Mobil Cerro Negro, Ltd. v. Bolivarian Republic of Venezuela, Docket No. 15-707

• Decision Date: 11 July 2017
• Docket Number: August Term, 2016,Docket No. 15-707
• Citation: 863 F.3d 96
• Parties: MOBIL CERRO NEGRO, LIMITED, Venezuela Holdings, B.V., Mobil Cerro Negro Holding, Limited, Mobil Venezolana De Petroleos Holdings, Incorporated, Mobil Venezolana De Petroleos, Incorporated, Arbitration Award Creditors–Petitioners-Appellees, v. BOLIVARIAN REPUBLIC OF VENEZUELA, Arbitration Award Debtor–Respondent-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

863 F.3d 96

MOBIL CERRO NEGRO, LIMITED, Venezuela Holdings, B.V., Mobil Cerro Negro Holding, Limited, Mobil Venezolana De Petroleos Holdings, Incorporated, Mobil Venezolana De Petroleos, Incorporated, Arbitration Award Creditors–Petitioners-Appellees,

v.BOLIVARIAN REPUBLIC OF VENEZUELA, Arbitration Award Debtor–Respondent-Appellant.

Docket No. 15-707

August Term, 2016

United States Court of Appeals, Second Circuit.

Argued: January 7, 2016

[Last submissions: May 23, 2016]

Decided: July 11, 2017

Joseph D. Pizzurro (Kevin A. Meehan, Juan O. Perla, Joseph B. Heath, on the brief), Curtis, Mallet-Prevost, Colt & Mosle LLP, New York, New York, for Respondent-Appellant.

Steven K. Davidson (Michael J. Baratz, Bruce C. Bishop, Jared R. Butcher, Molly Bruder Fox, on the brief), Steptoe & Johnson LLP, Washington, D.C., for Petitioners-Appellees.

Jennifer Jude, Benjamin H. Torrance, Christopher Connolly, Assistant United States Attorneys, for Preet Bharara, United States Attorney for the Southern District of New York, New York, New York, Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Sharon Swingle, Civil Division, Department of Justice, Brian Egan, Legal Adviser, Department of State, Washington, D.C., for amicus curiae United States of America.

Before: Pooler, Hall, and Carney, Circuit Judges.

Susan L. Carney, Circuit Judge:

This case requires us to examine the authority of a United States district court to adjudicate an arbitral award-creditor's ex parte petition for entry of a federal judgment against a foreign sovereign premised on an award made under the International Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the "ICSID Convention" or "Convention"). The award in this case arose from a dispute submitted to the International Centre for the Settlement of Investment Disputes by certain subsidiaries of ExxonMobil Corporation (collectively, "Mobil") and the Bolivarian Republic of Venezuela ("Venezuela"). Directing Venezuela to pay Mobil approximately $1.6 billion, the award was announced on October 9, 2014 (the "Award"). The following day, Mobil filed an ex parte petition asking the U.S. District Court for the Southern District of New York to recognize the Award and to enter judgment based on it. The Motion Term Part I judge granted the petition and entered judgment in the full amount awarded by the ICSID panel.

Venezuela learned of the judgment's entry by letter delivered electronically to its legal counsel soon after the court's action and promptly moved under Federal Rule of Civil Procedure 60(b) to vacate the judgment for both lack of subject matter and personal jurisdiction. The District Court judge subsequently assigned to the case denied the motion, concluding that it had subject matter jurisdiction under certain exceptions to sovereign immunity recognized in one provision of the Foreign Sovereign Immunities Act of 1976 ("FSIA"), 28 U.S.C. § 1605, and in 22 U.S.C. § 1650a ("Section 1650a"), the statute enabling U.S. participation in the ICSID Convention. See Mobil Cerro Negro Ltd. v. Bolivarian Republic of Venezuela ("Mobil Cerro Negro "), 87 F.Supp.3d 573, 587-90 (S.D.N.Y. 2015). The ex parte procedures—which did not satisfy the FSIA's requirements for personal jurisdiction—were sufficient, the District Court reasoned, because a procedural "gap" in Section 1650a permitted courts to take guidance from New York state law. Id. at 583-86. Accordingly, it turned to the summary procedures for recognizing and enforcing "foreign judgments" that are set forth in New York Civil Practice Law and Rules ("N.Y. CPLR") Article 54. Id. at 584. The District Court disclaimed any need to obtain personal jurisdiction over Venezuela under the FSIA, in light of Venezuela's participation in the Convention and the permission given by N.Y. CPLR Article 54 for New York state courts to enter "foreign judgments" even absent jurisdiction over the judgment debtor. Id. at 590-602.

We conclude that the District Court erred in declining to vacate the judgment. We reject Mobil's argument that Section 1650a provides an independent grant of subject-matter jurisdiction for actions against foreign sovereigns and decide that the FSIA provides the sole basis for subject-matter jurisdiction over actions to enforce ICSID awards against a foreign sovereign. Because actions to enforce ICSID awards against a foreign sovereign fall within the FSIA's comprehensive scheme, plaintiffs pursuing such actions must satisfy the FSIA's procedural requirements. The District Court was therefore mistaken in excusing Mobil from complying with the FSIA's service and venue requirements. The ex parte proceedings that Mobil utilized are neither permitted by the FSIA nor required by Section 1650a. The FSIA's procedural requirements regarding notice and venue serve Congress's stated goals of promoting comity with other sovereigns and ensuring the United States' consistency of approach with respect to federal courts' interactions with foreign sovereigns. The ICSID Convention's significant, but more modest, aims of allowing streamlined enforcement of authenticated ICSID arbitral awards and restricting substantive appeals of those awards to ICSID pose no significant conflict with the FSIA and can readily be accommodated by the FSIA's comprehensive regime.

Although several courts of the Southern District of New York (the "Southern District") have from time to time allowed such ex parte proceedings as occurred here to provide the basis for entry of a federal judgment against a foreign sovereign, district courts in other districts have not, and have given precedence to the FSIA. We think the correct view is the latter: ICSID award-creditors must pursue federal court judgments to enforce their awards against a foreign sovereign by filing a federal action on the award against the sovereign, serving the sovereign with process in compliance with the FSIA, and meeting the FSIA's venue requirements before seeking entry of a federal judgment, whether through a motion for judgment on the pleadings or for summary judgment. Those requirements were not met here. The court entering judgment needed, but lacked, personal jurisdiction over Venezuela under the FSIA.

We therefore REVERSE the District Court's order denying Venezuela's motion to vacate, VACATE the judgment entered in favor of Mobil, and REMAND the cause to the District Court with instructions to dismiss the ex parte petition.

BACKGROUND

I. Statutory background

The present appeal requires us to harmonize the ICSID Convention and its enabling statute, 22 U.S.C. § 1650a, with the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1330, 1391(f), 1441(d), 1602 -1611. We therefore begin with an overview of the relevant texts, as these provide the setting for the issues presented on appeal.

A. The ICSID Convention

Between 1962 and 1965, the World Bank spearheaded development of the ICSID Convention, a multilateral treaty aimed at encouraging and facilitating private foreign investment in developing countries. See Anthony R. Parra, The History of ICSID 11-12, 24-26 (Oxford 2012) ("Parra, History "); Convention on the Settlement of Investment Disputes: Hearing on H.R. 15785 before the H. Comm. on Foreign Affairs, Subcomm. on Int'l Organizations and Movements , 89th Cong. 2-3 (1966) ("H.R. 15785 Hearing") (statement of Hon. Fred B. Smith, Gen. Counsel, Dep't of Treasury) ("Smith House Statement"). According to Parra (a former ICSID Deputy Secretary-General and Legal Adviser), the "immediate origins" of the Convention stem from the period between 1955 and 1962, when the "retreat of colonialism" quickly increased the number of developing countries. Parra, History , at 11. The amount of governmental development assistance available for these countries fell far short of their growing economic needs, leading to a widely shared hope "that private foreign investment would become an increasingly important source of funds." Id . at 12. Private investors were wary of investment in these countries, however, citing risks of expropriation and other "government measures that might tend to impair the rights or assets of foreign investors." Id . To help allay these concerns, the World Bank was called upon to create an effective and neutral dispute settlement forum.

The ICSID Convention was the result. See International Convention on the Settlement of Investment Disputes between States and Nationals of Other States ("ICSID Convention"), Mar. 18, 1965, T.I.A.S. No. 6090, 17 U.S.T. 1270. The Convention established an international institution—the International Centre for Settlement of Investment Disputes, based in Washington, D.C. (the "Centre" or "ICSID")—under whose authority arbitration panels may be convened to adjudicate disputes between international investors and host governments in "Contracting States"—those countries whose governments have adopted the Convention.¹ See ICSID Convention arts. 3, 25; see also Smith House Statement at 2-3. The final texts of the Convention (it has parallel versions in English, French, and Spanish) were approved by the Executive Directors of the World Bank on March 18, 1965, for submission to World Bank member governments. Parra, History , at 94. On June 10, 1966, the United States Congress ratified the Convention, and on October 14, 1966, after ratification by a twentieth country, the Convention officially entered into force. See id . at 95-97; Christopher H. Schreuer, et al., The ICSID Convention: A Commentary 1270 (2d ed. 2009) ("Schreuer, Commentary ").

The Centre convenes arbitral tribunals in response to requests made by either a member state or a national of a member state. ICSID Convention arts. 36-37. At the conclusion of the proceedings, the tribunals issue written awards that address "every question submitted to the Tribunal," and "state the reasons upon which [the award] is based." Id. art. 48. Of particular note here, Article 53 of the Convention provides that a...