Stati Brothers Ask SDNY to Vacate Ex Parte Order and Quash Subpoena

The Moldovan Stati brothers, along with related entities (the "Intervenors"), intervened in a Section 1782 matter initiated by Kazakhstan to ask the Southern District of New York on April 6 to vacate an ex parte order and quash a subpoena seeking financial discovery of financial transactions from The Clearing House Payments Company L.L.C related to the Intervenors “during the last seven years” to use in ongoing foreign proceedings.

The Intervenors argued that the discovery sought by Kazakhstan was "not in aid of a foreign proceeding, as required under 28 U.S.C. § 1782[, but r]ather, ... an improper fishing expedition filed in advance of yet another round of contemplated litigation in the U.S." The Intervenors explain that although Kazakhstan claims to seek discovery in order to supports its allegations of fraud in relation to the Intervenors obtaining an arbitration award back in 2013, the financial information sought "goes back, at most, seven years, to 2016." The Intervenors further pointed out that Kazakhstan has recently filed a new action in the District of Columbia arguing that the Intervenors have obtained the 2013 award through fraud, thus proving that "the Petition in this case was in furtherance of a U.S. proceeding."

The Intervenors also ask the Court to reject Kazakhstan's claim that the information is needed “to locate the Statis’ assets to execute on cost orders” because "clear, binding caselaw from the Second Circuit Court of Appeals prohibit[s] § 1782 relief for exactly this kind of request." The Intervenors referred to Euromepa, S.A. v. R. Esmerian, Inc., 154 F.3d 24 (2d Cir.1998) and Jiangsu Steamship Co. v. Success Superior Ltd., No. 14 CIV. 9997 CM, 2015 WL 3439220, at *4 (S.D.N.Y. Feb. 5, 2015) to support their position that “[n]either pre-judgment attachment nor post-judgment proceedings are adjudicative in nature” and thus Section 1782 cannot be used to propound discovery in such cases.

The case is In re Application of the Republic of Kazakhstan for Order Directing Discovery from The Clearing House Payments Company L.L.C. Pursuant to 28 U.S.C. § 1782, No. 1:22-mc-00367-JPO. The Intervenors are represented by Berenice Le Diascorn and Thomas Vandenabeele of Kellner Herlihy Getty & Friedman, LLP.

The Motion to Vacate can be downloaded below.

Kazakhstan - Stati Mot to Vacate.pdf

Download PDF • 477KB

Sovereign Litigation Cases to Watch in 2023

Enforcement Actions against Russia

Over the past year, three petitions to confirm arbitration awards were filed in the District of Columbia against Russia. These cases will be particularly interesting to watch in light of the current geopolitical landscape. Historically, it has been extraordinarily difficult to enforce judgments against Russia, but global sanctions against the sovereign might provide new ways to approach enforcement. It famously took Franz Sedelmeyer 12 years and over 30 domestic execution cases to collect his award against Russia--a saga which made him the only individual ever to collect a monetary award from Putin’s Russia.

Yukos Capital Limited v. The Russian Federation (No. 1:22-cv-00798) seeks to enforce a July 2021 arbitral award issued against Russia by the Permanent Court of Arbitration in proceedings conducted pursuant to the Energy Charter Treaty. After the clerk entered default judgment against the sovereign, Russia moved to dismiss the case for failure to effect service, and just recently requested a hearing on the motion to dismiss. Yukos is represented by Matthew McGill and Matthew Rozen of Gibson, Dunn & Crutcher LLP. The Russian Federation is represented by Bruce Samuel Marks, Maria Grechishkina, and Thomas Sullivan of Marks & Sokolov, LLC.

In Stabil LLC v. The Russian Federation (No. 1:22-cv-00983), a group of petitioners represented by James H. Boykin, III and John M. Townsend of Hughes Hubbard & Reed LLP, filed a lawsuit to confirm a 2019 arbitration award against Russia "awarding them compensation for the Russian Federation’s seizure of their assets after its 2014 invasion of Crimea." Service is still pending in this case, although it was filed over a year ago.

Just recently, the Joint Stock Company State Savings Bank of Ukraine (known as JSC Oschadbank) filed suit against Russia to confirm a 2018 arbitration award arising from "the Russian Federation’s wrongful invasion and occupation of Crimea, which resulted in the closure of [JSC Oschadbank]’s Crimean operation and the unlawful seizure of its business, assets and valuables." The lawsuit was assigned to the newly sworn in Judge Reyes, who has a plethora of experience in the judgment enforcement and sovereign litigation areas. JSC Oschadbank is represented by Dennis Hranitzky and Debra O'Gorman of Quinn Emanuel Urquhart & Sullivan LLP and the case number is 1:23-cv-00764-ACR.

Enforcement Actions against India & Air India

Last year, the Republic of India found itself a defendant in no less than three cases before the District of Columbia, brought by petitioners and arbitration award winners CC/Devas (Mauritius) Ltd. (No. 1:21-cv-00106-RCL), Cairn Energy and Cairn UK Holdings Ltd. (No. 1:21-cv-00396-RJL), and Deutsche Telekom AG (No. 1:21-cv-01070-RJL). These cases came along with companion enforcement cases in the Southern District of New York against India's then-state owned entity, Air India (Case Nos. 1:21-cv-09155-PGG, 1:21-cv-05601-PGG, and 1:21-cv-04375-PGG).

Cairn settled with the Republic of India in December 2021, and the two other cases were stayed pending resolution of India's challenges to the awards. According to the regular status updates provided by the parties, India's challenges to the Deutsche award are still pending. Although the CC/Devas Petitioners reported to the Court a final ruling of the Supreme Court of the Netherlands, India has opposed a lift of the stay in that case, noting that further proceedings are scheduled to take place before the District Court of The Hague and the Court of Appeal in The Hague.

The parallel enforcement cases against Air India as India's alter ego, are also stayed. However, during the stay, Air India was sold to Tata Group. These cases would have provided great insight into the timing of alter ego enforcement cases and whether an arbitration award against a sovereign would have to be confirmed in a separate proceeding before commencing an enforcement action against the sovereign's alter ego.

The Republic of India is represented by David Riesenberg, Carolyn Beth Lamm, Nicolle E. Kownacki, and Weiqian Luo of White & Case LLP. Air India was represented by Dorit Ungar Black of Holwell Shuster & Goldberg LLP.

The petitioners are represented by Dennis Hranitzky, Debra O'Gorman, and Mark McNeill of Quinn Emanuel Urquhart & Sullivan LLP (Cairn), James H. Boykin, III of Hughes Hubbard & Reed LLP (Deutsche), and Matthew D. McGill, Ankita Ritwik, David Casazza, and Lee Ross Crain of Gibson, Dunn & Crutcher LLP and Bradley A. Klein of Skadden Arps Slate Meagher & Flom LLP (CC/Devas).

Kazakstan Sues Investors

In March 2023, Kazakstan filed a lawsuit in the District of Columbia (No. 1:23-cv-00565) against the Moldovan Stati brothers and their companies, who have been pursuing the enforcement of an arbitral award against Kazakstan for almost ten years, seeking relief from the Court from the judgment entered in relation to such award, accusing the defendants of fraud on the court. Although the award was confirmed in 2019, Kazakhstan claims to have "now obtained [evidence of the fraud that] is clear, convincing, and indisputable," stemming from allegedly false audit reports and financial statements which were used to obtain the confirmed arbitration award.

Matthew H. Kirtland and Esha Kamboj from Norton Rose Fulbright US LLP represent the Republic of Kazakstan. Information regarding counsel for the Stati brothers and entities is not yet available.