D.C. Circuit Affirms Denial of Romania Attempt to Avoid Arbitral Award by Micula Brothers

Yet another appeal in the Micula v. Romania saga was rejected by the D.C. Court earlier today. After the confirmation of the arbitration award in 2019, Romania appealed the District Court for the District of Columbia's decision, arguing that the Court did not have subject matter jurisdiction over the matter, arguing that the arbitration provision in the Sweden-Romania BIT was void as of Romania’s 2007 accession because EU law prohibits intra-EU agreements to arbitrate EU law disputes between a member state and the citizens of another member state. The D.C. Circuit affirmed the confirmation of the award in 2020, agreeing with the lower court's ruling thatEU law was inapplicable because the parties’ dispute predated Romania’s EU membership and the award did not “relate to the interpretation or application of EU law." The parties found themselves before the D.C. Circuit court twice more in relation to discovery sanctions and accrued sanctions. The D.C. Circuit ruled in favor of the Micula brothers both times.

In 2022, Romania filed a motion under Rule 60(b) seeking relief from the 2019 confirmation of the award and the ensuing sanctions,  arguing that two decisions of the EU’s highest court in 2022 held, “[i]n unequivocal terms,” that “the agreement to arbitrate in the [Sweden-Romania] BIT was void the moment that Romania entered the EU.” The district court denied the Rule 60(b) motion, concluding that the CJEU Decisions did not hold Romania’s accession retroactively voided its pre-EU consent to arbitrate and “the jurisdictional fact . . . that there was a valid agreement to arbitrate before Romania acceded to the EU — remains undisturbed.” This appeal ensued.

The D.C. Circuit denied Romania's fourth appeal. As to Romania's arguments under Rule 60(b)(4)--requiring relief when the judgment is void--the Court found that Romania did not make a showing, as required, that the district court lacked even an arguable basis for jurisdiction in confirming the award. Romania maintained that even so there is no arguable basis for jurisdiction because the “sole basis” for the district court’s determination that jurisdiction existed under the FSIA was an erroneous “interpretation and application of EU law." The appellate court rejected that, explaining that the district court’s jurisdictional analysis in 2019 was not premised on the “interpretation and application of EU law,” but that the district court independently found the requisite “jurisdictional fact[]” under the arbitration exception of an agreement to arbitrate with the Miculas, through the 2002 Sweden- Romania BIT and the Miculas’ 2005 request for arbitration. Further, the Court explained that the 2022 CJEU decisions on which Romania relies do not support the interpretation that its 2007 accession to the EU retroactively rendered the preexisting agreement to arbitrate with Swedish investors “void ab initio.”

As to Romania's arguments under Rule 60(b)(5)--which provides relief from certain judgments, including a judgment “based on an earlier judgment that has been reversed or vacated” or where “applying it prospectively is no longer equitable"--the Court rejected the notion that the district court judgments are based on a judgment of the General Court that the CJEU reversed or vacated. The Court explained that the district court’s subject matter jurisdiction, contrary to Romania’s view, did not “depend” on the 2019 General Court decision, but simply on the fact that the dispute pre-dated Romania's ascension to the EU. In fact, the district court's decision to confirm the award never even referred to the 2019 General Court decision.

Lastly, as to Romania's arguments under Rule 60(b)(6)--which provides relief from a judgment for “any other reason that justifies relief"--the D.C. Circuit found it to be barred because it simply repackaged the same arguments under Rules 60(b)(4) and (5).

The appeal is captioned Micula et al. v. Gov't of Romania, No. 23-7008.

Construction Co. Opposes Guatemala's Motion to Dismiss

On May 10, Sigma Constructores, S.A. ("Sigma"), a well-established construction and engineering company incorporated in Guatemala, opposed Guatemala's motion to dismiss its petition to confirm three awards totaling over $32 million. Sigma addressed six different arguments--or categories of arguments--advanced by the sovereign in its attempt to dismiss the petition to confirm the awards.

First, Sigma argued that the sovereign's arguments such as "(i) that Sigma’s claims in the Arbitrations were time-barred; (ii) that Guatemalan law prevents Respondent from paying the amounts due in U.S. dollars, or (iii) that payment of the Awards would otherwise violate Guatemalan law" are impermissible attempts by Guatemala for a second bite at the apple, as they have been considered--and rejected--by the competent arbitral tribunals, as well as Guatemalan courts, that confirmed the three awards. Petitioner explained that these arguments are not jurisdictional and thus improperly raised in a Rule 12(b)(6) motion. Petitioner further argued that these arguments should be precluded under a long line of precedent that bars award debtors from re-litigating substantive issues during a confirmation proceeding.

Second, Sigma used Guatemala's counsel own words during a status conference to reject an argument that the awards were made against Guatemalan Ministry of Communications, and not the state itself. Petitioner not only pointed out that the Ministry was not a party to the contracts underlying the arbitrations, nor to the arbitration itself, but also quoted Guatemala's counsel who conceded during a status conference that the Ministry "does not have a separate legal personality" under Guatemalan law.

Third, Sigma rebuffed Guatemala's attempt to apply the Panama Convention instead of the New York Convention to its request to confirm the awards because the awards are purely domestic. Nevertheless, the petitioner pointed out that it has satisfied the pleading requirements for recognition under the Panama Convention as well.

Fourth, Sigma asked the Court to reject the "comity" arguments set forth by the sovereign as premature and factual.

Fifth, petitioner explained that Guatemala's forum non conveniens arguments should be rejected because the D.C. Circuit held that the doctrine is inapplicable in arbitration award confirmation proceedings.

Lastly, petitioner asked the Court to deny the sovereign's request for a stay of the confirmation proceedings, as all the ancillary litigation launched by Respondent to collaterally attack the judgments confirming two of the awards have been finally decided in Sigma’s favor. Moreover, the remaining award has been confirmed and Respondent’s efforts to stay its enforcement have been consistently rejected by Guatemalan courts.

The case is Sigma Constructores, S.A. v. Republic of Guatemala, C.A. No. 1:22-cv-01674-TSC (D.D.C.). Jonathan Cross and Daniela Paez of Herbert Smith Freehills N.Y. LLP represent petitioner. Guatemala was represented by Greenberg Traurig in moving to dismiss, but the firm withdrew its appearance earlier this month after presidential elections in Guatemala resulted in a change of regime and, as Greenberg Traurig explained, "effectively, a new client." According to the motion to withdraw, Guatemala is actively looking for a new firm to take Greenberg Traurig's place. Guatemala's reply is due on May 30, 2024.

Hulley Opposes Russia's Appeal

Appellees Hulley Enterprises Ltd., Yukos Universal Ltd., and Veteran Petroleum Ltd. filed their brief in opposition to Russia's appeal last week. Appellees, represented by Susman Godfrey LLP, focused their response on the fact that Russia's arbitrability argument has been rejected repeatedly in the course of the sovereign's various attempts at annulling or vacating the award. Appellees implored the Court: "This case cries out for the doctrine of issue preclusion to be applied."

Appellees argued that since the case was stayed for six years to wait for the annulment proceedings before Dutch courts to come to an end, allowing Russia to re-litigate these issues would "defeat the central purpose of the New York Convention—facilitating the expeditious resolution of disputes."

Even if the Court were to give Russia another bite at the apple, Appellees argue, the District Court correctly denied the Russian Federation’s motion to dismiss under the Foreign Sovereign Immunities Act (“FSIA”). Appellees explained that Russia's agreement to provisionally apply the ECT was sufficient for the District Court to find that an agreement to arbitrate existed. Appellees further argued that since the sovereign is not challenging the existence of the agreement, but its validity, Russia's challenges are questions of arbitrability, which are not jurisdictional questions under the FSIA.

Russia's opening brief, in April, is an appeal of the District Court's decision denying its request to dismiss the action to enforce an arbitral award against it, claiming that it has never waived its immunity against jurisdiction. Russia now argues that the Court erred in refusing to dismiss the action because (1) it has not delegated the arbitrability review to the tribunal; and (2) even if it did, the District Court still had the obligation to independently decide "whether Respondent made a 'standing offer' to arbitrate under the [Energy Charter Treaty ("ECT")] and whether Petitioners were eligible offerees who could 'accept[]' any purported offer."

The case is Hulley Enterprises Ltd. v. Russian Federation, No. 23-7174 (D.C. Cir.). Russia's reply brief is due on May 22, 2024.