Dardana Ltd. v. Yuganskneftegaz

Decision Date15 January 2003
Docket NumberDocket No. 01-9177.
PartiesDARDANA LIMITED, Petitioner-Appellant, v. A.O. YUGANSKNEFTEGAZ and YUKOS OIL COMPANY, Respondents-Appellees.
CourtU.S. Court of Appeals — Second Circuit

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

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

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 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 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 confirmed."8

The parties submitted affidavits and documentary evidence on Yukos's motion. Most of the submissions dealt with whether Yukos was a party to the contract and thus subject to the arbitral award under Swedish or Russian law. With regard to the issue of personal jurisdiction, Yukos submitted a brief statement that it has "no continuous, permanent or substantial activity in New York," and that it did not maintain an office or employees or own real property in New York. Dardana responded that Yukos's conclusory statement had not answered Dardana's specific allegations, including that Yukos had consented to jurisdiction through the contract, was conducting and soliciting business in New York and the United States through its agents, employed investment banks and other companies, planned to issue American Depository Receipts to trade its securities in the United States, concluded contracts with business entities in New York, and conducted petroleum transactions and maintained bank accounts and other credit facilities in New York and the United States. The district court did not order discovery or hold an evidentiary hearing or argument on any of these issues.

In a Memorandum and Order filed in September 2001, the district court addressed only Yukos's motion to dismiss for lack of personal jurisdiction. The district court concluded that although the Convention conferred federal subject matter jurisdiction over Dardana's petition to confirm the Swedish arbitral awards, it did not confer personal jurisdiction over respondents. The court thus looked to the state long arm statute, N.Y. C.P.L.R. 301, to determine whether general jurisdiction could be asserted over the appearing respondent Yukos.9 After reviewing Yukos's alleged contacts with New York, the court concluded that, even if those contacts existed, Dardana failed to make a prima facie showing of jurisdiction. Accordingly, the court dismissed the complaint against Yukos. Then, explaining that "even in the absence of a motion from [YNG], the court must conduct an independent analysis of its jurisdiction over [YNG]," the court found that the contacts between YNG and New York were even more tenuous and sua sponte dismissed the petition against YNG for lack of personal jurisdiction. This appeal followed.

II. Discussion

In this court, Dardana challenges the district court's ruling regarding the sufficiency of respondents' alleged contacts with New York. Dardana also argues that it should have been permitted to proceed, even if the district court were correct in its jurisdictional analysis, on grounds that the court did not address. Dardana contends that (1) respondents contractually consented, or waived objection, to jurisdiction in a court of Dardana's choosing; and (2) respondents' nationwide contacts, grouped together, are sufficient to confer general jurisdiction over respondents under Fed.R.Civ.P. 4(k)(2). Dardana argues that the district court should have ordered discovery on these issues. In addition, Dardana challenges the applicability of a traditional "minimum contacts" analysis in the context of an action to enforce arbitral awards, arguing that respondents' property alone can supply the jurisdictional basis.

In support of these arguments, Dardana stresses the strong public policy favoring arbitration. We emphasized only a few years ago the goals of the Convention and pointed out that "[t]he adoption of the Convention by the United States promotes the strong federal policy favoring...

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