Stays Pending Appeal in Sovereign Litigation

Last week, the Republic of Djibouti's request that enforcement of a judgment entered against it be stayed without bond pending appeal was denied by the District Court of the District of Columbia. Judge Howell explained that sovereigns are not entitled to special treatment when assessing solvency and rejected Djibouti's argument that sovereigns "enjoy a 'presumption' of solvency and compliance entitling them to unbonded stays." Looking at Pao Tatneft v. Ukraine, No. 17-cv-582 (CKK), 2021 WL 2209460, at *2–3 (D.D.C. June 1, 2021), the Court found that "[s]uch a “presumption” appears to be wishful thinking, as this argument has been repeatedly rejected in this Circuit."

Under these circumstances, courts will look at three factors "(1) the damage award amount, (2) the net worth of the moving party in relation to the damage award, and (3) the residency status of the moving party.” The Court noted that although sovereigns have high net worths, the likelihood of them invoking sovereign immunity will likely limit the pool of assets available to satisfy an award. Waiving such immunity, stated the Court, would weigh in favor of granting an unbonded stay.

Let's take a look at how other sovereigns have fared when requesting an unbonded stay.

The District of Columbia District Court has waived the supersedeas bond requirement for Canada, finding that Canada "is a sovereign entity with ample funds to satisfy the Court’s judgment at the appropriate time." The court further stated that "[i]n deference to Canada’s sovereignty, the Court will not presume that the RCMP will ignore its obligation to satisfy any outstanding judgment after resolution of its appeal to the D.C. Circuit," especially since"Canada has affirmatively represented to the Court that it will satisfy any outstanding legal obligations after resolution of the pending appeal." Cruise Connections Charter Mgmt. 1, LP v. Att'y Gen. of Canada, No. CV 08-2054 (RMC), 2014 WL 12778302, at *1 (D.D.C. Oct. 1, 2014).

In 2020, the same court granted an unbonded stay pending appeal to Spain, noting that "courts in this Circuit generally have not required foreign sovereigns to post security because they are 'presumably ... solvent and will comply with legitimate orders issued by courts in this country or in [their home jurisdiction.]'” Novenergia II - Energy & Env't (SCA) v. Kingdom of Spain, No. 18-CV-01148 (TSC), 2020 WL 417794, at *6 (D.D.C. Jan. 27, 2020)

The Court specifically pointed to DRC, Inc. v. Republic of Honduras, 774 F. Supp. 2d 66, 76 (D.D.C. 2011) and In re Arbitration of Certain Controversies Between Getma Int'l & Republic of Guinea (Getma Int'l), 142 F. Supp. 3d 110, n.10 (D.D.C. 2015), where the court refused to impose security on Honduras and Guinea as "solvent sovereign." It must be noted, however, that in Novenergia, the Court had not yet determined "whether it has jurisdiction under the New York Convention, and therefore [could not] order security."

On the other side, the Court required security from Ukraine in Pao Tatneft. Further, in Baker v. Socialist People's Libyan Arab Jamahirya, 810 F.Supp.2d 90, 100 (D.D.C. 2011), the Court required security when "Syria has not provided any reasons for imposing a stay pending appeal without a bond" and “there [wa]s a reasonable likelihood of Syria's unwillingness to satisfy the judgment in full upon ultimate disposition of the case.'”

Doraleh, in opposing the request for an unbonded stay also recognized that Courts are becoming increasingly aware of the difficulties of collecting judgments from sovereigns. As an example, Doraleh referenced the District of Columbia District Court's February 24, 2016 order in Gold Rsrv. Inc. v. Bolivarian Republic of Venezuela, No. 14-cv-2014 JEB, "doubting that it is 'sound to ‘presume’ that the sovereign would pay its debt.'" Doraleh also referenced Hulley Enterprises Ltd. V. Russian Fed’n, No. 14-cv-1996 BAH, 2022 WL 1102200, at *9 (D.D.C. Apr. 13, 2022), where a stay was lifted in a case involving Russia after the sovereign delayed the proceedings, and NML Cap., Ltd. V. Republic of Argentina, 727 F.3d 230, 247 (2d Cir. 2013), where the Second Circuit noted that "foreign states can often be 'uniquely recalcitrant debtor[s].'”

Doraleh is represented by Dennis H. Hranitzky, Debra O'Gorman, Jianjian Ye and Alex H. Loomis of Quinn Emanuel Urquhart & Sullivan LLP. Djibouti is represented by Matthew M. Madden and Jason A. Shaffer of Kramer Levin Naftalis & Frankel LLP.

The case is Doraleh Container Terminal SA v. Republic of Djibouti, No. 1:20-cv-02571, in the U.S. District Court for the District of Columbia. The appeal is Doraleh Container Terminal SA v. Republic of Djibouti, No. 23-7023, in the U.S. Court of Appeals for the District of Columbia Circuit. The Opinion discussed above can be downloaded below.

Djibouti D.D.C. 20-cv-02571 dckt 000057_000 filed 2023-04-24.pdf

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