311 F.3d 488 (2nd Cir. 2002), 01-7947, In re Arbitration between Monegasque De Reassurances S.A.M.
|Docket Nº:||01-7947, 01-9153.|
|Citation:||311 F.3d 488|
|Party Name:||In the Matter of the ARBITRATION BETWEEN MONEGASQUE DE REASSURANCES S.A.M. (Monde Re), Petitioner-Appellant, v. NAK NAFTOGAZ OF UKRAINE and State of Ukraine, Respondents-Appellees.|
|Case Date:||November 15, 2002|
|Court:||United States Courts of Appeals, Court of Appeals for the Second Circuit|
Argued: April 29, 2002.
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Michael O. Hardison, Eaton & Van Winkle, New York, N.Y. (Alan Van Praag, Eaton & Van Winkle, New York, NY, of counsel), for Petitioner-Appellant.
Martin Mendelson, Verner, Liipfert, Bernhard, McPherson & Hand, Washington, DC (James A. Shifren, Stroock & Stroock & Lavan, LLP, New York, NY, Orlando E. Vidal, Thomas R. Snider, Verner, Liipfert, Bernhard, McPherson & Hand, Washington, DC, Myroslaw Smorodsky, Smorodsky & Stawnchy, P.A.,
Rutherford, NJ, of counsel), for Respondent-Appellee Nak Naftogaz of Ukraine.
John S. Willems, White & Case LLP, New York, NY (Alycia Regan Benenati, White & Case LLP, New York, NY, of counsel), for Respondent-Appellee State of Ukraine.
Before: MINER and SACK, Circuit Judges, and BERMAN, District Judge.[*]
MINER, Circuit Judge.
Petitioner-appellant Monegasque De Reassurances S.A.M. ("Monde Re"), a reinsurer, appeals from a judgment entered in the United States District Court for the Southern District of New York (Marrero, J.), in favor of respondents-appellees Nak Naftogaz of Ukraine ("Naftogaz"), a transporter of natural gas, and State of Ukraine ("Ukraine"), a foreign sovereign. Monde Re instituted the proceeding giving rise to this appeal to confirm an arbitration award made in its favor. The petition for confirmation invoked the provisions of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, T.I.A.S. No. 6997, 330 U.N.T. 53 ("Convention"), as implemented by and reprinted in the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 201-208, to enforce the arbitral award, which was rendered in Moscow. The petition also invoked the provisions of the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1330, 1602-1611. Relying on the doctrine of forum non conveniens, the district court dismissed the petition, and this appeal followed. As in the district court, Monde Re here contends that the terms of the Convention preclude application of the doctrine and that the elements of the doctrine have not been established in any event. We affirm the judgment of the District Court.
The dispute between the parties had its genesis in a contract entered into on January 16, 1998 between AO Gazprom, a Russian company, and AO Ukragazprom, a Ukrainian company. The contract provided for Ukragazprom to transport natural gas by pipeline across the Ukraine to various destinations in Europe. As consideration, Ukragazprom was entitled to withdraw 235 million cubic meters of natural gas. According to Gazprom, additional unauthorized withdrawals were made, giving rise to a breach of contract. Gazprom sought and received reimbursement for the value of the improperly withdrawn gas from its insurer, Sogaz Insurance Company ("Sogaz"). Sogaz in turn was reimbursed by Monde Re pursuant to a reinsurance agreement. Monde Re is a corporation organized under the laws of Monaco with a parent company in Australia, Reinsurance Australia Corp. Ltd.
Asserting the right to pursue arbitration of the dispute regarding the excessive gas withdrawal in the place of Gazprom, and in accordance with the transportation contract, Monde Re filed its claim against Ukragazprom with the International Commercial Court of Arbitration in Moscow, Russia on April 21, 1999. In July 1999, Naftogaz assumed the rights and obligations of Ukragazprom under the contract. The dispute was presented to three arbitrators, who filed a decision on May 31, 2000 by a vote of two to one awarding in excess of 88 million dollars to Monde Re for the payment it made to Sogaz. Naftogaz appealed the decision of the arbitrators to the Moscow City Court. In its appeal to the Moscow City Court, Naftogaz
sought cancellation of the award on the following grounds: that the dispute was not covered by an agreement to arbitrate because neither Monde Re nor Naftogaz was a party to the gas transportation contract; that the International Commercial Court of Arbitration staff did not meet the requirements of the contract; and that the arbitral ruling was not in accordance with the public policy of Russia. In a ruling issued March 21, 2001, the Moscow City Court declined to cancel the award. That ruling was affirmed by the Supreme Court of the Russian Federation on April 24, 2001.
On September 12, 2000, prior to the rulings of the Moscow City Court and the Supreme Court of the Russian Federation, Monde Re filed its petition for confirmation of the arbitral award in the United States District Court for the Southern District of New York. In its petition, Monde Re sought confirmation and judgment against Ukraine, which was not a party to the arbitration proceeding, as well as against Naftogaz, contending that Naftogaz was an agent, instrumentality or alter ego of Ukraine. Three causes of action were pleaded in the petition filed in the district court. The first is based on the arbitral award and seeks confirmation of the award and entry of judgment against Naftogaz; the second is based on the contention that Ukraine wholly controls Naftogaz and is responsible for its obligations under the award and seeks confirmation and judgment against Ukraine; and the third, grounded in the allegation that Ukraine and Naftogaz acted as joint venturers, also seeks confirmation and judgment against Ukraine.
On January 22, 2001, Naftogaz moved for dismissal of the petition in the district court for lack of personal jurisdiction, asserting that it is a Ukrainian company, that it has no contacts with the United States or New York, and that the gas transmission contract and all events leading to the arbitral award occurred in Ukraine and neighboring countries.
On the same date, Ukraine separately moved for dismissal of the petition, contending that the district court was without subject matter or personal jurisdiction because Ukraine is immune from suit under the FSIA as a foreign state; that the district court should decline jurisdiction under the doctrine of forum non conveniens; and that Monde Re has failed to state a claim upon which relief could be granted against Ukraine.
By decision and amended order dated December 4, 2001, the district court granted Ukraine's motion to dismiss Monde Re's petition on the ground of forum non conveniens and ordered the removal from its docket of the motion by Naftogaz by reason of mootness. See Matter of the Arbitration Between Monegasque de Reassurances, S.A.M. ("Monde Re") v. NAK Naftogaz of Ukraine, State of Ukraine, 158 F.Supp.2d 377, 387-88 (S.D.N.Y.2001). In its opinion, the district court first addressed the question of the applicability of the doctrine of forum non conveniens to the so-called arbitration exception of the FSIA. The court noted that it was well settled, prior to the enactment of the exception, that the doctrine was applicable to cases arising under the FSIA. Id. at 382. The amendment to the FSIA enacting the arbitration exception, in the words of the district court states that a party may bring an action or may confirm an award made pursuant to an agreement to arbitrate between a sovereign state and a private party if the award is or may be governed by a treaty or other international agreement in force in the United States calling for the recognition and enforcement of arbitral awards. Id. (citing 28 U.S.C. § 1605(a)(6)).
Observing that the Convention was just the type of treaty contemplated by the arbitration exception, the district court stated that "it would be highly peculiar if the practical inclusion of chapter two of the FAA [implementing the Convention] into the FSIA somehow worked to alter the apparently comparable harmony between the FSIA and the forum non conveniens doctrine." Id. at 383. The district court took note of the Convention provision that allows for application of the procedural rules of the forum and determined that the forum non conveniens doctrine is "more procedural than substantive" and therefore "that the Convention cannot be read as affecting the discretion of federal courts to decline jurisdiction where judicial economy, convenience and justice so compel." Id.
The district court recognized Monde Re's argument that, because the Convention allows for the enforcement of an arbitral award in any signatory state, Ukraine has accepted the United States as a convenient forum. That argument, according to the district court, "read[ ] too much into the language and purpose of the Convention," it being "simply unreasonable to say that the Convention intended, without explicit language to that effect, to invalidate wholesale portions of federal common law and procedural doctrine." Id. The district court thought that, to permit enforcement of an award in a forum that had no connection to the dispute or to the place of arbitration, would discourage the use of arbitration provisions in international commercial agreements and therefore "might chill international trade." Id.
Finding that the doctrine of forum non conveniens is applicable to cases arising under the Convention, the district court went on to apply the doctrine to the case at hand. The court first found that Ukraine was an adequate alternative forum despite some evidence of corruption in that nation and some opinion that a fair hearing would not be afforded in its courts to a claim that was brought against the nation itself or one of its entities. The court concluded that Monde Re's allegations in regard to impartiality and corruption were "conclusory" and consisted of "sweeping generalizations." Id. at 384-85. The court then...
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