Thai-Lao Lignite (Thailand) Co. v. Gov't of the Lao People's Democratic Republic, Docket Nos. 14-597

• Decision Date: 20 July 2017
• Docket Number: August Term, 2014,14-1052,Docket Nos. 14-597,14-1497
• Citation: 864 F.3d 172
• Parties: THAI-LAO LIGNITE (THAILAND) CO., LTD., Hongsa Lignite (Lao PDR) Co., Ltd., Petitioners-Appellants–Cross-Appellees, v. GOVERNMENT OF the LAO PEOPLE'S DEMOCRATIC REPUBLIC, Respondent-Appellee–Cross-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

864 F.3d 172

THAI-LAO LIGNITE (THAILAND) CO., LTD., Hongsa Lignite (Lao PDR) Co., Ltd., Petitioners-Appellants–Cross-Appellees,

v.GOVERNMENT OF the LAO PEOPLE'S DEMOCRATIC REPUBLIC, Respondent-Appellee–Cross-Appellant.

Docket Nos. 14-597

14-1052

14-1497

August Term, 2014

United States Court of Appeals, Second Circuit.

Argued: April 1, 2015

Decided: July 20, 2017

James E. Berger (Charlene C. Sun, J. Emmett Murphy, Nilufar Hossain, Kerianne Tobitsche, on the brief), King & Spalding LLP, New York, NY, for Petitioners-Appellants–Cross-Appellees.

Robert K. Kry (Steven F. Molo, Joel M. Melendez, MoloLamken LLP, New York, NY; David J. Branson, Anthony F. King, Tiana A. Bey, King Branson LLC, Bethesda, MD; Anthony J. Hatab, Dressel & Hatab, P.C., New York, NY, on the brief), for Respondent-Appellee–Cross-Appellant.

Before: Katzmann, Chief Judge, Pooler, and Carney, Circuit Judges.

Susan L. Carney, Circuit Judge:

This case requires us to address how a district court should adjudicate a motion to vacate a judgment that it has entered enforcing a foreign arbitral award, when that award has later been set aside by courts in the arbitral seat. In particular, we consider the interplay between Federal Rule of Civil Procedure 60(b)(5), which permits district courts to "relieve a party ... from a final judgment" when the judgment "is based on an earlier judgment that has been reversed or vacated," on the one hand, and the standards for declining to enforce an arbitral award under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, on the other.

Briefly, the question arises in the following context. In 2007, Petitioners Thai-Lao Lignite (Thailand) Co., Ltd. ("TLL") and its subsidiary, Hongsa Lignite (Lao PDR) Co., Ltd. ("HLL") (collectively, "Petitioners") submitted to arbitration in Malaysia a commercial dispute arising from the terminations by the Government of the Lao People's Democratic Republic ("Laos") of contracts granting TLL rights to mine lignite (a soft coal) in the Hongsa region of Laos and to build a major lignite-burning power plant there—an extensive project undertaken during the early 1990s. In late 2009, a duly convened arbitral panel found Laos in breach and awarded Petitioners approximately $57 million as compensation for their losses (the "Award"). After the period for challenging the Award in Malaysia expired, Petitioners began enforcement actions against Laos in the United States, the United Kingdom, and France under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, implemented by 9 U.S.C. §§ 201 - 08 (the "New York Convention" or "Convention"). Their enforcement efforts succeeded in the United States and the United Kingdom, resulting first in an August 2011 judgment in the United States District Court for the Southern District of New York (the "August 2011 judgment") and, later, a November 2012 judgment in the High Court of Justice of England and Wales (the "English judgment").

In October 2010, almost one year after the Award was issued and nine months after a challenge was due, Laos moved in Malaysia for an extension of time within which to file its request to set aside the Award. The Malaysian courts eventually granted Laos's motion and then, in 2012, set aside the Award. Returning to the United States with the Malaysian judgment in hand, Laos moved under Federal Rule of Civil Procedure 60(b)(5) to vacate the District Court's August 2011 judgment enforcing the Award.

Rule 60(b) provides that, "[o]n motion and just terms, the court may relieve a party ... from a final judgment" for certain specified reasons, one of which is set forth in Rule 60(b)(5) : that "the judgment ... is based on an earlier judgment that has been reversed or vacated." Fed. R. Civ. P. 60(b). Petitioners urged the District Court to deny Laos's motion to vacate, citing (among other conduct) Laos's delay in Malaysia in challenging the Award and its dilatory tactics in discovery matters arising in the U.S. litigation—conduct that Petitioners argued was so egregious that it should bar Laos from obtaining the equitable relief of vacatur.

The District Court rejected Petitioners' arguments, concluding that the New York Convention left it with exceedingly limited discretion: in essence, it was bound to give effect to the Malaysian annulment unless doing so would offend basic standards of justice in the United States. Finding that neither Laos's conduct nor anything in the Malaysian courts' reasoning so tainted the Malaysian order such that vacatur would offend fundamental standards of justice, the District Court granted Laos's Rule 60(b)(5) motion. In related rulings, the District Court also denied Petitioners' later application to enforce the English judgment, on grounds that the English judgment conflicted with the presumptively dominant Malaysian judgment, and it rejected Petitioners' request for security from Laos to protect their interest in the Award during the pendency of its Rule 60(b) motion and any subsequent appeals.

Petitioners now appeal these orders. Because our determination of this appeal rests in part on our decision in Corporación Mexicana de Mantenimiento Integral, S. de R.L. de C.V. v. Pemex-Exploración y Producción (" Pemex "), we have held our ruling in this matter pending our decision and resolution of the petition for certiorari in that case. 832 F.3d 92 (2016), cert. dismissed , ––– U.S. ––––, 137 S.Ct. 1622, 197 L.Ed.2d 746 (2017).

The New York Convention adopts an approach that does not require a party seeking enforcement of an award in what is known as a "secondary jurisdiction" (here, the United States) to await the conclusion of all appeals of the award that may be pursued in the "primary jurisdiction" (here, Malaysia). While uniquely empowering courts in the primary jurisdiction to set aside or annul an arbitral award, the Convention also anticipates that an arbitral party that has prevailed may sue elsewhere to enforce an award before the award has been reviewed by courts in the arbitral seat. Thus, Article V of the Convention addresses one scenario that grows out of that approach: when the prevailing party files an action to enforce the award in a secondary jurisdiction and then, the primary jurisdiction sets aside the award, Article V(1)(e) declares that a court of a secondary jurisdiction "may" refuse to enforce the award, N.Y. Convention art. V(1)(e), in contrast to the general directive that such a court "shall" enforce the award, id. art. III.

In Pemex , our Court recently addressed how district courts should evaluate an enforcement petition when the arbitral award has been annulled in the primary jurisdiction. There, we ruled that although Article V(1)(e)'s permissive language could be read to suggest that a district court has "unfettered discretion" as to whether to enforce such an award, the court's exercise of that discretion should rather be treated as "constrained by the prudential concern of international comity." Pemex , 832 F.3d at 106. Pemex also carved out a "public policy" exception to the comity principle for occasions when enforcing an arbitral award annulled in the primary jurisdiction is needed "to vindicate 'fundamental notions of what is decent and just' in the United States." Id. at 107 (quoting TermoRio S.A. E.S.P. v. Electranta SP., 487 F.3d 928, 938 (D.C. Cir. 2007) ); see also Baker Marine (Nig.) Ltd v. Chevron (Nig.) Ltd., 191 F.3d 194, 197 n.3 (2d Cir. 1999) ; Ackermann v. Levine, 788 F.2d 830, 837, 841 (2d Cir. 1986).

In Pemex, however, we did not have occasion to consider the interaction between Rule 60(b)(5) and the primary jurisdiction's annulment of an arbitral award. We now consider that interaction. We decide that Rule 60(b)(5) applies to a district court's consideration of a motion to vacate a judgment enforcing an arbitral award that has since been annulled in the primary jurisdiction. In conducting a Rule 60(b)(5) analysis, district courts should analyze the full range of Rule 60(b) considerations, including timeliness and the equities. In conducting this analysis, courts—in accordance with Pemex —ought to assign significant weight to considerations of international comity in the absence of a need to vindicate " 'fundamental notions of what is decent and just' in the United States." Pemex, 832 F.3d at 107 (quoting TermoRio , 487 F.3d at 938 ). In the instant case, however, more explicit consideration of these factors would not have materially changed the District Court's decision to vacate its prior judgment, especially in light of the District Court's explanations of its rulings granting vacatur and denying sanctions.

We therefore AFFIRM the District Court's order vacating the judgment. We further conclude that the District Court did not exceed the permissible bounds of its discretion in refusing to order Laos to post security during the pendency of its Rule 60(b) motion and any subsequent appeals, nor did it err by refusing to enforce the English judgment. Accordingly, we also AFFIRM the District Court's order denying the requested security, and we AFFIRM its order denying enforcement of the English judgment.

BACKGROUND

I. The Award

We draw the following statement of facts primarily from the text of the Award. The facts are largely undisputed by the parties; any differences are noted.

In the early 1990s, TLL (a Thai corporation) and its subsidiary HLL (a Laotian corporation partly owned by a state-owned enterprise of Laos) worked with Laos to develop plans for mining lignite in the Hongsa region of Laos, in the northwest area of the country, near the Thai border. The mining operations were intended to enable and support the parties' construction and operation of a power plant that would generate electricity for sale primarily in and to Thailand. In furtherance of these plans, in 1992 and 1993 TLL entered into successive contracts with Laos (the "Mining Contracts"), in which, among other things,...