Hulley Enterprises Ltd. v. Russian Federation
211 F. Supp. 3d 269
| D.D.C. | 2016Background
- Hulley Enterprises, Yukos Universal, and Veteran Petroleum (the Shareholders) obtained three ICSID/ECT-related arbitral awards against the Russian Federation totaling ~$50 billion, finding Russia violated the Energy Charter Treaty and awarding damages and costs after nearly a decade of arbitration seated in The Hague.
- Russia filed a request in the District Court of The Hague to set aside the Awards before the Shareholders sought confirmation in multiple jurisdictions, including this U.S. district court action under the Federal Arbitration Act (FAA) and the New York Convention.
- The District Court of The Hague annulled the Awards, concluding the arbitral tribunal lacked jurisdiction because Russia never accepted the ECT arbitration provision; Russia notified this U.S. court of that decision and supplemented its motions to dismiss on FSIA jurisdiction and to deny confirmation under the New York Convention.
- The Shareholders moved to stay the U.S. confirmation proceeding pending their appeal of the Dutch annulment to the Court of Appeal of The Hague; Russia opposed, arguing the U.S. court must decide its subject-matter jurisdiction first and that a stay is unwarranted.
- The core legal tension: whether a U.S. district court may exercise its inherent docket-control power to stay proceedings before resolving FSIA-based jurisdictional challenges, and whether comity and New York Convention principles favor deferring to ongoing set-aside proceedings in the arbitral seat.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether court may stay proceedings before deciding subject-matter jurisdiction (FSIA) | Stay is within court’s inherent docket-control power and may be granted as a nonmerits matter | Court must resolve jurisdictional gateway (FSIA) before taking any procedural step | Court may grant a stay prior to resolving jurisdiction where the action is a nonmerits docket-management decision (Sinochem framework) |
| Whether a stay is warranted pending Dutch appeal of annulment | Dutch appeal likely to change/narrow U.S. issues; set-aside at seat undermines U.S. confirmation; efficiency & comity favor stay | Dutch proceedings irrelevant to U.S. de novo jurisdictional review; staying wastes time and confers legitimacy on enforcement efforts | Stay warranted: Dutch annulment and potential appellate reversal impact U.S. jurisdiction/confirmation; balance favors stay |
| Degree of deference to Dutch court findings on existence of arbitration agreement | Dutch findings are persuasive and outcome may be dispositive; avoiding duplicative litigation is sensible | U.S. court must review existence of arbitration agreement under U.S. law and cannot simply defer | Court will consider Dutch reasoning but may need to assess issues itself if appeal resolves differently; stay avoids premature rulings |
| Scope/duration of stay and reporting requirements | Stay until Dutch Court of Appeal resolves appeal; periodic status reports | Opposed or wanted no stay | Court stayed case pending appeal in Dutch Court of Appeal through Jan 21, 2019 (subject to earlier conclusion), with joint status reports every six months |
Key Cases Cited
- Landis v. North American Co., 299 U.S. 248 (Sup. Ct.) (district courts have inherent power to stay proceedings for docket control)
- Sinochem International Co. v. Malaysia International Shipping Corp., 549 U.S. 422 (Sup. Ct.) (courts may defer jurisdictional rulings to decide threshold nonmerits issues)
- TermoRio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928 (D.C. Cir.) (U.S. courts should not enforce awards lawfully nullified at their seat absent extraordinary circumstances)
- Phoenix Consulting, Inc. v. Republic of Angola, 216 F.3d 36 (D.C. Cir.) (factual FSIA jurisdiction disputes must be resolved early; court cannot assume plaintiff’s jurisdictional facts)
- Belize Soc. Dev. Ltd. v. Government of Belize, 668 F.3d 724 (D.C. Cir.) (stay of indefinite duration is an abuse; courts must provide status updates and limits)
- Europcar Italia S.p.A. v. Maiellano Tours, Inc., 156 F.3d 310 (2d Cir.) (factors for staying enforcement pending related foreign proceedings under New York Convention)
- Chevron Corp. v. Republic of Ecuador, 795 F.3d 200 (D.C. Cir.) (analysis of arbitration-agreement existence for FSIA/New York Convention purposes)
- Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 500 F.3d 111 (2d Cir.) (secondary-jurisdiction courts may refuse enforcement when award was set aside by competent authority at its seat)