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.

Russia Makes Arbitrability Argument in Appellate Opening Brief

Earlier this month, Russia filed its appellant brief challenging U.S. District Court for the District of Columbia's denial of its motion to dismiss. Notably, the brief was filed by David Riesenberg, newly with Pinna Goldberg, a French firm who opened a D.C. office earlier this year. David has previously represented Russia along with his colleagues from White & Case LLP in the proceedings in the District Court. 

Russia asked the Court to dismiss the long-stayed action to enforce the 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."

Specifically, Russia argues that it has delegated only the initial determination of arbitrability--and not the exclusive determination--to arbitrators. Russia points out that its interpretation that the delegated arbitrability review was non-exclusive is consistent with the approach of French, Dutch, and Canadian courts before which parallel ECT litigation against Respondent is pending. 

Russia then argued that even if petitioners were correct regarding the delegation of authority, the D.C. District Court still had an obligation to independently decide "some arbitrability questions" de novo as part of its review of the jurisdictional requirements of the Foreign Sovereign Immunities Act. In Russia's interpretation of Chevron Corp. v. Republic of Ecuador, 795 F.3d 200 (D.C. Cir. 2015), the court should have approached at least the following jurisdictional questions de novo: "(1) whether the treaty’s signatory made 'a standing offer' to arbitrate and (2) whether the offer was 'accepted' by a claimant from within the category of eligible offerees (e.g., 'all potential U.S. investors')." 

Russia explained that although its executive branch signed the ECT, its parliament chose not to ratify it, and thus "accepted only a limited commitment under the ECT’s Article 45(1) to apply the treaty 'provisionally … to the extent that such provisional application is not inconsistent with its constitution, laws or regulations.'”  According to the brief, "Respondent had not committed to applying the ECT’s arbitration provisions, [as] confirmed publicly in 2004 by the ECT Deputy Secretary General."

These arguments were rejected in November 2023 by the District of Columbia District Court, which explained in a lengthy opinion that ruling otherwise would "risk upending the global community's predominant mechanism for international commercial dispute resolution." The case had been pending before the District of Columbia court since 2014, and was subject to multiple stays pending Russia's attempts to annul the award in Dutch courts.

In the same month, the Commercial Court, King's Bench Division of the High Court of Justice of England and Wales rejected Russia's sovereign immunity arguments.

District of Columbia Warns Sovereigns Against Dragging Out Confirmation Proceedings

In Deutsche Telekom AG v. Republic of India, No. CV 21-1070 (RJL), 2024 WL 1299344 (D.D.C. Mar. 27, 2024), Judge Leon of the District Court for the District of Columbia sent a strong message to sovereign states looking to delay the confirmation of arbitration awards.

Judge Leon confirmed Deutsche Telekom's award, denying India's motion to dismiss on forum non conveniens and because India is immune from suit under the Foreign Sovereign Immunities Act. The forum non conveniens argument was "dispatched with alacrity"--as the D.C. Circuit has “squarely held ‘that forum non conveniens is not available in proceedings to confirm a foreign arbitral award because only U.S. courts can attach foreign commercial assets found within the United States.’ ” Id. at *2.

The court gave more time to the sovereign immunity argument, but nevertheless rejected it, finding that the FSIA's "arbitration exception" applies. Id. The Court explained that "the arbitration exception requires establishing three 'jurisdictional facts': 'the existence of an arbitration agreement, an arbitration award[,] and a treaty governing the award.'” Id. at *3. India attempted to rebut Deutsche Telekom's clear establishment of these three requirements by arguing that "its offer to arbitrate in ... the BIT did not encompass [Deutsche Telekom's]'s claims—first because '[it]had not made any ‘investment’ in India and was not an ‘investor’ as defined in the BIT,' and second because [its] activities through a subsidiary were not protected by the BIT." Id. The court explained, however, that such arguments "about whether a sovereign's offer to arbitrate covers 'this particular dispute' concern 'the arbitrability of a dispute[, which] is not a jurisdictional question under the FSIA., [but] are 'properly considered as part of [merits] review under the New York Convention.'” Id. Finding that India is not immune from suit, the court moved on to consider --and reject--India's argument as part of its analysis under the New York Convention.

Lastly, the court strongly rejected India's argument that confirmation proceedings in U.S. courts have evolved to comprise two separate stages when sovereigns are involved: one where arguments regarding immunity are heard; and one where defenses under the New York convention are considered. The court explained that not only need confirmation proceedings need to be summary in nature, but proceeding as requested by India would give sovereigns another bite at the apple after it raised the same arbitrability arguments--to no avail--before "the arbitral panel, the Swiss Federal Supreme Court, and the [District of Columbia] court." "Enough is enough!" the Court concluded.