Hardy Exploration & Prod. (India), Inc. v. Gov't of India, Civil Action No.: 16–0140 (RC)

• Decision Date: 30 November 2016
• Docket Number: Civil Action No.: 16–0140 (RC)
• Citation: 219 F.Supp.3d 50
• Parties: HARDY EXPLORATION & PRODUCTION (INDIA), INC., Petitioner, v. GOVERNMENT OF INDIA, Ministry of Petroleum and Natural Gas, Respondent.
• Court: U.S. District Court — District of Columbia

219 F.Supp.3d 50

HARDY EXPLORATION & PRODUCTION (INDIA), INC., Petitioner,

v.GOVERNMENT OF INDIA, Ministry of Petroleum and Natural Gas, Respondent.

Civil Action No.: 16–0140 (RC)

United States District Court, District of Columbia.

Filed November 30, 2016

Alexander A. Yanos, John Fellas, Malik Havalic, James H. Boykin, III, Hughes, Hubbard & Reed, LLP, New York, NY, for Petitioner.

Mark Neil. Bravin, Mitchell Silberberg & Knupp, LLP, Washington, DC, for Respondent.

MEMORANDUM OPINION

GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS

RUDOLPH CONTRERAS, United States District Judge

I. INTRODUCTION

Petitioner Hardy Exploration & Production (India), Inc. ("HEPI") has filed a Petition to confirm an arbitration award ("Award") against Respondent, the Government of India ("India"), acting through its Ministry of Petroleum and Natural Gas ("Ministry"). See generally Pet. Confirm Arbitration Award ("Pet."), ECF No. 1. HEPI filed its Petition pursuant to Section 207 of the Federal Arbitration Act. 9 U.S.C. § 207. Because India is a foreign state, HEPI must effect service under the Foreign Sovereign Immunities Act ("FSIA"). 28 U.S.C. § 1608. India moves to dismiss the Petition, arguing that HEPI did not properly effect service on India and, thus, that this Court lacks personal jurisdiction over India. See generally Specially–Appearing Resp't's Mot. Dismiss ("Mot. Dismiss"), ECF No. 16; Specially–Appearing Resp't's Mem. Law Supp. Mot. Dismiss ("Resp't's Mem."), ECF No. 16–1. India's motion is now ripe and ready for decision.

The Court finds that HEPI has failed to demonstrate that it properly served India. The contract between the parties does not constitute a special arrangement for service for the purposes of the FSIA, and, therefore, India has not been served. The Court will not, however, dismiss the Petition. Instead, HEPI will be permitted another opportunity to serve India by relying on the other methods for service identified in the FSIA.

II. BACKGROUND

The Court will begin its analysis by providing an overview of the facts giving rise to this dispute before turning to the parties' subsequent arbitration and litigation.

A. Factual Background¹

This case originates in the parties' participation in a Production Sharing Contract ("PSC") for the development and production of hydrocarbons. The PSC governs the exploration of a geographic block called CY–OS/2 (the "Block") found off the southeastern coast of India. See Pet. ¶ 5; Decl. of Ian MacKenzie ("MacKenzie Decl.") ¶ 3, ECF No. 1–2. See generally Production Sharing Contract ("PSC"), MacKenzie Decl., Ex. 2, ECF No. 1–4. The PSC has been in force since November 19, 1996. See Pet. ¶ 6; see also PSC at 136. At that time, an agreement was reached by three private companies, India's state-owned oil company, and "the President of India, acting through the Joint Secretary, Ministry of Petroleum and Natural Gas." See Pet. ¶ 6 (quoting PSC at 1). The PSC permitted the private companies to explore the Block and, if they found commercially viable hydrocarbon reserves, extract those resources under a production sharing arrangement. See Pet'r's Mem. Law Supp. Pet. to Confirm Arbitration Award ("Pet'r's Mem.") at 2–3, ECF No. 1–1; PSC art. 14–15.

HEPI was not an original participant in the PSC. See Pet. ¶ 7. Instead, HEPI acquired a 25% participation share in the PSC from one of the original private companies in 1997. See Pet'r's Mem. at 3. HEPI's interest was confirmed in the initial addendum to the PSC executed on March 30, 2000. See MacKenzie Decl., Ex. 3 at 1–2, ECF No. 1–5. Subsequently, each of the other private companies decided not to participate further in the PSC, and HEPI acquired a 100% participation share. See Pet'r's Mem. at 3; see also Arbitration Award at 3, MacKenzie Decl., Ex. 1, ECF No. 1–3. This change was reflected in the second addendum to the PSC, which was executed on August 17, 2001. See MacKenzie Decl., Ex. 4 at 1–2, ECF No. 1–6. Finally, HEPI transferred a 25% share of its interest in the PSC to GAIL (India) Ltd., a state-owned, Indian company in the business of gas processing and distribution. See Pet'r's Mem. at 3. This change was reflected in an additional amendment to the PSC.² See generally MacKenzie Decl., Ex. 5, ECF No. 1–7. India was a signatory to each of these three amendments to the PSC. See MacKenzie Decl., Ex. 3 at 6; Ex. 4 at 4; Ex. 5 at 5. HEPI continued to own a 75% share during the period giving rise to the underlying dispute between the parties. See Pet'r's Mem. at 4.

In late 2006, an exploratory well drilled in the Block yielded hydrocarbons. See id. at 4; Arbitration Award at 6. HEPI and GAIL alerted the Ministry of Petroleum and Natural Gas about the discovery on January 8, 2007. See Pet'r's Mem. at 4; Arbitration Award at 6–7. The PSC defined the procedure the parties would follow in the event of such a discovery. See PSC art. 9. Under the PSC, an appraisal period followed any discovery of hydrocarbons. See Pet'r's Mem. at 4; Arbitration Award at 7. At the end of the appraisal period, the PSC required the participating companies to issue a determination as to whether the discovery was a "Commercial Discovery," meaning that the production of the hydrocarbons would be economically feasible. See Pet'r's Mem. at 4; PSC arts. 9.5, 21.4.4. The PSC provided different appraisal period durations depending on the type of hydrocarbons discovered. See Pet'r's Mem. at 4. If the discovery was crude oil, as defined by the PSC, the appraisal period would be two years. See PSC art. 9.5. If the discovery was natural gas, on the other hand, the appraisal period would be five years. See PSC art. 21.4.4.

The parties disagreed about whether the discovery was crude oil or natural gas. See Pet'r's Mem. at 5. The Ministry maintained that the discovery was crude oil, and informed HEPI that its rights to the Block were relinquished after the shorter two-year appraisal period concluded on January 7, 2009. See Pet'r's Mem. at 5; Arbitration Award at 9–10. During 2009 and 2010, HEPI pursued a number of avenues in an attempt to convince the Ministry to change its position. See Pet'r's Mem. at 5; Arbitration Award at 10–12. The Ministry refused, insisting that the discovery was crude oil and that HEPI had forfeited its rights to the Block. See Pet'r's Mem. at 5.

B. The Arbitration and Subsequent Litigation

The PSC includes an arbitration provision. See PSC art. 33. Specifically, Article 33 of the PSC provides that "any unresolved dispute, difference or claim which cannot be settled amicably within a reasonable time may ... be submitted to an arbitral tribunal for final decision." PSC art. 33.3. Article 33 sets forth the procedures for any arbitration, including selecting Kuala Lumpur, Malaysia as the venue. See PSC art. 33.12. The PSC provides that "[t]he decision of the arbitral tribunal, and, in the case of difference among the arbitrators, the decision of the majority, shall be final and binding upon the Parties." PSC art. 33.8.

HEPI initiated an arbitration proceeding following the parties' inability to resolve which assessment period applied to the discovery of hydrocarbons in the Block. See Pet'r's Mem. at 5. Both HEPI and India nominated former Chief Justices of the Supreme Court of India to serve as party-appointed arbitrators, and the two party-appointed arbitrators nominated another former Chief Justice to serve as the presiding arbitrator. See Pet'r's Mem. at 5; Arbitration Award at 4. The Tribunal first turned to preliminary issues, and issued an order on May 28, 2011 finding that the dispute between the parties was subject to arbitration and within the Tribunal's jurisdiction. See MacKenzie Decl., Ex. 7, ECF No. 1–9; see also Arbitration Award at 4.

After considering the merits of the dispute, the Tribunal issued a unanimous award on February 2, 2013 in Kuala Lumpur, Malaysia. See Arbitration Award at 43. On the central question, the Tribunal found that "the nature of the discovery in the Block ... would unequivocally qualify under the term of the [PSC] as Non Associated Natural Gas." Id. at 28. Because the discovery was natural gas, not crude oil, the Tribunal decided that HEPI was "denied the time provided for in the contract for appraisal and to come to [a] conclusion about the commerciality of the discovery." Id. at 35. The Tribunal concluded that severing HEPI's interest in the Block was "illegal, being on the erroneous impression that the discovery was Oil." Id. at 42.

As a remedy, the Tribunal stated that "the parties shall be immediately relegated to the position in which they stood prior to the order of the relinquishment and the block shall be restored to [HEPI]." Id . The Tribunal also awarded HEPI financial compensation of 5 billion Indian Rupees, see id. which HEPI alleges corresponds to roughly $74 million, see Pet'r's Mem. at 7 n.1. Finally, the Tribunal also ordered India to pay certain costs of the arbitration. See Arbitration Award at 42–43.

HEPI alleges that India has not complied with the Award. See Pet'r's Mem. at 7. HEPI's declarant, Mr. Ian MacKenzie, states that no legal proceedings related to the Award have been filed in Malaysia, the venue of the arbitration. See MacKenzie Decl. ¶ 9. India did, however, file a petition in Delhi High Court challenging the Award in July 2013. Id. ¶ 6. In November 2013, HEPI filed its own petition to enforce the award in the same court. Id. ¶ 8. India's petition was dismissed by the Delhi High Court on July 9, 2015. Id. ¶ 6. A request for reconsideration of that decision was rejected on January 20, 2016.³ Id. ¶ 7. HEPI's petition to enforce the award in India remained pending in the Delhi High Court in January 2016. Id. ¶ 8.

C. Proceedings before this Court

On January 28, 2016, HEPI filed this Petition before the Court, seeking the confirmation of the Award. See generally Pet. On February 17, 2016, HEPI filed a Certificate of Service asserting that India was served by Federal Express and attaching...