanuth v. Prescott, Ball & Turben, Inc., 949 F.2d 1175, 1180 (D.C. Cir. 1991) (quoting United Paperworkers Int'l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 38 (1987)).

         In a proceeding to confirm a foreign award under the New York Convention, the district court is even more constrained and “may refuse to enforce the award only on the grounds explicitly set forth in Article V of the Convention.” TermoRio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928, 935 (D.C. Cir. 2007) (citation omitted); see also Int'l Trading & Indus. Inv. Co. v. DynCorp Aerospace Tech., 763 F.Supp.2d 12, 20 (D.D.C. 2011) (“Confirmation proceedings are generally summary in nature” because “the New York Convention provides only several narrow circumstances when a court may deny confirmation of an arbitral award.” (citing Zeiler v. Deitsch, 500 F.3d 157, 169 (2d Cir. 2007))).

         IV. ANALYSIS

         The Respondents present no argument on the merits against the confirmation of the Award, but instead raise two procedural issues. First, while they grant that jurisdiction is proper in this Court, they argue that the Petition ought to be dismissed on grounds of forum non conveniens because the Kyrgyz Republic's courts would be a superior venue. Second, they argue that if the Petition is to be granted and the Award ...