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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
In the Matter of the Application of
IOAN MICULA, et al.,
Petitioners,
For Recognition and Enforcement of an
Arbitration Award
- against –
THE GOVERNMENT OF ROMANIA,
Respondent.
Case No. 1:15-mc-00107-P1
Defendant, The Government of Romania (“Romania”) respectfully submits this
memorandum in support of its motion pursuant to Fed. R. Civ. P. 59(e), 60(b), and 62(b) to
vacate and/or stay:
a) the Order and Judgment signed by this Court on April 21, 2015 (“April 21
Order and Judgment”); and
b) the Order and Judgment signed this Court on April 28, 2015 (“April 28 Order
and Judgment”), amending the April 21 Order and Judgment.
On December 11, 2013, in an arbitration conducted at the International Centre for
Settlement of Investment Disputes (“ICSID”), concerning a from Romania’s introduction and
subsequent revocation of certain economic incentives, contained in Emergency Government
Ordinance 24/1998 (“EGO 24”), and the alleged damages suffered by Plaintiffs as a result of
such revocation, the arbitration tribunal (“Tribunal”) issued an award (“Award”) in favor of
Plaintiffs for the sum of pay RON 367,433,229. See a true and accurate copy of the Award
attached hereto as Exhibit 1.
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On Aril 11, 2015 Viorel, filed in United States District Court for the District of Columbia
the District (“DC Court”), a Petition to Confirm Arbitration Award (“D.C. Petition”), case
number 1:14-cv-00600(APM). See a true and accurate copy of the D.C. Petition to Confirm
Arbitration Award attached hereto as Exhibit 2. Despite the sole filing, his counsel confirmed
that he was seeking the recognition and enforcement of the Award for all Claimants. See a true
and accurate copy of the D.C. Court transcript from April 16, 2015 attached hereto as Exhibit 3,
p. 10, ln. 22-25. On April 16, 2015, the D.C. court denied the Petition ruling that “the enabling
statute of the ICSID Convention which is 22. U.S. C. 1650a does not permit the ex parte
procedure of confirmation of an ICSID award that the petitioner has requested.” See Exhibit 3,
pp. 9-12, and see a true and accurate copy of said D.C. Order attached hereto as Exhibit 4. The
Court ruled that in terms of enforcing an award, Plaintiffs “file a plenary action, that is, an action
subject to the ordinary requirements of process…which will require them to serve process on the
government of Romania”. See Exhibit 3, p. 21, ln. 1-6.
Despite the D.C. Order, on April 21, 2015 Ioan, European Food, Starmill, and Multipack
filed another Petition requesting immediate entry of judgment on the Award on an ex parte basis
pursuant to 22 U.S.C. § 1650a in the United States District Court , Southern District of New
York (“NY Petition”). See a true and accurate copy of said NY Petition attached hereto as
Exhibit 5. This Court granted the NY Petition on April 21, 2015 and entered the April 28, 2015
Order and Judgment. See a true and accurate copy of said April 21, 2015 Order and Judgment
attached hereto as Exhibit 6. On April 28, 2015 Viorel filed a Motion to Intervene and to Amend
Judgment requesting to intervene and amend the April 21, 2015 Order and Judgment and for
immediate entry of judgment on the Award on an ex parte basis pursuant to 22 U.S.C. § 1650a.
See a true and accurate copy of Viorel’s Motion to Intervene and to Amend Judgment attached
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hereto as Exhibit 7. The Court granted Viorel’s petition on April 28, 2015 (“April 28 Order and
Judgment”). See a true and accurate copy of the April 28 Amended Order and Judgment
attached hereto as Exhibit 8.
Romania now moves to vacate the April 21 Order and Judgment and April 28 Order and
Judgment as void pursuant to Fed. R. Civ. P. 60(b) given that (i) there was no service of process
on the Romanian government; (ii) federal courts cannot recognize or confirm an ICSID award ex
parte; (iii) venue is only proper in the District Court of the District of Columbia, where a plenary
action must be filed; and (iv) alternatively, the enforcement of the judgment must be stayed
because of (a) an ongoing appeal before the ICSID tribunal, (b) the inaccuracy of the amount
awarded, (c) order from the European Commission (“Commission”) prohibiting Romania to
execute the Award, and (d) the precedential effect of the appeal of Mobil Cerro Negro Ltd, et al.
v. Bolivarian Republic of Venezuela on the use of ex parte petitions in cases such as this.
A federal court has no personal jurisdiction in any action against a foreign state, and the
state is therefore entitled to jurisdictional immunity, unless and until there has been service of
process upon the foreign state in conformity with the service provisions of the Foreign Sovereign
Immunities Act (“FSIA”), 28 U.S.C. § 1608(a). Plaintiffs’ reliance on provisions of the New
York CPLR to obtain an ex parte order recognizing the Award not only ignores the exclusive
application of the FSIA, but also runs afoul of the specific provisions of the ICSID Convention
regarding the recognition of awards, as well as the United States implementing legislation, 22
U.S.C. § 1650a.
Under the ICSID Convention, a Contracting State with a federal system, such as the
United States, may treat an ICSID award as if it were a “final judgment of the courts of a
constituent state.” This provision is carried out in the United States implementing legislation,
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which specifically provides that federal courts have exclusive jurisdiction to recognize ICSID
awards and that an ICSID 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). The procedure applicable in United States federal courts for the
recognition of state court judgments is the institution of a plenary action, on notice, with
appropriate service of process.
Most importantly, Plaintiffs’ ex parte Petition in DC was denied on this very basis. See
Exhibit 3, pp. 9-12, and pp.10-15 of the D.C. court’s Memorandum Opinion attached hereto as
Exhibit 9. In effect Plaintiffs forum shopped when filing their NY Petition with this Court.
This Court should vacate the April 21 Order and Judgment and April 28 Order and
Judgment because venue is improper. Under the exclusive venue provisions of the FSIA, in the
absence of any connection to this district or any other U.S. district, venue in an action against a
foreign state lies only in the United States District Court for the District of Columbia. Plaintiffs’
disregard of this requirement is forum shopping, pure and simple, which the unified recognition
scheme set out in 22 U.S.C. § 1650a seeks to discourage and which the venue provisions of the
FSIA prohibit. This is especially true in light of the fact that the DC Court issued a ruling
expressly denying Plaintiffs’ ex parte motion on these ground! The April 21 Order and
Judgment and the April 28, 2015 Order and Judgment do not include any direction as to when
the Plaintiffs should give notice to Romania of the entry of judgment or whether Plaintiffs’
notice should comply with the service provisions of the FSIA, 28 U.S.C. § 1608(a).
For these reasons, this Court should (a) vacate the April 21 Order and Judgment and
April 28 Order and Judgment, (b) reject any further attempts by Plaintiffs to bring an
enforcement action in this Court or any other court in the United States , and (d) in the event that
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this Court denies this Motion, stay any enforcement action of the April 21 Order and Judgment
and April 28 Order and Judgment.
The ICSID arbitration arose from Romania’s introduction and subsequent revocation of
certain economic incentives, contained in Emergency Government Ordinance 24/1998 (“EGO
24”), for the development of certain disfavored regions of Romania. The Plaintiffs claimed that,
in reliance on those incentives, and in reliance on the expectation that these incentives would be
maintained during a 10-year period, they made substantial investments in northwestern Romania.
The Plaintiffs further claimed that Romania’s premature revocation of these incentives was in
breach of its obligations under the Agreement Between the Government of the Kingdom of
Sweden and the Government of Romania on the Promotion and Reciprocal Protection of
Investments (the “BIT” or the “Treaty”), which entered into force on April 1, 2003 and caused
damages to the Plaintiffs.
Romania denied that this revocation breached any of its obligations under the BIT. In
addition, it argued that this revocation was necessary to comply with European Union’s state aid
obligations, which in turn was necessary for Romania to complete its accession to the European
Union.
On July 20, 2009, the European Commission (“Commission”) intervened with an amicus
curiae. In its intervention, the Commission explained that the EGO 24 incentives were
incompatible with the European Community rules on regional aid. In particular, the incentives
did not respect the requirements of Community law as regards eligible costs and aid intensities.
Moreover, the facilities constituted operating aid, which is proscribed under regional aid rules. It
also argued that “[a]ny ruling reinstating the privileges abolished by Romania, or compensating
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the claimants for the loss of these privileges, would lead to the granting of new aid which would
not be compatible with the EC Treaty”. It also advised the Arbitration Tribunal that the
“execution of [any award requiring Romania to re-establish investment schemes which have
been found incompatible with the internal market during accession negotiations] can thus not
take place if it would contradict the rules of EU State aid policy”.
On December 13, 2013 the Tribunal ordered Romania to pay RON 367,433,229 as
damages for failing to ensure a fair and equitable treatment of Plaintiffs’ investments, thus
violating Article 2(3) of the Romania – Sweden Bilateral Investment Treaty. In addition, the
Tribunal ordered Romania to pay interest until full payment of the Award.
On January 2014, Romania had partially implemented the Award by offsetting the
damages Romania had been ordered to pay against taxes owed by European Food. The tax debt
that that was thus offset amounted to RON 337,492,864. On January 31, 2014, the Commission
advised Romanian that any implementation of the Award would constitute new aid and would
have to be notified to the Commission. In February 2014, Viorel introduced first the court
proceedings in Romania to enforce the Award. On May 7, 2014, the Commission intervened in
those proceedings. On May 28, 2014 Viorel withdrew his action and therefore no judgment has
been rendered. On March 18, 2014 the other four claimants (European Food, Starmill,
Multipack, and Ioan) initiated court proceedings in Romania to enforce the Award pursuant to
Article 54 of the ICSID Convention requesting the payment of 80% of the outstanding amount
(i.e. RON 301 146 583) and the corresponding interest.
On March 24, 2014, the Bucharest Tribunal allowed the execution of the Award as
requested by the four claimants considering. On March 30, 2014, an executor started the
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enforcement procedure by setting the Romanian Ministry of Finance a deadline of 6 months to
pay to the four claimants 80% of the Award plus the interests and other costs. Romania
challenged the execution of the Award before the Bucharest Tribunal and asked for a temporary
suspension of execution until the case had been decided on the merits. On April 1, 2014, the
Commission alerted Romanian to the possibility of issuing a suspension injunction. On April 9,
2014, Romania filed an appeal for the annulment of the Award on the basis of Article 52 of
ICSID before an ad hoc committee. On May 14, 2014, the Bucharest Court temporarily
suspended the execution of the Award until a decision on the merits of Romania’s appeal of the
Award was granted and granted its request to suspend the execution. On May 26, 2014, the
Commission intervened in those proceedings requesting that the Bucharest Tribunal to suspend
and annul the execution of the Award. In the alternative, the Commission requested that the
Bucharest Court issue a preliminary question to the Court of Justice of the European Union
(“CJEU”).
The May 26, 2016 Decision also issued an injunction against Romania:
“ the Commission therefore finds it is necessary to issue a suspension injunction in accordance
with Article 11(1) of the Council Regulation (EC) No 659/1999. The Commission warns Romania
that failing to comply with the present suspension injunction; it may refer the matter direct to the
Court of Justice pursuant to Article 12 of Regulation No. 659/1999. ...The Commission therefore
finds it is necessary to issue a suspension injunction in accordance with Article 11(1) of the
Council Regulation (EC) No 659/1999. The Commission warns Romania that failing to comply
with the present suspension injunction; it may refer the matter direct to the Court of Justice
pursuant to Article 12 of Regulation No. 659/1999. See Page 15, paragraph 57, 58
On August 7, 2014, the ad hoc committee of ICSID granted a stay of enforcement of the
Award under the condition that Romania deposit, within one month, the following assurances:
“Romania commits itself subject to no conditions whatsoever (including those related to [EU] Law
or decisions) to effect the full payment of its pecuniary obligation imposed by the Award in ICSID
Case No. ARB/05/20 and owed to Claimants to the extent that the Award is not annulled -
following the notification of the Decision on annulment.
Romania informed the Commission of such order. The Commission responded to
Romania that it could not provide the unconditional commitment that it would pay the
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compensation awarded under the Award even if that entailed a violation of its obligations under
Union law and regardless of any decision of the Commission. Romania replied accordingly to
the ad hoc committee which lifted the stay of enforcement of the Award as of September 7,
2014. On September 23, 2014, the Bucharest Tribunal, lifted the suspension and rejected
Romania’s request for a suspension of the execution of the Award. The primary reason for that
rejection was the lifting of the stay of enforcement of the Award by the ICSID ad hoc committee
on 7 September 7, 2014. On September 30, 2014, Romania appealed the September 23, 2014
decision of Bucharest Tribunal.
On October 15, 2014, the Commission submitted an application to the ad hoc committee
for leave to intervene as a non-disputing party in the annulment proceedings. Leave to intervene
was granted by the ad hoc committee on December 4, 2014 and the Commission submitted its
amicus curiae brief in those proceedings on January 9, 2015.
On October 17, 2014, the Commission commenced an investigation to open the formal
investigation procedure, before the Bucharest Tribunal to determine if the payments made by
Romania executing the Award constitute state aid and therefore are illegal. On October 31, 2014
the executor appointed by the Bucharest Tribunal issued orders to seize the accounts of
Romania’s Ministry of Finance and seek the execution of 80% of the Award. The Ministry of
Finance’s state treasury and bank accounts were frozen. On November 24, 2014, the Bucharest
Tribunal also rejected Romania’s main action against the execution orders, including the request
for interim measures. On January 14, 2015, Romania appeals the decision of the Bucharest
Tribunal.
On February 24, 2015, the Bucharest Court of Appeal lifted the decision of the Bucharest
Tribunal of September 23, 2014 and suspended the forced execution until the appeal against the
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decision of Bucharest Tribunal of November 24, 2014 is decided. The Commission sought leave
to intervene in those appeal proceedings.
On January 5, 2015, the court-appointed executor seized RON 36 484 232 (ca. EUR 8.1
million) from Romania’s Ministry of Finance. Of this sum, the executor subsequently transferred
RON 34 004 232 (ca. EUR 7.56 million) in equal parts to three of the five claimants, and kept
the remainder as compensation for execution costs. Between February 5 and 25 February 2015,
the court-appointed executor seized an additional RON 9 197 482 (ca. EUR 2 million) from the
Ministry of Finance. On March 9, 2015 the Ministry of Finance voluntarily transferred the
remaining amount of RON 472 788 675 (ca. EUR 106.5 million) (including the costs of court
appointed executor of RON 6 028 608) onto a blocked account on the name of the five claimants
in order to implement the Award. However, the five claimants can withdraw the money only if
the Commission decides that the State aid granted on the basis of the Award is compatible with
the internal market.
Viorel also initiated further enforcement proceedings against Romania before the
Romanian courts on October 3 2014, but that claim was rejected by the Bucharest Tribunal on
November 3, 2014.
On March 30, 2015, the Commission issues a final ruling that enforcement of the Award
(“Final Commission Decision”), inter alia, as follows:
-The payment of the compensation awarded by the Tribunal constitutes State aid;
-Romania shall not pay out any incompatible aid
-Viorel Micula, Ioan Micula, S.C. European Food S.A., S.C. Starmill S.R.L., S.C. Multipack, European
Drinks S.A., Rieni Drinks S.A., Scandic Distilleries S.A., Transilvania General Import-Export S.R.L., and
West Leasing S.R.L shall be jointly liable to repay the State aid received by any one of them.
-Recovery of the aid referred to in Article 1 shall be immediate and effective.
-Romania shall ensure that this Decision is implemented within four months following the date of
notification of this Decision.
See Exhibit 10 Final Commission Decision on State Aid 38517 (2014/C) (ex 2014/NN),page 40, 41.
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This Court lacked jurisdiction to enter judgment against Romania because Plaintiffs
failed to bring an action and serve Romania in accordance with FSIA.
In any action against a foreign state, the state is entitled to sovereign immunity unless the
provisions of the FSIA are complied with. 28 U.S.C. §§ 1604, 1330. The only way to establish
subject matter and personal jurisdiction is to comply with the FSIA’s requirements, including its
service of process provisions. 28 U.S.C. §§ 1330(a), (b) and 1608(a); Argentine Venezuala v.
Amerada Hess Shipping Corp., 488 U.S. 428, 443 (1989) (“[T]he FSIA provides the sole basis
for obtaining jurisdiction over a foreign state in the courts of this country . . . .”).
Without personal and subject matter jurisdiction, a federal court lacks authority to issue a
valid judgment. Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 701
(1982) (“The validity of an order of a federal court depends upon that court’s having jurisdiction
over both the subject matter and the parties.”); Steel Co. v. Citizens for a Better Env’t, 523 U.S.
83, 94 (1998), quoting Ex parte McCardle, 74 U.S. (7 Wall.) 506, 514 (1869) (“Without
jurisdiction the court cannot proceed at all in any cause.”). Moreover, without proper service, this
Court lacks authority to adjudicate its own jurisdiction. Zenith Radio Corp. v. Hazeltine
Research, Inc., 395 U.S. 100, 110 (1969) (“It is elementary that one is not bound by a judgment
in personam resulting from litigation . . . to which he has not been made a party by service of
process.”).
In an action against a foreign state, service of process is not a mere formality; it is the
basis for the Court’s jurisdiction. Texas Trading & Milling Corp. v. Federal Romania of Nigeria,
647 F.2d 300, 308 (2d Cir. 1981) (under the FSIA, “subject matter jurisdiction plus service of
process equals personal jurisdiction.”), overruled on other grounds by Frontera Res. Azerbaijan
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Corp. v. State Oil Co. of Azerbaijan Romania, 582 F.3d 393 (2d Cir. 2009). Accord Practical
Concepts, Inc. v. Romania of Bolivia, 811 F.2d 1543, 1549 (D.C. Cir. 1987). The requirement of
serving process upon and establishing personal jurisdiction over a foreign state arises out of the
FSIA.
To this end the FSIA, § 1608(a), provides the exclusive method for serving process on a
foreign state. Transaero, Inc. v. La Fuerza Aerea Boliviana, 30 F.3d 148, 154 (D.C. Cir. 1994)
(“[S]ection 1608(a) ‘sets forth the exclusive procedures for service on a foreign state . . . .”).
Plaintiffs must comply strictly with these requirements. Id. at 154 (“We hold that strict adherence
to the terms of 1608(a) is required.”). Absent proper service, a court lacks jurisdiction to enter
judgment against a foreign state. Id. at 154 (“The Eastern District of New York lacked personal
jurisdiction [over the Romania of Bolivia], and the default judgment registered in the District of
Columbia was therefore void and unenforceable.”). Thus, the April 21 Order and Judgment is
void because Plaintiffs failed to serve process and establish the court’s jurisdiction. Fed. R. Civ.
P. 60(b); City of N.Y. v. Mickalis Pawn Shop, 645 F.3d 114, 138 (2d Cir. 2011) (a judgment is
void “if the Court that rendered it lacked jurisdiction of the subject matter, or of the parties, or if
it acted in a manner inconsistent with due process of law.”).
Plaintiffs’ reliance on Siag v. The Arab Romania of Egypt, No. M-82, 2009 WL 1834562
(S.D.N.Y. June 19, 2009), and other uncontested ex parte orders issued by the courts in the
Southern District is misplaced. Neither Siag nor any of those other orders was decided in
situations where the sovereign had appeared and presented any arguments at all, and only the
Siag court provided any reasoning for its decision. In fact, the only court to have heard both sides
of the issue, the Eastern District of Virginia, ruled in favor of the foreign state and held that the
proper procedure for enforcing an ICSID award in federal court is to bring a new and distinct
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action on the award with its attendant requisites of service of process, jurisdiction and venue.
See, Cont’l Cas. Co. v. Argentine Republic, 893 F. Supp. 2d 747, 748 (E.D. Va. 2012).
Unlike judgments of a federal court, which may be recognized ex parte by registration
pursuant to 28 U.S.C. § 1963, recognition and enforcement of a state court judgment in federal
court require the commencement of a plenary action. Caruso v. Perlow, 440 F. Supp. 2d 117,
119 (D. Conn. 2006) (“[T]he holder of a state-court judgment seeking to have it enforced in
federal court must fall back on the traditional, if rather cumbersome, strategy of bringing a civil
action on the state-court judgment by invoking, for example, the diversity jurisdiction of the
federal court.”). The same procedure applies to an ICSID award.
The question of the proper procedure for recognition of an ICSID award was squarely
faced by the court in Cont’l Cas. Co. v. Argentine Romania, 893 F. Supp. 2d 747 (E.D. Va.
2012). This is the only case revealed by research in which a United States district court has
undertaken an analysis of this issue with the benefit of arguments from counsel for the foreign
state defendant. The court analyzed in detail both the ICSID Convention and the well settled
procedures for enforcing state court judgments in federal courts. First, the court confirmed that
state court judgments are excluded from ex parte registration under 28 U.S.C. § 1963. Id. at 753
(“Although 28 U.SC. § 1963 provides for the registration of other federal district court
judgments, there is no parallel provision for state court judgments.”). Similarly, it concluded that
enforcement of an ICSID award cannot proceed by ex parte registration, but rather must follow
the same necessary steps to enforce a state court judgment, i.e., the commencement of a plenary
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action. Id. at 754 (“Congress mandated that the proper method of enforcement of an ICSID
arbitral award is the same as enforcement of a state court judgment, which is a suit on the
judgment as a debt.”).
The context for this ruling was Argentina’s challenge to Continental’s choice of venue, as
there was no challenge to the method of service. Continental argued that it could bring its
petition in any jurisdiction without regard to venue because it was seeking “merely recognition
or confirmation,” not “enforcement,” of the award. Id. at 752. The court rejected the notion that
federal courts can simply recognize or confirm an ICSID award as an initial step to enforcement,
concluding instead that “there is no warrant for distinguishing between recognition, or
confirmation on the one hand, and enforcement on the other.” Id. (“The implementing statute for
the ICSID Convention recognizes no such distinction and provides only for the enforcement of
ICSID awards.”).
Furthermore, the court found that the reference to full faith and credit in § 1650a(a) does
not authorize a federal court to treat a state court judgment as if it were a federal court judgment:
“[G]iving a state’s judgment full faith and credit . . . is a far cry from making a judgment of a
state court a federal judgment . . . .” Cont’l Cas., 893 F. Supp. 2d at 753, quoting W.S. Frey Co.
v. Precipitation Associates of Am., Inc., 899 F. Supp. 1527, 1528 (W.D. Va. 1995). The effect of
this ruling was to subject ICSID enforcement proceedings to the same procedural rules that apply
to any other action against a foreign state, including the FSIA’s jurisdictional and venue
requirements. Cont’l Cas., 893 F. Supp. 2d at 748.
In sum, neither 22 U.S.C. § 1650a nor 28 U.S.C. § 1963 authorizes the recognition of an
ICSID award as a judgment of this Court on an ex parte basis. On the contrary, by limiting ex
parte registration in federal court to the judgments of other federal courts under the federal
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registration statute, Congress left undisturbed the traditional mechanism for enforcing state court
judgments in the U.S. District Courts. W.S. Frey Co., 899 F. Supp. at 1529 (“Congress has not
seen fit to grant the courts of the United States authority to do what petitioner asks [i.e., register a
state court judgment ex parte], and neither statutory nor constitutional full faith and credit
affords a substitute for such authority.”). Absent any federal authority, a state registration statute
such as Article 54 of the CPLR does not authorize ex parte recognition of state court judgments
in federal court. Caruso, 440 F. Supp. 2d at 119 (“[A] federal court has no authority to borrow
Connecticut’s registration shortcut [i.e., Connecticut’s version of CPLR Article 54] for foreign
state-court judgments and use that state procedure in place of the federal shortcut provided by
Congress [i.e., 28 U.S.C. § 1963].”). Thus, Congress’ decision to equate an ICSID award to a
state court judgment, instead of a federal court judgment, represented a conscious policy decision
not to provide for ex parte recognition of ICSID awards.
In the Petition, plaintiffs rely on Siag v. Egypt and other orders entered in this Court’s
Motion Term, Part I, that have recognized ICSID awards ex parte by applying the CPLR’s
registration procedures. All of those orders have been entered without opposition from the ICSID
award debtors and, with exception of Siag, without any opinion or analysis of the Court. See,
e.g., Enron Corp. & Ponderosa Assets, L.P. v. Argentina, No. M-82 (S.D.N.Y., Nov. 19, 2007);
Sempra Energy Int’l v. Argentina, No. M-82 (S.D.N.Y., Nov. 15, 2007).
The opinion in Siag v. Egypt was issued without an appearance or briefing by counsel for
Egypt. In permitting ex parte registration of the ICSID award, the court focused on the fact that
the award creditors sought only “entry of judgment” rather than “execution of an existing
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judgment” or attachment of assets. Siag, 2009 WL 1834562 at 1. In deciding to apply New
York’s CPLR, the court cited Keeton v. Hustler Magazine, Inc., 815 F.2d 857 (2d Cir. 1987). But
the issue in Keeton was whether Article 54 of the CPLR could be used in state court to recognize
a federal court judgment rendered in another state. Keeton, at 860. There, the Article 54
proceeding was commenced in New York state court and then removed to federal court. The
entire decision was about the propriety of state legislation regarding the recognition of federal
judgments. The case simply has nothing to do with the issue of whether Article 54 can be used in
a federal court to achieve the recognition of a state court judgment in lieu of the ordinary
procedure in federal courts regarding the recognition of state court judgments.
By disregarding the explicit statutory directives of 22 U.S.C. § 1650a that ICSID awards
are to be treated by the federal courts like state court judgments for recognition purposes and
adopting the Siag approach, this Court has put the Award on a more favorable footing than it
would a state court judgment. For example, if Plaintiffs had tried to recognize a Connecticut
state court judgment in this Court using the CPLR’s ex parte registration statute, this Court
would have rejected the petition outright because federal law limits ex parte registration to the
judgments of other federal courts only. Yet, that is exactly what Plaintiffs asked this Court to do
with the ICSID Award.
Furthermore, the outcome of Siag’s approach is untenable, because it would have federal
courts across the country look to a patchwork of state rules to enforce ICSID awards instead of
relying on the consistent federal approach. The establishment of a uniform set of procedures for
the enforcement of ICSID awards across all federal courts throughout the country also has the
beneficial effect of discouraging the type of forum shopping engaged in by the Plaintiffs here. As
set forth below in section III, the exclusive venue provision of the FSIA, 28 U.S.C. § 1391(f),
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requires Plaintiffs to commence this proceeding in the United States District Court for the
District of Columbia. Plaintiffs’ blatant disregard of that statute can only be attributed to the fact
that, as far as research has revealed, the Southern District of New York is the only court in the
country to have adopted the ex parte procedure used by Plaintiffs in recognizing ICSID awards.
That forum shopping, which is clearly in contravention of the explicit language of the statutes
and public policy, should not be rewarded.
In sum, the only method for enforcing an ICSID award in federal court is to follow the
same procedure for enforcing a state court judgment, i.e., commencing a plenary action on the
award as a debt.
The legislative history of 22 U.S.C. § 1650a, supported by the ICSID Convention’s
preparatory works, confirms the intent of the U.S. Government and Congress that enforcement
of an ICSID award must be done through the institution of a plenary action, as opposed to an
“automatic” ex parte proceeding that is purely clerical in nature.
As set forth above, the second sentence in Article 54(1) of the ICSID Convention, which
provides for a sui generis enforcement regime for Contracting States with a federal system, was
added to the Convention at the insistence of the United States. Combined later with 22 U.S.C. §
1650a, it effectively denied ICSID awards automatic recognition in the United States and
instead, required the institution of an action on the award in the same way one has to bring a
plenary action on the judgment to enforce a state court judgment in federal court. At the
Congressional hearing to ratify the Convention, Fred Smith, general counsel of the U.S.
Treasury, explained:
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To give full faith and credit to an [ICSID] arbitral award as if it were a final judgment of a court of one of
the several states means that an action would have to be brought on an award in a United States District
court just as an action would have to be brought in a United States District court to enforce the final
judgment of a state court. Hearing of the House Subcomm., 89th Cong., 2d Sess. 4 (1966) (statement by
Fred Smith, General Counsel of the U.S. Treasury) (emphasis added).
If Congress had wanted to provide for automatic recognition of ICSID awards, it could have
easily done so by equating awards to federal judgments, thereby extending ex parte registration
to ICSID awards under 28 U.S.C. § 1963, which had been enacted in 1948 long before
ratification of the ICSID Convention. However, Congress has never adopted that approach.
Instead, its objective was to establish a uniform procedure for entering judgment on an ICSID
award across all federal courts, i.e., commencing an action with its attendant requisites of service
of process and jurisdiction as required for enforcing a state court judgment in federal court.
In any action against a foreign state, the plaintiff must lay venue in accordance with the
FSIA’s venue provision, 28 U.S.C. § 1391(f), which provides that venue is proper only in the
United States District Court for the District of Columbia unless a “substantial part of the events
or omissions giving rise to the claim occurred, or a substantial part of property that is the subject
of the action is situated” in another district. See Commissions Imp. Exp. S.A. v. Republic of the
Congo, No. 11-cv-6176, 2012 WL 1468486 (S.D.N.Y. Apr. 27, 2012) (finding improper venue
and transferring enforcement action to the District of Columbia pursuant to § 1391(f), because
the underlying claim had no connection to the Southern District of New York). The same
requirement applies in an action to enforce an ICSID award. Continental, 893 F. Supp. 2d at 748.
As stated previously in Section I, a plenary suit is the only avenue for Petitioners to bring their
action. Id.; 22 USC §1650(a). Furthermore, since a plenary action must be brought, 28 USC
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§1391(f) also applies since the action would be a “civil action against a foreign stated.” Id.; 28
USC §1391(f).
Under Section §1391(f), venue is only proper in a district where the underlying dispute is
located or in the United States District Court of D.C. 28 USC §1391(f). Much like Continental,
this case involves the confirmation of an ICSID award. Because the Award takes on the
appearance of a state court judgment via 22 USC §1650a, the Award must be brought pursuant to
Section §1391(f). No connections exist with this District. The parties are foreign, the arbitration
hearings were conducted in Paris, and all the property at issue in the underlying dispute was
located in Venezuela. Thus, the Southern District of New York is an improper venue for this
petition.
As stated before (infra p. 2), the D.C. Court denied Plaintiffs’ ex parte Petition seeking to
have the Award recognized and enforced, ruling that ex parte Petitions in this context are
impermissible. Despite this, Plaintiffs filed the ex parte NY Petition on April 21, 2015.
On May 18, 2015, the D.C. issued a written ruling, the D.C. Order in which the D.C.
Court analyzed this Court’s many ex parte rulings, including its recent ruling in Mobil Cerro
Negro Ltd. v. Bolivarian Republic of Venezuela, 14 CIV. 8163 PAE, 2015 WL 631409 (S.D.N.Y.
Feb. 13, 2015). See Exhibit 9, p. 8. It found that the analysis of this Court was incorrect and that
the court in Continental was consistent with the text and structure of the ICSID Convention and
22 USC §1650a. Exhibit 9, p. 10. The court held that clearly the text of Section 1650a requires
ISCID awards to be treated as state judgments. Id. The enforcement through a plenary action is
the only proper treatment of a state judgment by a federal court. Id. The court provides a
thorough analysis of the multitude of reasons for requiring a plenary action in dealing with an
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ICSID award, which is a recitation of its analysis at the telephonic hearing. See, Exhibit 9, p. 10-
13; Exhibit 3, pp. 12-26.
Assessing the timeline, familial and corporate relationships of the parties, and the fact
that Plaintiffs have clearly engaged in forum shopping in an effort to take advantage of favorable
ex parte proceedings and prejudice Romania from having adequate time to find counsel and
respond.
Romania seeks to vacate the April 21 Order and Judgment and April 28 Order and
Judgment. It also, seeks a stay said orders during the pendency of this Motion and until the
appeal on the Award is finalized.
“[T]he power to stay proceedings is incidental to the power inherent in every court to
control the disposition of the causes on its docket with economy of time and effort for itself, for
counsel, and for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254, 57 S.Ct. 163, 81 L.Ed. 153
(1936). “[T]he decision whether to issue a stay is [therefore] ‘firmly within a district court’s
discretion.’ ” LaSala v. Needham & Co., Inc., 399 F.Supp.2d 421, 427 (S.D.N.Y.2005) (quoting
Am. Shipping Line v. Massan Shipping, 885 F.Supp. 499, 502 (S.D.N.Y.1995)).
On April 9, 2014, Romania filed an appeal for annulment of the Award on the basis of
Article 52 of ICSID before an ad hoc committee. See Romania’s Reply on Annulment attached
hereto as Exhibit 11. The basis of Romania’s and the Commission’s annulment/appeal of the
Award is, inter alia, that the Award is unenforceable. See Exhibit 11. The arguments filed by all
parties on appeal are complex, elaborate and involve extensive legal analysis, which are beyond
the scope of this court.
[Page 20]
Without elaborating on the extensive laws, treatises and regulations cited by all parties in
the appeal, Romania argues on appeal, that the Award constitutes impermissible State aid. See
Exhibit 11, ¶85 . It also argues that paying any such compensation would place Romania in
breach of its obligations under European law, hence the Award is unenforceable. See Reply page
85. The Commission makes the same argument on appeal. Written Submission Pursuant to
Articles 37(2) and 53 of the ICSID Arbitration Rules Romania’s. It argues that the Tribunal
failed to consider, inter alia, the European State aid law. See Id a p 6. Had it done so, it would
have been able to see an inherent conflict between exiting treatises and would have been unable
to render the Award. Id. Moreover, it would also have seen that the Award constitutes unlawful
Id. Paragraph 44.
Also as evidenced by the multiple lawsuits in Romania and appeals related to such, the
issue of validity of the enforcement of the Award is not only in dispute, but subject to conflicting
rulings. Any ruling to permitting the execution of the Award creates an additional layer of
confusion and conflict in this matter.
This Court has recently recognized that staying the enforcement of an award is the
prudent solution when there is pending appeals or discrepancies in the award amount. Mobil
Cerro Negro Ltd. v. Bolivarian Republic of Venezuela, 14 CIV. 8163 PAE, 2015 WL 631409, at
*24 (S.D.N.Y. Feb. 13, 2015). Many international courts and entities are involved in these
proceedings abroad. Since the petitioners could seek attachment of more than the sum total
assets, this court must stay enforcement pending resolution of the ICSID tribunal appeal.
The Award amount is incorrect and in dispute. The following issues which are on appeal
make the enforcement of the Award create an extreme prejudice to Romania. Beyond a
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prejudice to Romania, it would result in a benefit to Plaintiffs, where they would have
overpayment, double payment or payment to which they are not entitled.
First, the Tribunal issued a “collective award” to the Plaintiffs. As evidenced on the
appeal, the Tribunal’s “collective award” did not provide an accounting of the damages. First,
the Award was calculated using the damages from six (6) companies that were not party to the
ICSID arbitration. See, Exhibit 11, ¶130. This has grossly inflated the award amount beyond
what it would be had the damages been limited to just the parties to the ICSID arbitration. Id.
The tribunal held that the non-party companies could not recover for their losses, but the tribunal
still added their damages into the ICSID Award. Given that it is unclear if the appeal will
exclude the amounts for the non-claimants, executing the Award for the amount of the April 21
Order and Judgment and the April 28 Order and Judgment, will result in an unfair windfall to
Plaintiffs.
Second, the April 21 Order and Judgment and the April 28 Order and Judgment do not
reflect any offsets to the Award. On January 2014, Romania had partially implemented the
Award by offsetting the damages Romania had been ordered to pay against taxes owed by
European Food. The tax debt that that was thus offset amounted to RON 337,492,864. See,
Exhibit 11, ¶135. The Award being executed without offsets creates a windfall to Plaintiffs.
Third, Romania has executed the Award, but has been ordered by the Commission to
recoup the amounts advanced to Plaintiffs. The fact that the Commission has intervened is a
third party action independent of Romania.
Fourth, there is a direct order prohibiting Romania from enforcing the Award. The Final
Commission Decision of March 30, 2015, is clear that Romania is prohibited from enforcing the
Award, as the execution of such constitutes state aid. Beyond that Romania has been ordered by
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the Commission to recoup any of the funds that it has advanced within four months of the
issuance of the Final Commission Decision.
The case of Mobil Cerro Negro Ltd. v. Bolivarian Republic of Venezuela is a case on
point with this case ruled that staying the enforcement of an award is the prudent solution when
there are pending appeals or discrepancies in the award amount. Mobil Cerro Negro Ltd. v.
Bolivarian Republic of Venezuela, 14 CIV. 8163 PAE, 2015 WL 631409, at *24 (S.D.N.Y. Feb.
13, 2015). The facts are almost duplicate in both cases. Both involve a petitioner bringing an ex
parte motion to confirm an ICSID Award. Both Venezuela in that case and Romania in this case
present arguments against the use of ex parte procedures to confirm such awards. The law and
arguments used, outside of the recent D.C. opinion, are nearly identical, and as such, will be
impacted by decision of the 2nd Circuit Court of Appeals in Mobil. See, Mobil Cerro Negro Ltd.
v. Bolivarian Republic of Venezuela, 2nd Circuit Court of Appeals, Docket No. 15-0707.
For the sake of judicial economy and to prevent further appeals and remands, this Court
should stay enforcement of the judgment pending the resolution of Mobil Cerro Negro Ltd. v.
Bolivarian Republic of Venezuela, 2nd Circuit Court of Appeals, Docket No. 15-0707.
This Court has recently recognized that staying the enforcement of an award is the
prudent solution when there are pending appeals or discrepancies in the award amount. Mobil 14
CIV. 8163 PAE, 2015 WL 631409, at *24 (S.D.N.Y. Feb. 13, 2015). Many international courts
and entities are involved in these proceedings abroad. Since the petitioners could seek attachment
of more than the sum total assets, this court must stay enforcement pending resolution of the
ICSID tribunal appeal.
[Page 23]
A federal court has no personal jurisdiction in any action against a foreign state, and the
state is therefore entitled to jurisdictional immunity, unless and until there has been service of
process upon the foreign state in conformity with the service provisions of the Foreign Sovereign
Immunities Act (“FSIA”), 28 U.S.C. § 1608(a). Plaintiffs’ reliance on provisions of the New
York CPLR to obtain an ex parte order recognizing the Award not only ignores the exclusive
application of the FSIA, but also runs afoul of the specific provisions of the ICSID Convention
regarding the recognition of awards, as well as the United States implementing legislation, 22
U.S.C. § 1650a.
Under the ICSID Convention, a Contracting State with a federal system, such as the
United States, may treat an ICSID award as if it were a “final judgment of the courts of a
constituent state.” This provision is carried out in the United States implementing legislation,
which specifically provides that federal courts have exclusive jurisdiction to recognize ICSID
awards and that an ICSID 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). The procedure applicable in United States federal courts for the
recognition of state court judgments is the institution of a plenary action, on notice, with
appropriate service of process.
Most importantly, Plaintiffs’ ex parte Petition in DC was denied on this very basis. In
effect Plaintiffs forum shopped when filing their NY Petition with this Court.
For these reasons, this Court should (a) vacate the April 21 Order and Judgment and
April 28 Order and Judgment, (b) reject any further attempts by Plaintiffs to bring an
enforcement action in this Court or any other court in the United States ,(c) stay any and all
enforcement proceedings pending this Motion, and (d) in the event that this Court denies this
[Page 24]
Motion, stay any enforcement action of the April 21 Order and Judgment and April 28 Order and
Judgment until a decision is issued in the appeal in the Tribunal.
Romania specifically reserves all of its rights and does not waive any of its defenses or its
sovereign immunity.
Dated: May 19, 2015
Respectfully submitted,
THE GOVERNMENT OF ROMANIA
By: /s/ Ioana Salajanu
Ioana Salajanu
Rock Fusco & Connelly, LLC
321 N. Clark Street, Suite 2200
Chicago, Illinois 60654
Telephone: (312) 494-1000
Facsimile: (312) 494-1001
[email protected]
Attorneys for Defendant Government of
Romania