413 F.Supp.3d 304
S.D.N.Y.2019Background
- Gazsnabtranzit (later merged into AO Moldovagaz in 1997) and Moldovagaz were created in part to restructure the Republic of Moldova’s gas debt to Gazprom; Moldovagaz's shareholders are Gazprom (50%+1 preferred), the Republic (35.33%), and Transnistria (13.44%).
- Lloyd's (subrogated to Gazprom) obtained a 1998 arbitration award against Gazsnabtranzit; a U.S. default judgment recognizing that award was entered in 2000 in SDNY and is the subject of renewal/enforcement proceedings.
- The Republic issues decrees and state-directed policies affecting Moldovagaz (appointment of state representatives to corporate organs, rate-setting influence, decree-driven investment and pipeline decisions, and payments on Moldovagaz’s debts to Gazprom).
- Defendants moved to vacate the 2000 default judgment and dismiss the renewal action on jurisdictional, venue, and FSIA grounds; Moldovagaz separately sought to vacate/dismiss on personal-jurisdiction grounds (invoking the Fifth Amendment).
- The Court concluded Moldovagaz is an alter ego of the Republic (so it cannot assert Fifth Amendment due-process protection against personal jurisdiction), held the Republic bound to the arbitration under alter-ego and direct-benefit estoppel theories, denied the motions to vacate, and sustained venue in SDNY for the renewal action.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Moldovagaz is an alter ego of the Republic (personal jurisdiction/Fifth Amendment) | Moldovagaz is extensively controlled by Moldova (appointments, decrees, pricing, debt payments) so it cannot claim Fifth Amendment protection | Moldovagaz is corporate and influenced by Gazprom, not controlled by the Republic; minority shareholding cannot create alter ego | Court held Moldovagaz is alter ego of the Republic; Republic’s control defeats Moldovagaz’s Fifth Amendment personal-jurisdiction defense |
| Whether the Republic (nonsignatory) is bound by the arbitration / FSIA §1605(a)(6) exception | The Republic caused its state entity to enter the underlying contract and received direct, immediate benefit; alter-ego/veil-piercing and direct-benefit estoppel bind the Republic | The Trade Agreement did not require the Republic to cause the contract; any benefit was indirect and nonsignatory status precludes binding | Court held Republic bound under alter-ego analysis and direct-benefit estoppel; FSIA arbitration exception applies |
| Whether the 2000 default judgment should be vacated under Rule 60(b) | Plaintiff: judgment valid; renewal is proper and earlier venue/notice bars late challenge | Republic/Moldovagaz: challenge jurisdiction/venue and seek vacatur of default judgment | Motions to vacate the 2000 judgment denied; Rule 60(b) relief not warranted in these circumstances |
| Whether venue in SDNY for the renewal action is proper | Renewal action is plenary and depends on the original SDNY default judgment, so SDNY venue is proper | Substantive events occurred abroad; §1391(f) points to D.C. as the only appropriate venue | SDNY is proper because the renewal action depends on and follows from the original SDNY judgment |
Key Cases Cited
- First Nat. City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611 (1983) (Bancec framework for when an instrumentality is treated as an alter ego of a foreign state)
- Frontera Res. Azerbaijan Corp. v. State Oil Co. of Azerbaijan Republic, 582 F.3d 393 (2d Cir. 2009) (foreign states/instrumentalities not entitled to Fifth Amendment personal-jurisdiction protections when alter ego)
- EM Ltd. v. Banco Cent. De La Republica Argentina, 800 F.3d 78 (2d Cir. 2015) (factors for extensive control and veil piercing in alter-ego analysis)
- Thomson-CSF, S.A. v. Am. Arbitration Ass'n, 64 F.3d 773 (2d Cir. 1995) (theories for binding nonsignatories to arbitration agreements)
- MAG Portfolio Consult GMBH v. Merlin Biomed Grp. LLC, 268 F.3d 58 (2d Cir. 2001) (direct-benefit estoppel can bind a nonsignatory to arbitration if it knowingly accepted direct benefits)
- Bridas S.A.P.I.C. v. Gov't of Turkmenistan, 447 F.3d 411 (5th Cir. 2006) (government manipulation of an instrumentality to avoid collection supports alter-ego/veil-piercing findings)
- Deloitte Noraudit A/S v. Deloitte Haskins & Sells, U.S., 9 F.3d 1060 (2d Cir. 1993) (affiliate bound to agreement containing arbitration clause when it directly received benefits and parties intended to bind affiliates)
- American Bureau of Shipping v. Tencara Shipyard S.P.A., 170 F.3d 349 (2d Cir. 1999) (nonsignatory owner required to arbitrate where it obtained direct benefits from a contract containing an arbitration clause)