Turan Petroleum Inc. v. Ministry of Oil and Gas of KazakhstanTuran Petroleum Inc. v. Ministry of Oil and Gas of Kazakhstan
MEMORANDUM OPINION
The plaintiffs, Turan Petroleum, Inc. (a Delaware corporation), Energyfund, Inc., and Trustees for Trek Resources, Inc. (collectively, the “plaintiffs“), bring this civil action seeking compensatory and punitive damages against the Ministry of Oil and Gas of Kazakhstan (the “Ministry“) and Does from 1 to 100,1 pursuant to the Foreign Sovereign Immunities Act
(“FSIA“),
Conference (“Int. Pl.‘s Req. for Hr‘g“), ECF No. 141.3 Upon consideration of the parties’ submissions,4
of Turan Nevada‘s motion to dismiss and the plaintiffs’ first motion to file a supplemental complaint, the plaintiffs’ request for judicial notice, and Turan Nevada‘s request for a hearing.5
The following factual allegations are taken from the plaintiffs’ Complaint and are accepted as true for the purposes of resolving Turan Nevada‘s motion to dismiss as required by
After gaining independence in 1992, the Republic of Kazakhstan (“Kazakhstan“) sought investments from foreign sources into its economy. See Compl. ¶ 13. As part of this endeavor, Kazakhstan offered “western investors concessions for exploration of oil and gas reserves,” which entitled investors “to explore the subsurface reserves[] [and] to produce . . . and [ ]export the oil and gas products extracted within the cоncession territories.” Id. ¶ 16. “In the course of that promotional campaign to attract western investments, the Ministry made various public offers and announced biddings for those oil and gas concessions.” Id. ¶ 18. At issue in this case is the Ministry‘s repudiation of two agreements, which the parties refer to as the Aral and Arys concessions. See id. ¶ 23.
In 2001, the Ministry solicited bids “for the exploration and development of the oil and gas resources” located in the Kyzlorda and Shymkent regions in Kazakhstan. Id. ¶ 44; see also id. ¶ 29. The Aral concession agreement was consummated with Ai Dan LLC (“Ai Dan“), a Kazakh entity, on June 29, 2002. See id. ¶ 31. Later that year, the agreement was amended to transfer the rights granted under the concession to Kok Aral Munai LLC (“KAM“), a subsidiary
of Ai Dan. See id. ¶¶ 32-33. In 2003, the “Ministry concluded the initial agreement on the Arys [c]oncession with a Kazakh entity[,] Aral Petroleum LLC.” Id. ¶ 48.
On February 18, 2005, “the Ministry issued an Order, by which it suspended the Aral [c]oncession for one month, claiming a non-performance by KAM.” Id. ¶ 37. Thereafter, on July 5, 2005, “the Ministry issued [ ] Order No. 979, by which it terminated the June 2002 agreement on the Aral [c]oncession altogether.” Id. ¶ 38. In September 2010, “the Ministry made a unilateral decision to terminate the Arys [c]oncession.” Id. ¶ 75.
On December 9, 2010, the plaintiffs instituted this civil action. See id. at 1. On March 30, 2011, Turan Nevada filed its motion to intervene, see generally Int. Pl.‘s Mot., which, as noted earlier, the Court “provisionally [granted nunc pro tunc] for the sole purpose of allowing it to file a motion to dismiss.” Order at 1 (Aug. 15, 2011), ECF No. 36 (emphasis in original). On August 8, 2011, Turan Nevada filed its motion to dismiss. See generally Int. Pl.‘s Mot. Thereafter, on November 4, 2011, the plaintiffs requested leave to file a supplemental complaint, see Pls.’ 1st Mot. to Supp. Compl. at 1, and on June 12, 2015, the plaintiffs filed their second motion to amend and supplement their complaint, see Pls.’ 2d Mot. to Am. and Supp. Compl. at 1. These motions are the subjects of this Memorandum Opinion.
II. STANDARDS OF REVIEW
A. Motion to Dismiss for Laсk of Subject-Matter Jurisdiction
“Federal [district] courts are courts of limited jurisdiction,” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994), and “[a] motion for dismissal under [Federal Rule of Civil Procedure] 12(b)(1) ‘presents a threshold challenge to the court‘s jurisdiction,‘” Morrow v. United States, 723 F. Supp. 2d 71, 75 (D.D.C. 2010) (Walton, J.) (quoting Haase v. Sessions, 835 F.2d 902, 906 (D.C. Cir. 1987)). Thus, “the Court is obligated to determine whether it has
subject-matter jurisdiction
In deciding a motion to dismiss based upon lack of subject-matter jurisdiction, “the [C]ourt need not limit itself to the allegations of the complaint.” Grand Lodge of the Fraternal Order of Police v. Ashcroft, 185 F. Supp. 2d 9, 14 (D.D.C. 2001). Rather, the “[C]ourt may consider such materials outside the pleadings as it deems appropriate to resolve the question [of] whether it has jurisdiction to hear the case.” Scolaro v. D.C. Bd. of Elections and Ethics, 104 F. Supp. 2d 18, 22 (D.D.C. 2000); see also Jerome Stevens Pharms., Inc. v. FDA, 402 F.3d 1249, 1253 (D.C. Cir. 2005). Additionally, the Court must “assume the truth of all material factual allegations in the complaint and ‘construe the complaint libеrally, granting [a] plaintiff the benefit of all inferences that can be derived from the facts alleged.‘” Am. Nat‘l Ins. Co. v. Fed. Deposit Ins. Corp, 642 F.3d 1137, 1139 (D.C. Cir. 2011) (alteration in original) (quoting Thomas v. Principi, 394 F.3d 970, 972 (D.C. Cir. 2005)). However, a “[p]laintiff‘s factual allegations in the complaint . . . will bear closer scrutiny in resolving a
B. Motion to Amend Pleadings
Under
repeated failure to cure deficiencies, or futility.” Richardson v. United States, 193 F.3d 545, 548-49 (D.C. Cir. 1999) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)). The rationale for this perspective is that “[i]f the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, [it] ought to be afforded an opportunity to test [its] claim on the merits.” Foman, 371 U.S. at 182. Nevertheless, the “[C]ourt may prоperly deny a motion to amend if the amended pleading would not survive a motion to dismiss,” i.e., if it is futile to permit the proposed amendment. In re Interbank Funding Corp. Sec. Litig., 629 F.3d 213, 218 (D.C. Cir. 2010); see also James Madison Ltd. v. Ludwig, 82 F.3d 1085, 1099 (D.C. Cir. 1996) (“Courts may deny a motion to amend a complaint as futile . . . if the proposed claim would not survive a motion to dismiss.“).
III. ANALYSIS
Turan Nevada argues that this case must be dismissed for lack of subject-matter jurisdiction because “as an agency of a foreign sovereign, the “[M]inistry is immune from suit under the . . . []FSIA[],” and that “allegations of [the p]laintiffs’ Complaint are insufficient . . . to establish that any of the exceptions to immunity under the FSIA applies.” Int. Pl.‘s Mot. at 2 (emphasis removed).6 Turan Nevada also
A. The FSIA
Under the FSIA, a foreign state, its political subdivisions, agencies, and instrumentalities are presumed to be immune from the jurisdiction of the United States courts. See TMR Energy Ltd. v. State Prop. Fund of Ukr., 411 F.3d 296, 299 (D.C. Cir. 2005) (citing Saudi Arabia v. Nelson, 507 U.S. 349, 355 (1993)); see also
exception, see id. The Court will address in turn each of the statutory exceptions to jurisdictional immunity of a foreign state asserted by the plaintiffs.
1. The Waiver Exception
The plaintiffs allege that this Court has subject-matter jurisdiction because the Ministry waived its sovereign immunity. See id. Specifically, the plaintiffs assert
Section 1605(a)(1) of the FSIA provides that “[a] foreign state shall not be immune from the jurisdiction of United States courts in any case . . . in which the foreign state has waived its immunity either explicitly or by implication.”
Implied waivers are also “construed narrowly and require[] clear evidence of the foreign sovereign‘s intention to dispense with its immunity.” Id. (citation omitted) (citing Creighton Ltd. v. Gov‘t of the State of Qatar, 181 F.3d 118, 122 (D.C. Cir. 1999)). In fact, this Circuit has “found an implicit waiver of sovereign immunity in only three situations.” Gutch v. Federal Republic of Germany, 255 F. App‘x 524, 525 (D.C. Cir. 2007) (citing World Wide Minerals, 296 F.3d at 1161 n.11); see Foremost-McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 444 (D.C. Cir. 1990) (“The legislative history of [the] FSIA gives three examples of circumstances in which courts have found implied waivers: (1) a foreign state has agreed to arbitration in another country; (2) a foreign state has agreed that the law of a particular country governs a
contract; or (3) a foreign state has filed a responsive pleading in an action withоut raising the defense of sovereign immunity.“). Specifically, courts have found that a foreign sovereign has implicitly waived the defense of immunity if the sovereign has (1) “filed a responsive pleading without raising the defense of sovereign immunity,” World Wide Minerals, 296 F.3d at 1161 n.11; (2) “agreed to arbitrate,” id.; or (3) agreed “to adopt a particular choice of law,” id. These examples “demonstrate that the theory of implied waiver contains an intentionality requirement,” Odhiambo v. Republic of Kenya, 930 F. Supp. 2d 17, 24 (D.D.C. 2013), and that an implied waiver “in particular ‘depends upon the foreign government‘s having at some point indicated its amenability to suit,‘” Strange v. Islamic Republic of Iran, 320 F. Supp. 3d 92, 98 (D.D.C. 2018) (quoting Princz v. Federal Republic of Germany, 26 F.3d 1166, 1174 (D.C. Cir. 1994)).
In this case, the plaintiffs’ allegations fail to establish that the Ministry expressly or implicitly consented to waiving its immunity. “[P]romot[ing] the oil and gas concessions on the international markets and agree[ing] to the participation of . . . American corporations as parents to the local entities holding the rights under the concessions,” Compl. ¶ 80, and “register[ing] the American parent entity” as the beneficial holder of the rights under a concession, id. ¶ 81, do not amount to an explicit waiver of immunity because it cannot be said that these actions “clearly and unambiguously” express the Ministry‘s intent to waive its immunity, accord Gutch, 255 F. App‘x at 525 (holding that “Germany‘s unconditional surrender [at the end of World War II] made no mention of waiver of German sovereign immunity in the courts of the United States“). But see World Wide Minerals, 296 F.3d at 1162 & n.13 (finding that “[t]here is no question that Kazakhstan clearly indicated its intent to waive its immunity” in two of its agreements, which stated that Kazakhstan “hereby irrevocably waives . . . immunity for itself” (second alteration in original)).
Moreover, even if these actions were construed as an implied waiver, the Court finds that the Ministry did not implicitly waive its immunity. First, on the record in this case, the Court finds that an implied waiver based on a foreign sovereign‘s filing of a responsive pleading without contesting jurisdiction by asserting its sovereign immunity is inapplicable in this case. The Ministry—or any other entity on behalf of Kazakhstan—has not made an appearance in this case or filed any pleading in response to the plaintiffs’ claims. Therefore, Kazakhstan has not made the requisite “‘conscious decision to take part in the litigation.‘” Ashraf-Hassan, 40 F. Supp. 3d at 101 (quoting Foremost-McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 444 (D.C. Cir. 1990)). Second, the Ministry‘s actions did not amount to an implicit waiver, as none of the Ministry‘s actions, see Compl. ¶¶ 80, 81, fall within the other two examples this Circuit has recognized as amounting to an implied waiver of sovereign immunity, cf. Foremost-McKesson, 905 F.2d at 444.
Notably, the plaintiffs do not claim that Kazakhstan waived its sovereign immunity—either explicitly or implicitly—in any treaty, legislation, or contract entered into by Kazakhstan. Even if the plaintiffs sought to rely on (1) the Bilateral Investment Treaty, see Compl. ¶ 14; (2) the Convention on the Settlement of Investment Disputes Between States and Nationals
As an initial matter, the Court notes that the plaintiffs have not produced and the Court has been unable to locate through independent research the Act on Use of Subsurface Resources or the Aral concession agreement, and as the party bearing the burden of production, the plaintiffs have failed to carry their burden of showing how either confers subject-matter jurisdiction on this Court. Additionally, with respect to the Bilateral Investment Treaty, as another member of this Court has held, the “Treaty‘s terms do not support a wаiver” of Kazakhstan‘s sovereign immunity.10 S.K. Innovation, 854 F. Supp. 2d at 114. Moreover, the Court has been unable to locate language in the Foreign Investments Act or the Arys concession agreement that could amount to either an express or implied waiver of immunity to suit in United States courts. However, the Court notes that even if the Ministry had impliedly waived its sovereign immunity in the Arys concession agreement through a choice of law or arbitration provision, “a contractual waiver of immunity does not apply to third parties who are not privy to the contract,” Heroth v. Kingdom of Saudi Arabia, 565 F. Supp. 2d 59, 65 (D.D.C. 2008), and because, as Turan Nevada correctly notes, the “[p]laintiffs do not allege that they are in privity to the concession agreements, any potential waiver of immunity arising from [] those agreements would not apply to them,” Int. Pl.‘s Mot. at 7.
Moreover, the mere fact that Kazakhstan is a signatory to the Convention on Settlement of Investmеnt Disputes does not permit the plaintiffs’ suit. Accord Odhiambo v. Republic of Kenya,
764 F.3d 31, 35 (D.C. Cir. 2014) (“Indeed, the Supreme Court has explained that it cannot ‘see how a foreign state can waive its immunity under § 1605(a)(1) by signing an international agreement that contains no mention of a waiver of immunity to suit in United States courts.‘” (quoting Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 442 (1989))). And, although the
Argеntine Republic, 893 F. Supp. 2d 747, 751 (E.D. Va. 2012) (“[C]ourts recognized that a foreign state‘s entering into the ICSID Convention waived foreign sovereign immunity [with respect to the enforcement of any arbitration award entered pursuant to the Convention.“).11 However, because the plaintiffs in this case are not seeking to enforce an arbitration award issued pursuant to the Convention on Settlement of Investment Disputes, the Court cannot conclude that Kazakhstan has waived its immunity under the implied waiver exception of the FSIA by merely being a signatory to the Convention on Settlement of Investment Disputes.
For all of these reasons, the Court finds that the plaintiffs have not shown that the Ministry explicitly or implicitly waived its sovereign immunity pursuant to § 1605(a)(1) of the FSIA.
2. The Commercial Activity Exception
The plaintiffs also allege that this Court has subject-matter jurisdiction over their
rather is “a quintessential sovereign act,” id., the plaintiffs’ allegations do not demonstrate that the Ministry engaged in commercial activity, which is necessary for the exception to apply, see id. The Court agrees with Turan Nevada that the commercial activity exception does not apply.
Section 1605(a)(2) of the FSIA, otherwise referred to as the commercial activity exception, states that
[a] foreign state shall not be immune from thе jurisdiction of courts of the United States . . . in which the action is based . . . upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States.
Here, the plaintiffs fail to allege sufficient facts showing that the Ministry engaged in any commercial activity. The plaintiffs argue that the Ministry “ha[s] undertaken very substantial commercial activities in the [United States].” Pl.s’ Opp‘n at 9.12 Specifically, the plaintiffs claim that “the Vice Minister of Oil and Gas was the keynote speaker at [a] Kazakhstan-[United States] Investment Forum, held in New York,” id. at 9-10, and that this presentation “shows that [the Ministry] has been actively seeking investments
contract whereby a foreign state grants a private party a license to exploit the state‘s natural resources is not a commercial activity [under the FSIA], since natural resources, to the extent they are ‘affected with the public interest,’ are goods in which only the sovereign may deal“); MOL, Inc. v. Peoples Republic of Bangladesh, 736 F.2d 1326, 1329 (9th Cir. 1984) (finding that the commercial activity exception did not apply because “Bangladesh was terminating an agreement that only a sovereign could have made” given that the agreement “concerned Bangladesh‘s right to regulate imports and exports, a sovereign prerogative” and its “right to regulate its natural resources, also a uniquely sovereign function‘“). Therefore, the “commercial activity exception has no applicability [in this case because] the alleged commercial activity is unnecessary to the plaintiff[s‘] claim[s].” Kirkham v. Societe Air Fr., 429 F.3d 288, 292 (D.C. Cir. 2005) (citing Nelson, 507 U.S. at 358); Millen Indus., 855 F.2d at 885 (“Even if a transaction is partly commercial, jurisdiction will not obtain if the cause of action is based on a sovereign activity.“). Instead, because “the [plaintiffs‘] causes of action are based on promises, breaches of promises, and other allegedly actionable conduct involving” Kazakhstan‘s oil and gas resources, “these would plainly be sovereign aspects of the transaction over which [this Court] lack[s] jurisdiction.” Millen Indus., 855 F.2d at 885. Thus, the Court finds that the plaintiffs have not pleaded sufficient allegations showing that the commercial activity exception abrogates the Ministry‘s immunity in this case.
3. The Expropriation Exception
The plaintiffs also claim that this Court has subjeсt-matter jurisdiction pursuant to the expropriation exception of the FSIA. See Compl. ¶¶ 6, 83. They argue that “[a]t the center of the present case, there are the allegations of confiscation of the very substantial assets related to the oil exploration, which did cause considerable damages in the [United States].” Pls.’ Opp‘n at 7. Turan Nevada, on the other hand, argues that “like the commercial activity exception, the
expropriation exception requires that the foreign state engage in a commercial activity,” Int. Pl.‘s Mot. at 10, and “the Ministry does not engage in a commercial activity within the meaning of the FSIA when it grants or terminates concessions to explore for, develop[,] and produce oil and gas within the territorial boundaries of Kazakhstan,” id. The Court
Under the expropriation exception of the FSIA,
[a] foreign state shall not be immune from the jurisdiction of courts in the United States, . . . in any case . . . in which rights in property taken in violation of international law are in issue and that property or any property exchanged for such property is present in the United States in connection with a commercial activity carried on in the United States by the foreign state; or that property or any property exchanged for such property is owned or operated by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial activity in the United States.
Nemariam, 491 F.3d at 475 (emphasis added) (internal quotation marks omitted) (quoting Peterson, 332 F. Supp. 2d at 197-98).
Here, the plaintiffs fail to address the jurisdictional nexus requirement of the expropriation exception, see Pl.s’ Opp‘n at 8-9, but rather merely contend that the Court “must also find the existence of a jurisdictional nexus between the expropriation and the United States” without offering any argument in support of their position, id. The plaintiffs instead focus on whether the taking violated international law, see id. at 7-8, and even contend that Turan Nevada “fails to show how the application of the ‘takings’ exception to the FSIA does not apply here, since the ‘taking’ deprived an investor of property without compensation,” id. at 9. However, the Court need not address whether the taking violated international law because, as discussed supra, see Part III.A.2, the plaintiffs have failed to establish the exception‘s third requirement—that the Ministry engaged in commercial activity. Accordingly, the plaintiffs have not sufficiently pleaded that the Ministry engaged in a commercial activity, and therefore, the Court finds that the plaintiffs have failed to show that the expropriation exception applies.
Because the plaintiffs have failed to establish that any of the claimed exceptions of the FSIA apply, the Court concludes that it lacks subject-matter jurisdiction over the plaintiffs’ claims against the Ministry.
B. Motions to Amend
The plaintiffs claim that the “[p]roposed [a]mend[ment] and [s]upplemental
(Supplemental Complaint for Damages) ¶¶ 35-46, 52-64, ECF No. 55-1 (“Supp. Compl.“); Pls.’ 2d Mot. to Am. and Supp. Compl., Ex. 1 (Amended and Supplemental Complaint) ¶¶ 118-136, 164-170, 180-184, ECF No. 108-1 (“Am. and Supp. Compl.“). However, because the plaintiffs’ proposed pleadings do not allege any additional bases upon which the Court could exercise subject-matter jurisdiction over the plaintiffs’ claims against the Ministry, including the claims asserted in their proposed amendment and supplemental pleading, the Court must deny the plaintiffs’ motions to amend the Complaint as futile.
As in support of their assertion that “RICO [c]laims [d]eprive [f]oreign [s]overeigns [o]ut of FSIA [d]efenses,” Pls.’ Supp. Resp. at 10, the plaintiffs cite to a number of cases to no avail, see id. at 11 (citing Southway v. Cent. Bank of Nigeria, 198 F.3d 1210, 1214 (10th Cir. 1999); Republic of the Philippines v. Marcos, 862 F.2d 1355, 1358 (9th Cir. 1988); Chalabi v. Hashemite Kingdom of Jordan, 503 F. Supp. 2d 267, 273 (D.D.C. 2007), aff‘d, 543 F.3d 725 (D.C. Cir. 2008); Rux v. Republic of Sudan, 495 F. Supp. 2d 541, 554 (E.D. Va. 2007); Am. Bonded Warehouse Corp. v. Compagnie Nationale Air Fr., 653 F. Supp. 861, 863 (N.D. Ill. 1987)). The courts, in some of these cases, allowed the RICO claims to proceed only after finding that an exception to the FSIA applied. See Southway, 198 F.3d at 1218 (“Accordingly, we hold that the FSIA confers subject-matter jurisdiction upon the district court over civil RICO claims against foreign states, their agencies, and instrumentalities, provided that the commercial activity exception, or another exception contained in §§ 1605–07 of the FSIA[,] applies.“); Chalabi, 503 F. Supp. 2d at 273 (“Thus, аccepting the factual allegations as true, the complaint asserts facts sufficient to confer subject-matter and personal jurisdiction over the [d]efendants under the commercial activity exception to the Act.“); Am. Bonded Warehouse Corp., 653 F. Supp. at 864 (“In the instant case, the complaint alleges that defendants implemented a scheme
to eliminate its competition in the freight forwarding industry in violation of RICO. Such allegations clearly set forth a cause of action based on commercial activity conducted by the defendants. Therefore, defendants are not entitled to jurisdictional immunity under the FSIA.“). And, the remaining cases cited by the plaintiffs are inapposite. See Rux, 495 F. Supp. 2d at 554 (finding that the court had subject-matter jurisdiction over the plaintiffs’ claims pursuant to the terrorist exception of § 1605(a)(7) of the FSIA in case where no RICO claims were pleaded); Marcos, 862 F.2d at 1358 (finding that the complaint “sufficiently allege[d] a RICO offense” against the former president of the Republic of the Philippines, a situation where the FSIA did not apply).
Here, as already concluded, the plaintiffs have not alleged additional facts from which the Court could find that the Ministry engaged in a commercial activity or that another FSIA exception otherwise applies. In fact, the plaintiffs’ additional claims, including their RICO claim, arises out of an “extension and reallocation of the Arys [c]oncession,” Supp. Compl. ¶ 45; see id. ¶ 38, 55; see also Am. and Supp. Compl. ¶¶ 121, 123, 167, 183, which this Court has already concluded, in Part III.A.2. of this Memorandum Opinion, supra, are “sovereign prerogative[s],” Millen Indus., 855 F.2d at 885. Accordingly, because the plaintiffs’ proposed pleadings do not cure
IV. CONCLUSION
For the foregoing reasons, the Court concludes that none of the claimed exceptions of the Foreign Sovereign Immunities Act apply in this case. The Court further concludes that permitting the plaintiffs to amend their Complaint would be futile because the plaintiffs’ proposed pleadings do not cure the jurisdictional deficiencies. Accordingly, the Court must (1) grant Turan Nevada‘s motion to dismiss the Complaint for lack of subject-matter jurisdiction, (2) deny the plaintiffs’ first motion to file a supplemental complaint and the plaintiffs’ second motion to amend and supplement the Complaint, (3) deny as moot the plaintiffs’ motion to consolidate the Court‘s cоnsideration of Turan Nevada‘s motion to dismiss and the plaintiffs’ first motion to file a supplemental complaint, the plaintiffs’ request for judicial notice, and Turan Nevada‘s request for a hearing, and (4) dismiss this case.
SO ORDERED this 26th day of April, 2019.13
REGGIE B. WALTON
United States District Judge