317 F.3d 202 (2nd Cir. 2003), 01-9177, Dardana Ltd. v. Yuganskneftegaz

Docket Nº:01-9177.
Citation:317 F.3d 202
Party Name:DARDANA LIMITED, Petitioner-Appellant, v. A.O. YUGANSKNEFTEGAZ and YUKOS OIL COMPANY, Respondents-Appellees.
Case Date:January 15, 2003
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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317 F.3d 202 (2nd Cir. 2003)

DARDANA LIMITED, Petitioner-Appellant,



No. 01-9177.

United States Court of Appeals, Second Circuit

January 15, 2003

Argued: Sept. 20, 2002.

Supplemental Briefs Received: Sept. 26, 2002.

Ivan F. Blejec, Share & Blejec LLP, New York, NY, for Petitioner-Appellant.

Irwin Rochman, Rochman, Platzer, Fallick & Sternheim, New York, NY, for Respondents-Appellees.

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Jamie B.W. Stecher, Tannenbaum, Helpern, Syracuse & Hirschtritt LLP, New York, NY, for Respondents-Appellees.

Before: FEINBERG, STRAUB and MAGILL,[*] Circuit Judges.

FEINBERG, Circuit Judge.

Petitioner Dardana Limited (Dardana) appeals from an order entered in the United States District Court for the Southern District of New York (Deborah A. Batts, J.), dismissing its petition to confirm two foreign arbitral awards against respondents A.O. Yuganskneftegaz (YNG) and Yukos Oil Company (Yukos) under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention). Respondent YNG did not appear in the proceedings in the district court. Respondent Yukos did, however, and moved under Fed.R.Civ.P. 12(b) to dismiss Dardana's petition against it. The district court dismissed the petition against Yukos for lack of personal jurisdiction, finding that Dardana failed to establish minimum contacts between Yukos and the State of New York. At the same time and for the same reason, the court dismissed sua sponte the petition against YNG.

Dardana's principal arguments on appeal are (1) respondents consented to jurisdiction by virtue of language in the agreement to arbitrate; (2) Dardana alleged a prima facie case of personal jurisdiction over respondents, under either N.Y. C.P.L.R. 301 or Fed.R.Civ.P. 4(k)(2); and (3) property of respondents in the jurisdiction is a sufficient basis to enforce a foreign arbitral award. For reasons set forth below, we vacate the order and remand for discovery and findings by the district court.

I. Background

Petitioner Dardana, a Cayman Islands corporation, is the assignee of two awards rendered by a Swedish arbitral tribunal against respondents YNG and Yukos for breach of contract. The contract at issue was executed in January 1995 between Western Atlas International Inc. (Western Atlas) and YNG. Western Atlas is a Delaware corporation operating principally in Houston, Texas. YNG is an open joint stock company organized under Russian law and a subsidiary of Yukos.1 Under the 1995 contract, Western Atlas agreed to provide technical services to assist YNG in developing its oil and gas prospects in Siberia. In 1996, with YNG's consent, Western Atlas assigned the contract to its subsidiary PetroAlliance Services Co. (PetroAlliance), a limited liability company registered in Cyprus with a business address in Houston, Texas. A dispute thereafter arose over nonpayment for PetroAlliance's services. In December 1997, PetroAlliance submitted its claim to arbitration in accordance with the contract. The contract provides that any dispute would be submitted for arbitration in Stockholm under the Arbitration Rules of the Stockholm Chamber of Commerce, and that Swedish law governs the contract in the event of a dispute.

In the arbitration proceedings, PetroAlliance sought to recover from YNG as well as from YNG's parent company Yukos on the ground that Yukos had assumed the contract. YNG participated in the proceedings

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but Yukos did not.2 Upon YNG's objection to consolidation of the two claims, the Swedish arbitral panel conducted the arbitrations separately. In its first decision in May 1999, the panel found YNG in breach of its contractual obligations. It awarded PetroAlliance over $6 million in damages plus over $3 million in interest as of June 1998 and interest at the rate of 2% per month thereafter.3 In March 2000, the same panel concluded that Yukos had assumed the contract, including the obligation to arbitrate, under Swedish law. It found that "YNG had no independent administration or control of its payments for services performed by PetroAlliance but was in financial terms . . . run by and controlled by Yukos" and that Yukos had "held itself out" as the contract party to PetroAlliance. The panel thus held Yukos jointly and severally liable with YNG for PetroAlliance's damages. YNG and Yukos each sought in Sweden to set aside the arbitral award rendered against it.4 In February 2000, the District Court of Stockholm rejected YNG's challenge to the arbitration and upheld the award.5 Yukos's appeal is still pending before the Stockholm court, but its request for an "inhibition" to suspend enforcement of the arbitral award was denied in June 2000.

Meanwhile, Dardana ultimately succeeded to PetroAlliance's interest in the two arbitral awards, and it sought to confirm and enforce the awards in a number of forums.6 In June 2000, Dardana filed the instant petition to confirm the arbitral awards pursuant to the Convention, codified in Chapter Two of the Federal Arbitration Act (FAA) at 9 U.S.C. § 201-208. Dardana also moved by order to show cause for entry and enforcement of a final judgment under the Federal Rules of Civil Procedure and New York Civil Practice Law and Rules, apparently including the New York Uniform Foreign Money-Judgments Recognition Act (Article 53), or any applicable federal or state statute. To that end, it requested an order allowing prejudgment discovery and attachment of assets.

In its papers, Dardana alleged that YNG and Yukos had consented, or waived objection, to the jurisdiction of the district court by virtue of the contract. Dardana also argued that respondents "have had significant business dealings with the United States and New York based companies on a continuing and systemic basis for some years making it likely, if not highly probable,

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that there are significant assets and/or information about the location of assets in this jurisdiction."7

In October 2000, Yukos moved to dismiss Dardana's petition under Fed.R.Civ.P. 12(b)(6) for failure to state a claim on the basis that it was not a party to the contract and under Fed.R.Civ.P. 12(b)(2) for lack of personal jurisdiction. Yukos also moved in the alternative for a stay of these proceedings pursuant to Article VI of the Convention. As already noted, YNG did not appear before the district court, and Yukos took "no position on whether that award [against YNG] should be...

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