Sovereign Immunity Provides No Defense to Recognition\u2014but Execution is Another Story<\/strong><\/p>\nVenezuela argued that the order should be vacated because the Foreign Sovereign Immunities Act (\u201cFSIA\u201d) provides exclusive rules for subject matter jurisdiction, service of process, personal jurisdiction, and venue in cases against sovereigns.<\/p>\n
As to subject matter jurisdiction, the Court noted that the FSIA itself provides exceptions to sovereign immunity in the case of confirmation of arbitral awards and that Venezuela had waived its immunity in actions to enforce ICSID awards by adhering to the ICSID Convention.\u00a0 Previous case law in the Circuit had reached the same conclusion.<\/p>\n
Questions of service of process, personal jurisdiction, and venue were more complex. The FSIA sets forth special procedures for serving foreign state entities, specifies that the proper venue is the federal court in the District of Columbia, and does not contemplate ex parte actions.[2]\u00a0 It was uncontested that Mobil did not follow these procedures. Venezuela argued that the order enforcing the ICSID award must be vacated on that basis.<\/p>\n
Having examined the history and text of the FSIA, the Court concluded that congressional intent was \u201cunclear as to whether the procedures the FSIA prescribes were to apply to conversion of ICSID awards against foreign sovereigns.\u201d To resolve the ambiguity, the Court analyzed the broader context of the ICSID Convention and its enabling statute, and noted the intent of the drafters to depart from the New York Convention recognition scheme: \u201cthe contracting states to the ICSID Convention intended to put in place an expedited and automatic recognition procedure.\u201d The only role of national courts is to confirm the authenticity of ICSID awards. To find that a plenary lawsuit was required to enforce ICSID awards would be contrary to the ICSID Convention and its enabling statute\u2014and would provide recalcitrant award debtors with an \u201cavenue for delay.\u201d<\/p>\n
Sovereign immunity will, however, continue to play a role in proceedings to execute against assets of states following the recognition of an ICSID award. Judge Engelmayer noted that the ICSID Convention Contracting States left questions as to immunity against execution to national law. The FSIA\u2019s provisions on execution\u2014limits on what assets are subject to execution, requirement of court approval\u2014will continue to apply when award creditors attempt to collect from a sovereign state.<\/p>\n
Federal Courts Defer to Proceedings Within ICSID, Including Stays of Enforcement <\/strong><\/p>\nThe Court deferred to the internal review process at ICSID, noting that it is a \u201cunique\u201d tribunal and that \u201c[a]ny challenge to the award is to be made within ICSID.\u201d Venezuela has in fact applied to ICSID for revision of the award. The ICSID Secretary-General granted a stay of enforcement while those issues are resolved. Noting that stay, the New York federal court adopted the \u201cprudent solution\u201d of staying the enforcement of the award against Venezuela until the stay is lifted by ICSID.\u00a0 The Court directed the parties to notify it of the status of the ICSID proceedings every 30 days.<\/p>\n
According to Venezuela\u2019s latest filings in federal court, which post-date Judge Engelmayer\u2019s decision, on February 9, 2015 Venezuela applied to ICSID to annul the underlying ICSID award awarding Mobil USD 1.6 billion in damages. The ICSID Secretariat is in the process of constituting an ad hoc<\/em> committee for the annulment proceedings.<\/p>\nWhat\u2019s Next?<\/strong><\/p>\nThe decision provides a clear answer as to how ICSID awards are recognized in United States courts\u2014automatically and without regard to the FSIA. Given the hotly contested issues of first impression arising before Judge Engelmayer as well as the sums in dispute, an appeal can be considered likely.<\/p>\n
However, the award creditors are no closer to collection, because the federal court\u2019s recognition of the award has been stayed and is likely to remain so until the ICSID annulment proceedings conclude.<\/p>\n
<\/p>\n
\n
Southern District of New York: Judge Paul A. Engelmayer
\nSDNY Part I (emergency) Court: Judge J. Paul Oetken<\/em><\/p>\n Counsel to Mobil Cerro Negro Ltd., et al. in the SDNY case: Steptoe & Johnson, LLP (Evan Glassman, Jared Robert Butcher, Jeffrey Michael Theodore, Michael Jeremy Baratz, Steven K. Davidson)<\/em><\/p>\n Counsel to the Bolivarian Republic of Venezuela in the SDNY case: Curtis, Mallet-Prevost, Colt & Mosle, LLP (Joseph D. Pizzuro, Juan Otoniel Perla)<\/em><\/p>\nTribunal in the underlying arbitration: Gabrielle Kaufmann-Kohler, Ahmed El-Kosheri, and\u00a0Gilbert Guillaume (Chair\/President)<\/em><\/p>\n
\n <\/p>\n
\n
[1] Civil Practice Law and Rules (\u201cCPLR\u201d), Article 54. Section 5401 reads: \u201cIn this article \u2018foreign judgment\u2019 means any judgment, decree, or order of a court of the United States or of any other court which is entitled to full faith and credit in this state, except one obtained by default in appearance, or by confession of judgment.\u201d\u00a0 A separate article governs recognition of money judgments issued by courts of foreign countries (CPLR, Article 53).<\/p>\n
[2] Personal jurisdiction is present when there is both subject matter jurisdiction and proper service of process.<\/p>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"
This is the second installment in a regular series offered by NYIAC’s Executive Director, Alexandra Dosman. Follow this series to learn about recent decisions by New York federal and state courts and for easy access to the full text of the decisions. Below, read more about Mobil Cerro Negro Ltd., et al. v. Bolivarian Republic […]<\/p>\n","protected":false},"author":42,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":"","_jetpack_memberships_contains_paid_content":false},"categories":[4],"tags":[],"acf":[],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/nyiac.org\/wp-json\/wp\/v2\/posts\/2725"}],"collection":[{"href":"https:\/\/nyiac.org\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/nyiac.org\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/nyiac.org\/wp-json\/wp\/v2\/users\/42"}],"replies":[{"embeddable":true,"href":"https:\/\/nyiac.org\/wp-json\/wp\/v2\/comments?post=2725"}],"version-history":[{"count":0,"href":"https:\/\/nyiac.org\/wp-json\/wp\/v2\/posts\/2725\/revisions"}],"wp:attachment":[{"href":"https:\/\/nyiac.org\/wp-json\/wp\/v2\/media?parent=2725"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/nyiac.org\/wp-json\/wp\/v2\/categories?post=2725"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/nyiac.org\/wp-json\/wp\/v2\/tags?post=2725"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}