Page 11 - Commercial Litigation

NYLJ.COM |
Commercial Litigation | MONDAY, AUGUST 10, 2015 | S11
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immunity and recognition of an international arbitration award. In Mobil Cerro Negro v. Bolivarian Republic of Venezuela, No. 14 Civ. 8163(PAE), 2015 WL 631409 (S.D.N.Y. Feb. 13, 2015), Arbitration award creditors (hereinaf- ter, Mobil) had received a $1.6 billion arbitra- tion award from the International Centre for Settlement of Investment Disputes (ICSID). Mobil had brought the arbitration under a bilateral investment treaty challenging Ven- ezuela’s expropriation in 2007 of Mobil’s interests in certain oil projects.
Mobil had brought an ex parte petition immediately after the award issued, which the court granted, entering final judgment on the award. Venezuela moved to vacate the judgment, but the court denied the motion.3
Venezuela argued that the ICSID convention enabling statute, 22 U.S.C. §1650a, did not permit resort to an ex parte New York state recognition procedure rather than a plenary proceeding. Noting that the enabling statute states that ICSID awards “are entitled to full faith and credit as if the award were a final judgment of a court of general jurisdiction of one of the several States,” the court noted that, although awards from other arbitral forums are subject to limited substantive review, ICSID awards are binding, subject to review only by ICSID. Nothing in the statute prescribes the procedure for recognition, however.
The court noted the Second Circuit has held that federal courts are to borrow state law to fill in gaps in a federal statutory scheme, including where, as here, the “sub- ject matter presents a quintessentially fed- eral concern.” Venezuela had identified no significant conflict between a federal policy and the use of state law; its claimed need for uniformity is “dubious” because ICSID awards are enforced in more than 140 member states; and the foreign sovereign may still challenge attempted execution on its assets, which pro- ceeds only after notice and a waiting period. The court also rejected Venezuela’s argument that it should use the two-step procedure for registering a state-court judgment as a federal
judgment, which necessarily involves a fed- eral court determination on whether the state judgment is entitled to full faith and credit, not necessary here. Thus, the application of the state ex parte proceeding was valid.
Venezuela next argued that the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. 1330, 1602 et seq., supervenes the ICSID enabling statute, governs recognition of an ICSID award against a foreign sovereign and provideed no basis for subject matter jurisdic- tion over this proceeding. The court rejected Venezuela’s argument, one of first impression in the S.D.N.Y., finding that exceptions to FSIA sovereign immunity applied and the FSIA itself exempts pre-existing treaty obligations, which would include the ICSID convention. Thus, the court had subject matter jurisdiction.
The court also rejected the argument that use of an ex parte procedure is inconsistent with the FSIA’s personal jurisdiction, service and venue requirements. Because the FSIA is silent on the issue, the court noted that it must construe the FSIA, where fairly possible, so as not to conflict with the ICSID treaty and enabling statute. It concluded that the history and language of the ICSID conven- tion reflected the contracting states’ intent that ICSID awards were subject to expedited and automatic recognition. Thus, a plenary lawsuit was not necessary to recognize an ICSID award.4
This decision allows an ICSID award against a foreign sovereign to be expeditiously con- verted to a U.S. judgment, which would also allow the award creditor to take advantage of post-judgment discovery available under U.S. law regarding assets potentially subject to execution. It may well encourage increased resort to the S.D.N.Y. for ICSID conversion actions.
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1. Wang v. The Hearst Corp., No. 13-4480-cv, 2015 WL 4033091 (2d Cir. July 2, 2015), is a companion decision remanded for further proceedings consistent with Glatt.
2. Walling v. Portland Terminal Co., 330 U.S. 148 (1947).
3. The court stayed enforcement of that judgment be- cause ICSID had stayed enforcement pending resolution of Venezuela’s motion to revise the award.
4. Venezuela has appealed to the Second Circuit.
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