Opinion
Case No. 1:15-mc-00107-LGS
04-21-2015
In the Matter of the Application of IOAN MICULA, et al., Petitioners, For Recognition and Enforcement of an Arbitration Award v. THE GOVERNMENT OF ROMANIA, Respondent.
Francis A. Vasquez, Jr. 701 Thirteenth Street, N.W. Washington, DC 20005 Telephone: (202) 626 3600 Facsimile: (202) 639 9355 fvasquez@whitecase.com -and- Owen C. Pell Jacqueline L. Chung 1155 Avenue of the Americas New York, NY 10036 Telephone: (212) 819 8200 Facsimile: (212) 354 8113 opell@whitecase.com jacqueline.chung@whitecase.com Counsel for Petitioners
PETITIONERS' MEMORANDUM OF LAW IN SUPPORT OF EX PARTE PETITION TO RECOGNIZE ARBITRATION AWARD
Petitioners loan Micula, S.C. European Food S.A., S.C. Starmill S.R.L. and S.C. Multipack S.R.L (collectively "Petitioners") file this memorandum of law in support of their Ex Parte Petition to Recognize an Arbitration Award Pursuant to 22 U.S.C. § 1650a (the "Petition"), filed contemporaneously herewith.
Petitioners have also filed herewith the Declaration of Francis A. Vasquez, Jr. ("Vasquez Decl.") and the accompanying exhibits offered in support of the Petition, which includes the Declaration of Oana Popa ("Popa Decl.") and a Proposed Order and Judgment.
INTRODUCTION
Petitioners seek recognition of an arbitral award issued in their favor on December 11, 2013 (the "Award"), against Respondent the Government of Romania following an arbitration conducted under the Rules of Arbitration of the International Centre for Settlement of Investment Disputes ("ICSID") in ICSID Case No. ARB/05/20 (the "ICSID Arbitration") (Vasquez Decl. Ex. 1).
ICSID is an autonomous international institution established under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the "ICSID Convention") with over one hundred and forty member States. Vasquez Decl. Ex. 6. The primary purpose of ICSID is to provide facilities for conciliation and arbitration of international investment disputes. Id. The ICSID Convention sought to remove major impediments to the free international flows of private investment posed by non-commercial risks and the absence of specialized international methods for investment dispute settlement. Id.
ICSID Convention, 17 U.S.T. 1270, T.I.A.S. 6090, 575 U.N.Y.S. 159 (Mar. 18, 1965).
Among the signatories to the ICSID Convention are the United States, Sweden, and Romania. Vasquez Decl. Ex. 7. Article 54(1) of the ICSID Convention provides that any arbitration award issued pursuant to the Convention must be recognized and enforced by each of the contracting nations. Vasquez Decl. Ex. 3. To meet that obligation, the United States has enacted legislation - 22 U.S.C. § 1650a - that requires federal district courts to give ICSID awards full faith and credit to ensure that such awards are enforced. Vasquez Decl. Ex. 2.
On August 2, 2005, Petitioners and an additional claimant, Viorel Micula (the "Claimants") filed a Request for Arbitration with ICSID against Romania. An ICSID arbitral tribunal was duly constituted on September 12, 2006 (the "Tribunal") and ultimately issued the Award dated December 11, 2013. The Tribunal found that Romania had violated Article 2(3) of the Agreement Between the Government of the Kingdom of Sweden and the Government of Romania on the Promotion and Reciprocal Protection of Investors (the "BIT") by failing to ensure fair and equitable treatment of the Claimants' investments in Romania. The Tribunal ordered Respondent to pay compensation in the amount of 376,433,229 Romanian Leu (RON) plus interest at the rate of 3-month Romanian Interbank Offer Rate (ROBOR) plus 5% compounded on a quarterly basis with respect to certain amounts and periods as specified in paragraph 1329(d) of the Award.
Counsel to the Petitioners does not represent Viorel Micula.
A certified copy of the Award is attached as Exhibit 1 to Vasquez Declaration.
To date, Romania has paid RON 43,100,691.04 in partial satisfaction of the Award. Vasquez Decl. Ex. 9 (Popa Decl. ¶ 4). The remaining amount of the Award to be paid is RON 333,332,537.96 plus interest. Id. Enforcement of the Award has not been stayed by the Tribunal. Id. ¶ 5. Petitioners have satisfied the criteria for recognition of an ICSID award and, accordingly, the Court should recognize the Award as a valid judgment of this Court.
A Proposed Order and Judgment is attached as Exhibit 10 to the Vasquez Declaration.
BACKGROUND
Petitioner loan Micula is a Swedish national, born in Romania, who has conducted business in Romania for a number of years. loan Micula, along with his brother Viorel Micula are majority shareholders of a group of companies known as the European Food and Drinks Group, or "EFDG," that are engaged in food and beverage production in the region of Ştei-Nucet-Drăgăneşti, Bihor County, Romania. S.C. European Food S.A., S.C. Starmill S.R.L. and S.C. Multipack S.R.L. are companies within EFDG, and are thus owned directly or indirectly by Petitioner loan Micula and Viorel Micula.
In 1998, Romania enacted legislation that made certain economic incentives available to investors who invested in disfavored regions of Romania. In reliance on these economic incentives, and in expectation that these incentives would be maintained during a 10-year period, the Claimants made substantial investments in the disfavored region of Ştei-Nucet-Drăgăneşti, Bihor County, Romania, in relation to their food and beverage business. In 2005, as part of its accession process into the European Union, Romania revoked the economic incentives it had implemented, and upon which Claimants had relied.
On August 2, 2005, Claimants filed their Request for Arbitration, dated July 28, 2005, with ICSID against Romania. Claimants alleged, among other things, that Romania had breached its obligation under the BIT by pre-maturely revoking the incentives that it had implemented to attract investment in disfavored regions.
On August 3, 2005, ICSID transmitted a copy of the Request for Arbitration to Romania. The Acting Secretary-General of ICSID registered the Request for Arbitration on October 13, 2005. The Tribunal was convened on September 12, 2006. Romania made a pre-hearing motion to dismiss the claims on jurisdictional and other grounds. After extensive briefing and argument, the Tribunal issued a Decision on Jurisdiction and Admissibility on September 25, 2008, in which it denied Romania's motion. See Vasquez Decl. Ex. 1, Award ¶ 284. The parties held a hearing on the merits before the Tribunal in Paris, France from November 8-19, 2010. Claimants and Romania participated fully in the hearing - both parties presented a substantial amount of witness testimony and documentary evidence and made oral arguments. See Vasquez Decl. Ex. 1, Award ¶¶ 342-1306. Claimants and Romania also presented post-hearing submissions and oral argument. See Vasquez Decl. Ex. 1, Award ¶¶ 123-24.
On December 11, 2013, the Tribunal ruled in favor of Claimants, finding that Romania had violated Article 2(3) of the BIT by failing to ensure fair and equitable treatment of the Claimants' investments in Romania. The Tribunal awarded the Claimants monetary damages in the amount of RON 376,433,229, plus interest at the rate of 3-month ROBOR plus 5%, compounded on a quarterly basis, with respect to certain amounts and periods as specified in paragraph 1329(d) of the Award. Vasquez Decl. Ex. 1, Award ¶ 1329. Petitioner now makes this application seeking an order from the Court recognizing the Award and directing that judgment be entered in favor of the Claimants and against Romania in the amount of RON 376,433,229 as detailed in paragraph 1329(c) of the Award and interest at the rate of 3-month ROBOR plus 5%, compounded on a quarterly basis, with respect to the amounts and periods detailed in paragraph 1329(d) of the Award, until payment in full.
ARGUMENT
I. PETITIONERS ARE ENTITLED TO RECOGNITION OF THE FINAL AWARD AND ENTRY OF JUDGMENT IN ITS FAVOR PURSUANT TO 22 U.S.C. §1650A
A. The Court Is Required to Give Full Faith and Credit to ICSID Award
The ICSID Convention and 22 U.S.C. § 1650a require that the Award be recognized and entered as judgment of this Court. Article 54(1) of the ICSID Convention provides that:
Each Contracting State shall recognize an award rendered pursuant to this Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State. A Contracting State with a federal constitution may enforce such an award in or through its federal courts and may provide that such courts shall treat the award as if it were a final judgment of the courts of a constituent state.The United States is a party to the ICSID Convention. Accordingly, the United States has adopted implementing legislation that requires U.S. federal district courts to give full faith and credit to ICSID awards. Specifically, 22 U.S.C. § 1650a(a) provides that "[t]he pecuniary obligations imposed by such an award shall be enforced and shall be given the same full faith and credit as if the award were a final judgment of a court of general jurisdiction of one of the several states." 22 U.S.C. § 1650a(a) (Vasquez Decl. Ex. 2). United States district courts have exclusive jurisdiction over actions to enforce ICSID awards. 22 U.S.C. § 1650a(b).
In Mobil Cerro Negro Ltd. v. Bolivian Rep. of Venezuela, No. 14 Civ. 8163, 2015 WL 631409 (S.D.N.Y. February 13, 2015), the Court confirmed that the recognition of an ICSID award in New York federal courts is an "automatic" process and may be obtained using the ex parte procedures contained in New York's CPLR Article 54, which governs judgment recognition in the state. In Mobil, petitioners filed an ex parte application in this Court seeking recognition of an arbitral award against Venezuela and entry of judgment. One the same day as the ex parte application, the district court judge (sitting in Part One) held an ex parte hearing, granted the petition, and entered a final judgment in petitioners' favor. Id. at *2; Order and Judgment, Mobil Cerro Negro Ltd. v. Bolivian Rep. of Venezuela, No. 14 Civ. 8163 (S.D.N.Y. Oct. 10, 2014). Venezuela filed a motion to vacate, arguing in part that 22 U.S.C. § 1650a did not permit ex parte proceedings, and accordingly a plenary action would be required. Id. at *3. The Court held that in light of the absence of federal law delineating the procedure for obtaining recognition of an ICSID arbitral award, a so-called "statutory gap," an acceptable approach would be to use the judgment recognition procedures of the forum state. Mobil, 2015 WL 631409, at *7-11 ("[U]nder §1650a, a federal district court, asked to recognize and convert an ICSID award to a judgment, may use the forum state's recognition procedure."). Accordingly, the court concluded that the Part One judgment was "consistent with the ICSID enabling statute" because it had been properly obtained through CPLR Article 54.
True and correct copies of decisions and orders of this Court in which a judgment has been entered pursuant to 22 U.S.C. § 1650 are submitted herewith as Exhibit 8 to the Vasquez Declaration.
In so finding, the court in Mobil relied on an earlier decision in Siag v. The Arab Republic of Egypt, No. M-82, 2009 WL 1834562 (S.D.N.Y. Jun. 19, 2009), where Judge Castel had similarly upheld a judgment recognizing an ICSID award that had been obtained using the ex parte method set forth in CPLR Article 54. Mobil, 2015 WL 631409 at *5-7 ("Siag thus identified CPLR Article 54 as a mechanism available for converting ICSID awards into judgments in this District."). In Siag, the Court explained that, because federal district courts in New York may apply Article 54 of the CPLR to register an out-of-state court judgment, and section 1650a requires federal courts to treat an ICSID award as a sister state judgment, a federal district court may recognize an ICSID award using the procedures set forth in CLPR Article 54. Siag, No. M-82, 2009 WL 1834562, at *2; see also Keeton v. Hustler Magazine, Inc., 815 F.2d 857, 857 (2d Cir. 1987) (Article 54 of the CPLR establishes "procedures designed to facilitate the registration of foreign, or out-of-state judgments, for New York will, with specified exceptions, simply recognize a foreign judgment as its own, rather than require a separate action on the judgment").
Ex parte applications to recognize an ICSID award have also been granted by this Court on other occasions. See Liberian Eastern Timber Corporation (LETCO) v. Republic of Liberia, No. M-68, 1986 U.S. Dist. LEXIS 31062 (S.D.N.Y. Sept. 10, 1986); Grenada v. Grynberg, No. 11 Misc. 45 (S.D.N.Y. Apr. 29, 2011) (Batts, J.); Enron Corp. & Ponderosa Assets L.P. v. Argentine Republic, No. M-82 (S.D.N.Y. Nov. 20, 2007) (Buchwald, J.); Sempra Energy Int'l v. Argentine Republic, No. M-82 (S.D.N.Y. Nov. 14, 2007) (Buchwald, J.). Vasquez Decl. Ex. 8.
By its terms, CPLR Article 54 applies to "any judgment... of a court of the United States or any other court which is entitled to full faith and credit in this state " CPLR. 5401. Pursuant to Article 54, judgment creditors are required to submit a true and accurate copy of the arbitration award, together with an affidavit stating that: (i) the proposed judgment was not obtained by default and has not been satisfied; (ii) the total amount remaining to be paid; and (iii) that the enforcement of the award has not been stayed. Siag, 2009 WL 1834562, at *3; CPLR 5402(a) (Vasquez Decl. Ex. 4). Article 54 does not require advance notice to the debtor. Rather, after the entry of a judgment, notice to the debtor must be provided within thirty days. C.P.L.R. § 5403 (Vasquez Decl. Ex. 5), see Siag, 2009 WL 1834562 at *2. See David D. Siegel, N.Y. Practice § 435 (4th ed.) ("Article 54 of the CPLR sets up a procedure for the simple New York registration of an out-of-state judgment, obviating an action on the judgment. " ). Petitioners have satisfied all of these requirements of CPLR Article 54 and have thus complied with the procedures for registering an out-of-state court judgment in the courts of New York.
Article 54(2) of the ICSID Convention also requires that "a party seeking recognition or enforcement in the territories of a Contracting State shall furnish to a competent court or other authority which such State shall have designated for this purpose a copy of the award certified by the Secretary-General." Vasquez Decl. Ex. 3.
See Vasquez Decl. Ex. 9 (Popa Decl.).
B. Sovereign Immunity Does Not Apply
Recognition of the Award against Romania does not implicate Romania's sovereign immunity. The Foreign Sovereign Immunities Act ("FSIA") provides several exceptions to immunity, at least two of which clearly apply here. The first exception applies to arbitral awards. The FSIA states that "[a] foreign state shall not be immune from the jurisdiction of courts of the United States or of States in any case . . . in which the action is brought . . . to confirm an [arbitration] award . . . if . . . the . . . award is . . . . governed by a treaty or international agreement in force for the United States calling for the recognition and enforcement of arbitral awards." 28 U.S.C. § 1605(a)(6)(B). That provision applies here because the ICSID award against Romania was governed by a treaty, the ICSID Convention, "calling for the recognition and enforcement of arbitral awards." The Second Circuit has held that the arbitral award exception to sovereign immunity applies with regard to the recognition of ICSID awards against a foreign sovereign. Blue Ridge Investments, L.L.C. v. Republic of Argentina, 735 F.3d 72, 85 (2d. Cir. 2013) (noting that "every court to consider whether awards issued pursuant to the ICSID Convention fall within the arbitral award exception to the FSIA has concluded that they do" and agreeing with that finding); Mobil, 2015 WL 631409 at *12 (finding that the arbitral award exception applied in the context of an ICSID award against Venezuela).
The second exception applies to implied waivers of immunity. The FSIA provides that "[a] foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case . . . in which the foreign state has waived its immunity either explicitly or implicitly or by implication." 28 U.S.C. § 1605(a)(1). In Blue Ridge Investments, the Second Circuit held also that the implied waiver exception to immunity should apply in the context of recognizing an ICSID award against a foreign sovereign. 735 F.3d at 84; see also Mobil, 2015 WL 631409 at *13 (finding that the implied waiver exception to sovereign immunity applied to ICSID award against Venezuela). Article 54 of the ICSID Convention contemplates such an implied waiver, as each contracting state is obliged to "recognize an award rendered pursuant to this Convention as binding and enforce the pecuniary obligations imposed by that award within its territories." Blue Ridge Investments, 735 F.3d at 84; Mobil, 2015 WL 631409 at *13. Thus, by signing onto the ICSID Convention, foreign sovereigns, including Romania, "'must have contemplated enforcement actions in other [Contracting] [S]tates," including the United States." Blue Ridge Investments, 735 F.3d at 84 (quoting Seetransport Wiking Trader Schiffarhts-gesellschaft MBH & Co., Kommanditgesellschaft v. Navimpex Centrala Navala, 989 F.2d 572 (2d. Cir. 1993)).
In Mobil, in addition to confirming that exceptions to sovereign immunity in the FSIA applied in an action seeking to recognize an ICSID ward against a foreign sovereign, the Court also held that the service of process, venue, and personal jurisdiction requirements under the FSIA did not apply. 2015 WL 631409 at 24. The court held that the imposition of such requirements in an ICSID award judgment recognition proceeding would conflict with intentions of the ICSID Convention and its enabling statute, which contemplated that "award recognition would be automatic and not subject to contest." Id. at *21. Moreover, the court noted that 22 U.S.C. 1650a specifically states that "[t]he Federal Arbitration Act (9 U.S.C. § 1 et seq.) shall not apply to the enforcement of awards rendered pursuant to the [ICSID] convention," thus indicating that Congress did not intend to allow courts reviewing ISCID awards to have the same authority they would have under the Federal Arbitration Act to substantively review arbitral awards or to give award debtors the same right to challenge arbitral awards. Id.
CONCLUSION
For the foregoing reasons, the Petitioners respectfully request that this Court enter the Proposed Order, attached to the Vasquez Declaration as Exhibit 10, recognizing the Award as a judgment of this Court pursuant to 22 U.S.C. § 1650a and Article 54 of the ICSID Convention and directing the clerk of the court to enter judgment against Romania in the amount of RON 376,433,229 and interest at the rate of 3-month ROBOR plus 5%, compounded on a quarterly basis, with respect to the amounts and periods detailed in paragraph 1329(d) of the Award, until payment in full. Dated: New York, New York
April 21, 2015
Respectfully submitted,
WHITE & CASE LLP
/s/_________
Francis A. Vasquez, Jr.
701 Thirteenth Street, N.W.
Washington, DC 20005
Telephone: (202) 626 3600
Facsimile: (202) 639 9355
fvasquez@whitecase.com
-and
Owen C. Pell
Jacqueline L. Chung
1155 Avenue of the Americas
New York, NY 10036
Telephone: (212) 819 8200
Facsimile: (212) 354 8113
opell@whitecase.com
jacqueline.chung@whitecase.com
Counsel for Petitioners