United States District Court, District of Columbia
ENTES INDUSTRIAL PLANTS, CONSTRUCTION AND ERECTION CONTRACTING CO. INC., Petitioner,
v.
THE KYRGYZ REPUBLIC and THE, MINISTRY OF TRANSPORT AND COMMUNICATIONS OF THE KYRGYZ REPUBLIC Respondent.
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 ...