LLC SPC STILEKS, APPELLEE v. THE REPUBLIC OF MOLDOVA, APPELLANT
No. 19-7106
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Decided January 15, 2021
Argued October 23, 2020
Consolidated with 19-7142
George C. Grasso argued the cause and filed the briefs for appellant.
Gene M. Burd argued the cause and filed the brief for appellee.
Before: HENDERSON and ROGERS, Circuit Judges, and GINSBURG, Senior Circuit Judge.
KAREN LECRAFT HENDERSON, Circuit Judge: This appeal arises from a long-running dispute between the Republic of Moldova and a Ukrainian energy provider called Energoalliance. For the better part of 1999 and 2000, Energoalliance sold electricity to a Moldovan state-owned utility. After the utility failed to pay its bill in full, Energoalliance alleged that Moldova violated its obligations under the Energy Charter Treaty. An arbitration panel agreed and a company called Stileks—which company, through a series of corporate transactions, owns the right to Energoalliance‘s arbitration award—now attempts to recover. Stileks and Moldova are proceeding against each other in multiple forums. In this court, the main issue is whether the district court correctly confirmed the arbitration award which, with interest, now exceeds $58 million. We uphold confirmation of the award but remand for the district court to consider whether Moldova had a settled expectation that an adverse judgment would be denominated in Moldovan lei rather than U.S. dollars.
I. Background
Ukraine and Moldova have highly interconnected electrical systems—a legacy of the years when both states were subject to direction from Moscow. When the Soviet Union collapsed, contracts and treaties replaced central planning. An example is the Energy Charter Treaty (ECT), a multilateral agreement signed by governments on both sides of the old Iron Curtain, including Ukraine and Moldova. See
Energoalliance sought recourse in Moldovan courts to collect this debt. These decade-long proceedings were unsuccessful, due in significant part to the Moldovan government‘s actions. To give one example, the government transferred most of Moldtranselectro‘s assets to several new state-owned entities, leaving the old utility with financial obligations and few tangible assets. Energoalliance claimed Moldova‘s actions violated the ECT. Unable to reach an amicable resolution, Energoalliance initiated arbitration proceedings under the rules of the United Nations Commission on International Trade Law (UNCITRAL) pursuant to Article 26 of the ECT.
In the summer of 2012, a three-day arbitral proceeding took place in Paris. On October 23 of the following year, the tribunal issued an award in favor of Energoalliance in the amount of some 593 million Moldovan lei in damages and interest plus 540,000 U.S. dollars in attorneys’ fees and costs. Energoalliance soon began enforcement proceedings in multiple jurisdictions, including the United States, where it filed a petition to confirm the arbitral award pursuant to
But Moldova was not ready to concede. In its view, the tribunal lacked jurisdiction to arbitrate the dispute because the byzantine arrangement that Energoalliance struck with Derimen to avoid Ukrainian currеncy controls was not an “investment” within the meaning of the ECT. Moldova made this and other arguments to the Paris Court of Appeal, seeking to annul the award. The Paris court agreed with Moldova and annulled the arbitration award on Moldova‘s jurisdictional theory. Energoalliance appealed to France‘s highest civil court, the Court of Cassation. In March 2018, that court vacated the Paris court‘s judgment, reinstated the award and remanded Moldova‘s annulment application to the Paris court.
Back to the United States. After Moldova filed its annulment application with the Paris court, it submitted a letter to the U.S. District Court for the District of Columbia, requesting a stay pending resolution of its application. Before the district court could rule, the Paris court had ruled in Moldova‘s favor. The tables now turned, a company called Komstroy—by this point the successor-in-interest to Energoalliance—consented to Moldova‘s request for stay pending Komstroy‘s appeal to the Court of Cassation. The district court entered the stay. But in March 2018, after the Court of Cassation reinstated the award, Energoalliance moved to lift the stay and confirm the award. Moldova opposed lifting the stay until the Paris court could resolve its remaining challenges to the award. The district court sided with Energoalliance, lifting the stay. See LLC Komstroy v. Republic of Moldova, No. 14-cv-01921, 2018 WL 5993437
Once the substantive confirmation proceedings were underway, Moldova argued for dismissal on grounds of sovereign immunity, forum non conveniens and various defenses under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), June 10, 1958, 21 U.S.T. 2517. The district court rejected each argument and confirmed the arbitral award. See LLC Komstroy v. Republic of Moldova, No. 14-cv-01921, 2019 WL 3997385, at *14 (D.D.C. Aug. 23, 2019). It also awarded Komstroy prejudgment interest and ordered that the resulting judgment be converted from Moldovan lei into U.S. dollars. Pursuant to the district court‘s instructions, Komstroy filed a proposed order of judgment, calculating a total judgment amount. Rather than responding to Komstroy‘s calculations, Moldova filed a notice of appeal and a response, arguing that the appeal divested the district court of jurisdiction. The district court confirmed its jurisdiction and entered a judgment in favor of Komstroy. See LLC Komstroy v. Republic of Moldova, No. 14-cv-01921, 2019 WL 4860826, at *1 (D.D.C. Oct. 2, 2019). Moldova now appeals the district court‘s stay-lifting order, the confirmation of the arbitral award and the final judgment. The judgment is defended by Stileks, Komstroy‘s assignee in bankruptcy.
II. Analysis
This apрeal presents four major issues. First, Moldova claims that the district court lacked jurisdiction under the Foreign Sovereign Immunities Act. Second, even if the district court had jurisdiction, Moldova says that it was error to confirm the arbitral award during the pendency of certain foreign proceedings. We reject both of these arguments and
In 1976, the Congress enacted the Foreign Sovereign Immunities Act (FSIA). Under the FSIA, foreign governments are generally immune from the jurisdiction of federal and state courts. See
The district court determined that it had jurisdiction under the so-called “arbitration exception.” See
Under the FSIA‘s arbitration exception, a foreign state is not immune from jurisdiction of U.S. courts in any case:
in which the action is brought . . . to confirm an award made pursuant to such an agreement to arbitrate, if . . . the agreement or award is or may be governed by a treaty or оther international agreement in force for the United States calling for the recognition and enforcement of arbitral awards.
Here, only one jurisdictional fact is in dispute: whether Energoalliance‘s award was made pursuant to the ECT.3 Stileks has produced copies of the ECT, the notices of
Moldova counters that the ECT did not give the arbitral tribunal jurisdiction of the dispute and thus the resulting award was not “made pursuant to such an agreement to arbitrate.”
If Moldova is correct, it might have a defense to confirmation under the New York Convention, which provides for non-recognition of an award if “[t]he award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration.” See New York Convention, art. V(1)(c). We have held, however, that the arbitrability of a dispute is not a jurisdictional question under the FSIA. See Chevron, 795 F.3d at 205-06. Moldova‘s brief uses Article V(1)(c) to bolster its claim of sovereign immunity, and, in so doing, it “conflates the jurisdictional standard of the FSIA with the standard for review under the New York Convention.” Id. at 205. The FSIA‘s arbitration exception therefore applies and we reject Moldova‘s immunity claim. We construe Moldova‘s arbitrability argument as a defense under Article V(1)(c) of the Convention.
Moldova agreed to assign arbitrability determinations to the tribunal. Under Article 26 of the ECT, all parties agree to arbitration under UNCITRAL‘s rules. See ECT, art. 26(4)(b). Those rules state that the “arbitral tribunal shall have the power to rule on its own jurisdiction.” UNCITRAL Arbitration
The conjunction of Chevron and Henry Schein means that we must accept the arbitral tribunal‘s determination that Energoalliance‘s claim fell within the ECT. It makes no difference that Henry Schein dealt with a domestic, commercial contract and the ECT is an international treaty. “[A] treaty is a contract, though between nations. Its interpretation normally is, like a contract‘s interpretation, a matter of determining the parties’ intent.” BG Group, 572 U.S. at 37.
Moldova‘s only counterargument is that “the ECT is not applicable to the dispute.” In other words, the ECT‘s incorporation of the UNCITRAL rules is not controlling because Stileks’ claim does not fall within the ECT. This is unadorned question-begging. Whether the ECT applies to the dispute and whether the tribunal had jurisdiction under the ECT are different ways of framing the same question. The tribunal‘s jurisdictional grant derived from Moldova‘s signature on the treaty itself, and—under our law—it is up to the tribunal to determine what the treaty means. We thus have no authority to delve into the merits of Moldova‘s argument.
Admittedly, this analysis sits uncomfortably alongside the general principle that legal issues relating to defenses under the New York Convention are reviewed de novo. See TMR Energy Ltd. v. State Prop. Fund of Ukraine, 411 F.3d 296, 304 (D.C. Cir. 2005). Here, however, the question that receives de novo review is whether the arbitrability decision was delegated to the arbitrators. It was. As a consequence, it is the only
B.
Under the New York Convention, a district court may, “if it considers it proper,” adjourn—that is, impose a stay of—confirmation proceedings if an application to vacate the award has been made in another jurisdiction. New York Convention, art. VI. In Europcar Italia, S.p.A. v. Maiellano Tours, Inc., 156 F.3d 310, 317-18 (2d Cir. 1998), the Second Circuit enumerated six factors that district courts should consider when making adjournment decisions. Applying the Europcar factors, the district court lifted the stay it entered in April 2016. Moldova argues that, given pendency of its case in the Paris Court of Appeal, this was error.
We have yet to pronounce the standard of review for a district court‘s grant or denial of a motion to stay confirmation proceedings under the New York Convention. That said, we agree with the Second Circuit that “in light of the permissive language of Article VI of the Convention and a district court‘s general discretion in managing its own caseload and suspense docket,” the appropriate standard of review is abuse of discretion. Id. at 316-17. Applying that standard, we affirm the district court‘s stay-lifting order.
We view the Europcar decision as the first federal appellаte opinion to subject the adjournment clause to a sustained analysis. Under Europcar, a district court deciding an adjournment motion under the New York Convention should consider:
the general objectives of arbitration—the expeditious resolution of disputes and the avoidance of protracted and expensive litigation; - the status of the foreign proceedings and the estimated time for those proceedings to be resolved;
- whether the award sought to be enforced will receive greater scrutiny in the foreign proceedings under a less deferential standard of review;
- the characteristics of the foreign proceedings including (i) whether they were brought to enforce an award (which would tend to weigh in favor of a stay) or to set the award aside (which would tend to weigh in favor of enforcement); (ii) whether they were initiated before the underlying enforcement proceeding so as to raise concerns of international comity; (iii) whether they were initiated by the party now seeking to enforce the award in federal court; and (iv) whether they were initiated under circumstances indicating an intent to hinder or delay resolution of the dispute;
- a balance of thе possible hardships to each of the parties. . . ; and
- any other circumstances that could tend to shift the balance in favor of or against adjournment.
Id. at 317-18. These factors are not all equally weighted. Because “the primary goal of the Convention is to facilitate the recognition and enforcement of arbitral awards,” the Second
We agree with the Europcar court that a district court would abuse its discretion if it failed to consider the first and second factors. We think these factors directly implicate the court‘s responsibility to “balance the Convention‘s policy favoring confirmation of arbitral awards against the principle of international comity embraced by the Convention.” Four Seasons Hotels & Resorts, B.V. v. Consorcio Barr S.A., 377 F.3d 1164, 1172 (11th Cir. 2004). Nevertheless, we doubt that a six-factor balancing test—enforced by appellate review—is consistent with the district court‘s “broad discretion to stay proceedings as an incident to its power to control its own docket.” Clinton v. Jones, 520 U.S. 681, 706 (1997). And the language of the New York Convention itself does nothing to alter this background understanding; indeed, it is difficult to conceive of a greater delegation of discretion than “if [the court] considers it proper.” New York Convention, art. VI.
We thus focus our attention on the district court‘s analysis of the first two factors. It was in the summer of 2010—more than 10 years ago—that Energoalliance handed Moldova a notice of arbitration. As the district court noted, this is “hardly an ‘expeditious resolution’ of the dispute.” LLC Komstroy,
In reply, Moldova simply asserts that it would be “premature” to lift the stay because of the “high probability” that the award will be overturned. The ipse dixit is insufficient; Moldova points to no evidence of a fair probability—much less a “high probability“—other than the fact of the remand itself. And even were we inclined to trust Moldova‘s prognostications, its failure to address the district court‘s concerns about further delay means that it has spoken to only one aspect of our inquiry. Moldova has plainly not met its burden to demonstrate that the district court abused its discretion.
C.
The United States Supreme Court has called payment of appropriate interest “a dictate of natural justice” necessary “to repair all the damages that accrue naturally” from the breach of an obligation. Curtis v. Innerarity, 6 How. 146, 154 (1848). Regarding a foreign arbitral award, there are three possible categories of interest: pre-award, prejudgment (i.e., after the arbitration award but before the award is converted into a U.S. judgment) and post-judgment. Here, Moldova challenges the district court‘s decision to grant Komstroy prejudgment interest. Applying the deferential abuse of discretion standard, see Bucheit v. Palestine Liberation Org., 388 F.3d 346, 351 (D.C. Cir. 2004), we affirm.
Moldova‘s primary argument is that the arbitral award itself provides full compensation so prejudgment interest is
The primary purpose of prejudgment interest is “to compensate the plaintiff for any delay in payment resulting from the litigation.” Oldham v. Korean Air Lines Co., 127 F.3d 43, 54 (D.C. Cir. 1997). It also “promotes settlement and deters any attempt to benefit unfairly from inevitable litigation delay.” Moore v. CapitalCare, Inc., 461 F.3d 1, 13 (D.C. Cir. 2006) (awarding prejudgment interest to ERISA plaintiffs). The second rationale is especially relevant in the arbitration context, where expeditious resolution is a central objective.
Other circuits have argued that a decision to award prejudgment interest “must be exercised in a manner consistent with the underlying arbitration award.” Ministry of Def. of the Islamic Republic of Iran v. Cubic Def. Sys., Inc., 665 F.3d 1091, 1103 (9th Cir. 2011); see also Waterside Ocean Nav. Co. v. Int‘l Nav. Ltd., 737 F.2d 150, 154 (2d Cir. 1984). Here, although the arbitral award was silent on prejudgment interest, the tribunal granted Energoalliance pre-award interest. It reasoned that “the income whiсh [Energoalliance] would have received if this amount had been used in its commercial activities is a part of [its] loss and is to be reimbursed by [Moldova].” We can think of no reason that this same reasoning should not apply to the award of prejudgment interest here.
Traditionally, U.S. courts render judgments in U.S. dollars. See Restatement (Third) of Foreign Relations Law § 823 cmt. B (1987). Indeed, this court once believed that U.S. dollar conversion was mandatory under the Coinage Act of 1792. See Int‘l Silk Guild v. Rogers, 262 F.2d 219, 224 (D.C. Cir. 1958) (“American courts are permitted to render judgments only in dollars.“), superseded by statute as recognized in Leidos, Inc. v. Hellenic Republic, 881 F.3d 213, 219 n.5 (D.C. Cir. 2018). Modern caselaw, however, has been more accepting of foreign currency-denominated awards, which are often desirable “when the commercial activity took place in that currency.” Amoco Cadiz, 954 F.2d at 1328; see also Restatement at § 823 cmt. B (“there is no impediment to issuance by a court in the United States of a judgment denominated in a foreign currency“).
Moldova claims that the district court abused its discretion by rendering the award in U.S. dollars. Energoalliance asked the arbitral tribunal for an award in Moldovan lei and later—after the lei had depreciated substantially—asked the district court for a dollar-dеnominated award. Had Energoalliance requested a dollar-denominated award from the beginning, Moldova might have been on notice and able to hedge against the risk of a depreciating lei. We think the district court should have considered the extent of Moldova‘s reliance on Energoalliance‘s legal representations.
Our conclusion finds support from our decision in Leidos. There, a defense contractor, Leidos, won confirmation of a foreign arbitration award against a foreign state, Greece, and thrice requested that the award be denominated in euros. See 881 F.3d at 219. But after a judgment was rendered in eurоs, Leidos successfully moved under Rule 59(e) to convert the
The district court declined to apply Leidos on the ground that the petitioner there did not request conversion until after the district court‘s judgment, whereas Komstroy requested conversion before judgment. This distinction is accurate, as far as it goes. A
But the underlying logic of Leidos is applicable. The fact that the petitioner requested an award in dollars after the judgment was important because it determined the procedural dеvice used to make the request and the standard by which that request was evaluated. Leidos did not, however, imbue judgment day with a metaphysical significance in which converting a judgment to U.S. dollars is proper if the request is made pre-judgment and improper if made post-judgment. The equitable consideration in Leidos was that the petitioner unfairly delayed his request, disrupting the settled expectations of the other party. Here, the district court should have
Energoallianсe took at least two such actions. First, as the arbitral tribunal made clear, Energoalliance requested an award in U.S. dollars and then changed its mind and requested the award in Moldovan lei:
Originally, the Claimant denominated its claim (both with regard to the principal debt and the interest) in US dollars. However later, it changed its demands in its Alternative Calculation Statement by denominating the amounts in [lei]. . . . As far as the Arbitration Court understands, the Claimant‘s argument is that any payments of Moldtranselectro to the Claimant would be made in lei (in case of monetary form of payments) therefore the most accurate measurement of the Claimant‘s loss would be denominated in lei.
Second, Energoalliance‘s November 2014 confirmation petition in district court denominated the bulk of requested relief in lei. Energoalliance‘s first request for a dollar-denominated award came in December 2018, more than five years after its first request for an award in lei and more than four years after its second such request.
We believe the district court wrongly focused on the most recent request for dollars, noting only that granting dollar conversion requests is “standard practice.” Allowing this standard practice to override Moldova‘s reliance interest lets an arbitration winner make a riskless bet on the foreign exchange market—always requesting the initial award in local currency and then, during the course of U.S. confirmation
As the district court recognized, the Moldovan lei had depreciated significantly since the arbitral award was issued on October 25, 2013. At the time of the arbitral award, the currency exchange rate of lei to dollars was 12.9207 lei to 1 dollar. As of the date of the district court‘s order, thе rate was 17.8856 lei to 1 dollar. Thus, the Moldovan lei depreciated nearly 30 per cent over the relevant period. But neither Stileks nor the district court explained why Moldova alone should bear the cost of currency depreciation. In sum, we conclude the district court inadequately accounted for the reliance interests Moldova may have reasonably developed based on Energoalliance‘s actions during arbitration.
For the foregoing reasons, we affirm the district court‘s November 13, 2018, stay-lifting order, as well as the portion of the August 23, 2019, order confirming the arbitral award and awarding prejudgment interest. However, the district court should have considered whether Moldova had a settled expectation that the award would be paid in Moldovan lei. Thus, we vacate the October 2, 2019, order entering judgment against Moldova in the amount of $58,591,058.50. On remand, the district court should evaluate Moldova‘s reliance interest, if any, that may have been created by Energoalliance‘s requests for a lei-denominated award. In light of our remand, we do not reach Moldova‘s argument regarding the district court‘s continuing jurisdiction vel non based on Moldova‘s appeal notice.
So ordered.