Energy Company Moved to Recognize ICSID Award Against Bulgaria

ACF Renewable Energy Limited ("ACF") moved before the U.S. District Court for the District of Columbia today to recognize and enforce a 60 million euro arbitration award against the Republic of Bulgaria.

ACF's petition to confirm states that the award arose out of Bulgaria's violations of the Energy Charter Treaty (the "ECT") with respect to ACF's investment in a photovoltaic facility. According to ACF, mere weeks after it bought a Bulgarian project company owning a photovoltaic facility, the sovereign introduced a series of measures that upended a governmental incentive scheme for photovoltaic plants that guaranteed renewable energy producers a fixed feed-in tariff, including by imposing a new "grid access fee" on producers of renewable energy, imposing an annual cap on the quantity of electricity produced by renewable energy plants that would qualify for the feed-in tariff, imposing an electricity production fee on wind and solar energy producers, and finally by replacing the feed-in tariff scheme altogether with a feed-in premium scheme. These measures, ACF argues, greatly diminished the value and return on ACF's investment in the Bulgarian project company and photovoltaic facility. ACF's damages surpassed 70 million euro.

ACF commenced arbitration in February 2018. Bulgaria objected to the Tribunal's jurisdiction, including on the ground that the ECT and the ICSID Convention would not provide jurisdiction over disputes between nationals of a EU state and another EU state. The Tribunal rejected all of Bulgaria's objections and upheld the Tribunal's jurisdiction, except that the Tribunal decided that one of the measures constituted a taxation measure and was thus outside of the Tribunal's jurisdiction. The Tribunal ordered Bulgaria to pay compensation to ACF, including over 60 million euro, pre-award interest, post-award interest, and legal costs and fees.

Bulgaria refused to pay the award. ACF filed the complaint seeking recognition and enforcement of the award under 22 U.S.C. § 1650a. Thomas C.C. Childs and Camilla Akbari of King & Spalding LLP represent ACF Renewable Energy Limited. White & Case represented Bulgaria in the arbitration, but no information regarding counsel in the recognition proceeding is available currently for the sovereign.

The case is ACF Renewable Energy Limited v. The Republic of Bulgaria, No. 1:24-cv-01715 (D.D.C.).

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.