The history underlying this litigation has been recounted in this Court's previous decisions resolving two earlier motions to stay. See Hulley Enterprises Ltd. v. Russian Federation ("Hulley II"), 502 F. Supp. 3d 144, 148-152, (D.D.C. 2020); Hulley Enterprises Ltd. v. Russian Federation ("Hulley I"), 211 F. Supp. 3d 269, 272-276 (D.D.C. 2016). Only the factual and procedural developments relevant to resolving the Russian Federation's instant motion to stay are thus addressed here.
This case traces its origins to a decade-long arbitration in the Netherlands that the Shareholders initiated in November 2004 under the Energy Charter Treaty ("ECT"), "to which the Russian Federation was a signatory between December 1994 and October 2009." Hulley II, 502 F. Supp. 3d at 148.2 The Shareholders were the majority owners of Yukos Oil Company ("Yukos"), "a Russian ... company that became the nation's largest and first fully privatized oil company following the dissolution of the Soviet Union." Hulley I, 211 F. Supp. 3d at 272. At the arbitration, the Shareholders claimed that the Russian Federation violated the ECT through a series of adverse measures intended to "bankrupt Yukos, appropriate the company's assets, and silence the company's head, Mikhail Khodorkovsky," due to Khodorkovsky's support for political parties opposed to President Vladimir Putin and the company's proposed integration with Western oil interests. Hulley II, 502 F. Supp. 3d at 148. On July 18, 2014, following a three-week hearing, an Arbitral Tribunal issued three final awards determining that, by engaging in such adverse measures, "the Russian Federation had violated its obligations under the ECT, and [thus] owed the Shareholders $50,020,867,798 in damages, plus interest, $60,000,000 in attorneys' fees, and €4,240,000 in arbitration costs." Id.
Upon the Shareholders' request and over the Russian Federation's objection, this matter was first stayed in September 2016 pending the Shareholders' appeal of an April 2016 Dutch District Court ruling setting aside the awards. Id.4 That 2016 Stay Order paused proceedings "until January 21, 2019, or until resolution of proceedings in the Netherlands to set aside [the Awards], whichever date occurs earlier." Order (Sept. 30, 2016) ("2016 Stay Order"), ECF No. 153.
Ukraine may lead to the unavailability of Russian Federation assets in the United States, Resp't's Reply in Supp. Mot. to Stay ("Resp't's Reply"), at 5-6, ECF No. 208, the Court directed the Russian Federation to advise of any "material developments affecting arguments it previously presented regarding the propriety of a stay or prejudgment security in this case following the Russian Federation's invasion of Ukraine beginning on February 24, 2022," Min. Order (March 16, 2022). In response, the Russian Federation explained that its invasion of Ukraine is an "evolving situation provid[ing] yet another reason to stay these proceedings during the ongoing parallel set-aside litigation in Amsterdam and while steps are taken to locate available and acceptable substitute Counsel for the Russian Federation." Resp't's Status Report at 1, ECF No. 224. In any event, the Russian Federation represented that it is "not aware of any foreseeable risk of [Russian Federation] assets leaving the United States" as the result of sanctions or other economic measures flowing from the war. Id. at 2. The Shareholders disagree with these representations, stating that the "unprecedented sanctions" being imposed on the Russian Federation "almost daily" will make "[f]inding and executing on assets ... far more difficult," Pet'rs' Resp. to Status Report at 1-2, ECF No. 225, such that further delay in this litigation "would in effect reward the Russian Federation for invading Ukraine in violation of international law," id. at 2 (citing March 16, 2022 International Court of Justice ruling ordering the "Russian Federation to "suspend the military operations that it commenced on 24 February 2022 in the territory of Ukraine").6
As previously held, absent a ruling on the Russian Federation's jurisdictional defense, this Court is "not in a position to issue a stay pursuant to the New York Convention." Hulley II, 502 F. Supp. 3d at 153 (quoting Hulley I, 211 F. Supp. 2d at 286); see also CC/Devas (Mauritius) Ltd. v. Republic of India, No. 21-cv-106-RCL, 2022 WL 873620, at *4 (D.D.C. Mar. 24, 2022) ("Because the Court's own jurisdiction has yet to be established, the Court is not in a position to issue a stay under the Convention.") (citations omitted).7 In issuing the prior stays in this case, reliance was placed on the multi-factor assessment devised in Europcar Italia, S.p.A. v. Maiellano Tours, Inc., 156 F.3d 310, 317 (2d Cir. 1998), to inform a stay decision under the New York Convention since those guideposts are "widely-accepted in these particular circumstances to evaluate the appropriateness of a stay." Hulley II, 502 F. Supp. 3d at 153. These factors consider: "(1) the general objective of arbitration—the expeditious resolution of disputes and the avoidance of protracted and expensive litigation; (2) the status of the foreign proceedings and the estimated time for those proceedings to be resolved; (3) whether the award sought to be enforced will receive greater scrutiny in the foreign proceedings under a less deferential standard of review; (4) the characteristics of the foreign proceedings ... (5) a balance of the possible hardships to the parties ... ; and (6) any other circumstances that could tend to shift the balance in favor of or against adjournment." Europcar, 156 F.3d at 317-318.
The first factor—arbitration's aim of expeditious dispute resolution and avoidance of protracted and expensive litigation—firmly militates against entry of another stay. In the context of arbitral award enforcement, the Supreme Court has directed that assertions of sovereign immunity be decided "as near to the outset of the case as is reasonably possible." Process & Indus. Dev. (P&ID) v. Fed. Republic of Nigeria, 962 F.3d 576, 584 (D.C. Cir. 2020) (quoting Bolivarian Republic of Venezuela v. Helmerich & Payne Int'l Drilling Co., 137 S. Ct. 1312, 1317 (2017)).
Without disputing the potential duration of the remand proceedings and concomitant duration of a renewed stay, the Russian Federation again claims denial of a stay would result in hardship due to the prospect of a "litigation quagmire" and "incongruous outcomes that would produce repetitive and unnecessary briefing" should proceedings in this forum resume while Dutch set-aside litigation continues. Resp't's Mem. at 14, 20. The Russian Federation explains that, because its allegations of procedural fraud are relevant to its jurisdictional defense, this Court should wait for the Amsterdam Court of Appeal to first rule on those allegations. See, e.g., Resp't's Reply 5 ("[I]t would be highly impractical to commence litigation of the FSIA issues before the conclusion of the Amsterdam litigation, given the considerable overlap between the factual issues in both proceedings."); id. at 9 ("If this Court goes forward now in deciding the FSIA issues, many of the factual issues that will be brought to light in the coming months in the Amsterdam Court simultaneously will be litigated in the United States.").9 Yet, ironically, the Russian Federation undercuts its own argument to let the Dutch courts go first in ruling on these fraud allegations by representing that these same allegations will have to be examined de novo by this Court, too, to determine "—among other issues— whether the Awards are void as a matter of U.S. public policy." Resp't's Mem. at 14; see also Resp't's Sur-Surreply Supp. Mot. to Extend Stay ("Resp't's Sur-Surreply"), at 4-5, ECF No. 222 (explaining that fraud allegations regarding ownership and control over the Shareholders implicate the jurisdictional inquiry as to "whether [the Shareholders] were or were not eligible to accept any offer of arbitration under the ECT"). In other words, the Russian Federation's fraud allegations now subject to review before a Dutch court may have to be confronted and dealt with here, too, and thus waiting for this foreign litigation to conclude would simply delay, not eliminate, the need for this Court's consideration of the issues.
The Russian Federation emphasizes that if its procedural fraud argument "prevails in the Amsterdam proceedings—or in any subsequent proceedings before the Dutch Supreme Court ... then the Awards thereafter will not exist to be enforced in the United States." Resp't's Mem. at 13. Maybe, but not necessarily so. See Getma Int'l v. Republic of Guinea, 862 F.3d 45, 48 (D.C. Cir. 2017) (noting that U.S. courts may enforce annulled award "if the annulment is repugnant to fundamental notions of what is decent and just in the United States") (citations omitted); TermoRio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928, 935 (D.C. Cir. 2007) (explaining that, under N.Y. Convention, an arbitral award set aside in a primary jurisdiction "normally may not" be enforced in another jurisdiction (emphasis added)). The remand proceedings are focused on whether the Russian Federation's fraud allegations are true and, if so, whether confirmation of the arbitral awards would offend Dutch public policy. See Resp't's Reply at 13. What may offend Dutch public policy, however, does not automatically dictate the outcome under the American federal legal regime. See Tatneft v. Ukraine, 21 F.4th 829, 838 (D.C. Cir. 2021) ("[T]he U.S. does not have a policy against enforcing arbitral awards predicated on underlying violations of foreign law."). Under either scenario—with the Dutch courts rejecting or affirming the fraud allegations—the Russian Federation's arguments fail to provide sufficient reason at this point to prolong the pause of these proceedings.
Moreover, in an opinion issued last month after conclusion of the instant round of briefing in this case, the D.C. Circuit held that "a foreign court's order ostensibly setting aside an arbitral award has no bearing on the district court's jurisdiction and is instead an affirmative defense properly suited for consideration at the merits stage." Process & Indus. Dev. (P&ID) v. Fed. Republic of Nigeria, 27 F.4th 771, 772 (D.C. Cir. 2022) (emphasis added).10 This recent and binding guidance from the D.C. Circuit makes clear that the "the validity or enforceability of an arbitral award is a merits question" and district courts "need not determine the validity of the arbitral award as part of [their] jurisdictional inquiry," P&ID, 27 F.4th at 776, and therefore, at a minimum, assessment of this Court's jurisdiction is independent of any Dutch court ruling to set-aside—or not—the award. Indeed, the Russian Federation's motion to dismiss on sovereign immunity grounds is fully briefed and ripe for resolution, unless the parties wish to supplement their briefing afresh. See Resp't's Mot. to Dismiss for Lack of Jurisdiction, ECF No. 24; Pet'rs' Opp'n to Mot. to Dismiss for Lack of Jurisdiction, ECF No. 63; Resp't's Reply in Supp. Mot. to Dismiss for Lack of Jurisdiction, ECF No. 64. Such supplemental briefing is neither required nor necessary, leaving the Russian Federation with little identifiable hardship by proceeding to, at least, the threshold jurisdictional issue. At most, then, the Russian Federation will have an opportunity to update its submissions in support of its pending motion to dismiss and that "is hardly an onerous burden" justifying an additional prolonged pause of these proceedings to the Shareholders' detriment. Pet'rs' Opp'n at 18.
In sum, the interest in judicial economy and relative hardships to the parties, assessed through the lens of the first two Europcar factors in accordance with the D.C. Circuit's recent guidance in Stileks, 985 F.3d at 880-881, do not favor a stay. The delay in this case has already been substantial: the arbitration underlying this litigation was initiated almost two decades ago and the Dutch set-aside proceedings that started in 2014 have yet to be resolved eight years later, with no evident resolution in the horizon. Eight years after their initiation, with the economic response to war in Ukraine increasingly compromising the Shareholders' ability to access Russian Federation assets in the United States in the event of succeeding in this action, the confirmation proceedings in this forum must proceed.
Date: April 13, 2022
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