Agrocomplect, Ad v. Republic of Iraq

• Decision Date: 30 November 2007
• Docket Number: Civil Action No. 07-0165(RBW).
• Citation: 524 F.Supp.2d 16
• Parties: AGROCOMPLECT, AD, Plaintiff v. REPUBLIC OF IRAQ, Defendant.
• Court: U.S. District Court — District of Columbia

524 F.Supp.2d 16

AGROCOMPLECT, AD, Plaintiff v. REPUBLIC OF IRAQ, Defendant.

Civil Action No. 07-0165(RBW).

United States District Court, District of Columbia.

November 30, 2007.

Philip M. Musolino, Musolino & Dessel, Washington, DC, Danielle M. E spinet, Rolinski & Suarez, L.L.P., Potomac, MD, for Plaintiff.

Matthew David Slater, Cleary, Gottlieb, Steen & Hamilton LLP, Washington, DC, for Defendant.

MEMORANDUM OPINION

REGGIE B. WALTON, District Judge.

Agrocomplect AD, the plaintiff in this civil suit, seeks $47,000,000 in compensatory damages from the Republic of Iraq for the alleged breach of a construction contract entered into by the plaintiff and the defendant in the early 1980s (the "Contract").¹ First Amended Complaint at 11 (the "Amended Complaint" or "Am. Compl."). The plaintiff further requests that the Court enter an order directing the parties to arbitrate its breach of contract claim in the first instance pursuant to the terms of the Contract. Id. Currently before the Court is the Defendant's Motion to Dismiss the First Amended Complaint (the "Def. Mot.") and the Plaintiff's Motion for Leave to Conduct Limited Discovery on Motion to Dismiss First Amended Complaint (the "Pl. Discovery Mot."). After carefully reviewing the Amended Complaint, the parties' motions, and all memoranda relevant thereto,² the Court concludes that it must grant the defendant's motion to dismiss and deny the plaintiff's discovery motion as moot for the reasons that follow.

I. Background

The following facts are either alleged or incorporated by reference in the plaintiff's Amended Complaint. The plaintiff "is a corporation organized under the laws of the Republic of Bulgaria." Am. Compl. ¶ 2. At some point in 1984,³ the plaintiff entered into the Contract with the defendant, whereby the plaintiff agreed "to perform work, inter alia, on the Hilla-Diwaniya 4 Land Reclamation Project for the State Organization for Land Reclamation [the Project], operating under the authority of Iraq's Ministry of Agriculture and Irrigation of the Republic of Iraq." Id. ¶¶ 4-5. The construction work awarded to the plaintiff by the Contract covered "102,000 donum,"⁴ which were "divided initially into [eight] zones." Id. ¶ 10. A ninth zone was later added. Id.

As reflected in a document attached to the Contract entitled "Memorandum No. 2," Contract at 248-51 (the "Mem. No. 2"),⁵ payment to the plaintiff was to be made in the form of "monthly certificates" redeemable hi part in Iraqi dinars (45%) and in part in United States dollars (55%), Mem. No. 2 ¶¶ 11(B), 14-15. Memorandum No. 2 specified that the defendant would make a down payment equal to eight percent of the contract price in three installments, id. ¶ 11(A), which would then be deducted "from the Iraqi [d]inar portion of the monthly certificates," id. ¶ 11(B). It further provided that the dollar portion of the contract price could be transferred abroad by the plaintiff for various uses, "including payment for the personnel engaged in the Project's execution, in accordance with the minutes of the Extraordinary Session [of the] Iraqi-Bulgarian Joint Committee for Economic, Scientific[,] and Technical Cooperation, signed on January 13, 1983[,] in Baghdad, Republic of [Iraq]." Id. ¶ 15.

The minutes referenced in Memorandum No. 2 appear to reflect a financing arrangement between the Bulgarian Foreign Trade Bank (the "Bulbank"), the national bank for the People's Republic of Bulgaria ("Bulgaria"), and the Central Bank of Iraq (the "CBI") reached at a session held by the Bulgarian-Iraqi Joint Committee for Economic, Scientific, and Technical Cooperation (the "Joint Committee") whereby the Bulbank would finance the dollar portion of the contract price pursuant to certain "deferred payment arrangements agreed upon" by the defendant and Bulgaria. Def. Mem., Ex. D (Agreed Minutes of the Fifteenth Regular Session of the Bulgarian-Iraqi Joint Committee for Economic, Scientific[,] and Technical Cooperation) (the "Fifteenth Session Minutes") at 2; see also Mem. No. 2 ¶¶ 15-16 (referencing this arrangement), Ministry Letter at 1 (same).⁶ "The utili[z]ed credit principle amount [would] be repaid in [four] equal yearly installments," with five percent interest on the principle to be paid within three months "following its charging." Mem. No. 2 ¶ 16(B).

The plaintiff commenced work on the Project on March 12, 1985. Am. Compl. ¶ 11. "[T]o perform under the terms of the Contract, [the p]laintiff ... enter[ed] into agreements with suppliers and others in the United States." Id. ¶ 8. The plaintiff completed work on the Project zoneby-zone, handing over each zone to the Iraqi government upon completion. Id. ¶ 11. "By August 2, 1990, eight zones were completed and handed over." Id. ¶ 12.

The defendant invaded Kuwait on August 2, 1990, id. ¶ 13, leading to an international embargo that lasted from August 6, 1990, through 2003, id. ¶ 14. At some point in January of 1991, "[the p]laintiffs machinery, production base, and camp facilities were destroyed by the American military as a consequence of the [defendant's] invasion and occupation of Kuwait." Id ¶ 15. As alleged in the Amended Complaint, the plaintiff suffered contract losses totaling approximately $17,000,000, the loss of tangible property totaling approximately $38,000,000, third-party expenses totaling approximately $188,000, and loss of business reputation totaling approximately 5483,000. Id. ¶ 17.

Based on the defendant's failure to "pay to [the p]laintiff the sums due and owing under the Contract," id. ¶ 18, or enter into arbitration pursuant to the terms of the Contract, id. ¶ 19, the plaintiff "timely exhausted its claims under the Contract to the United Nations Compensation Commission (the `UNCC[]')," id. ¶ 21. On March 19, 1999, the UNCC awarded the plaintiff $150,790 "for the cost of air evacuation of 368 company employees and 56 family members." Id. ¶ 22. Thereafter, the plaintiff pursued the balance of its claim before the Iraqi Debt Reconciliation Office (the "IDRO"), which was established by the interim Iraqi government "for the expressed purpose of resolving certain debts on certain pre-established terms, including discounts and structured payment schedules." Id. ¶ 23. The IDRO "rejected certain of [the p]laintiffs. [c]laims as outside of its jurisdiction," id. ¶ 25, but agreed to pay $7,505,203.20 "on certain of [the p]laintiff's claims, plus accrued interest at the IDRO rate," id. ¶ 26. The IDRO then reduced its award "to 10.25% of the total amount of the claim plus interest," resulting in a net payment of $1,761,875.12. Id.

The plaintiff filed its initial complaint with this Court on January 23, 2007. After the defendant filed a motion to dismiss the plaintiffs complaint under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) and the plaintiff filed a motion for limited jurisdictional discovery, the plaintiff filed its Amended Complaint on July 16, 2007, thereby rendering both motions moot. The defendant filed its motion to dismiss the Amended Complaint on August 6, 2007, once again citing Rules 12(b)(1) and 12(b)(6). The plaintiff filed its new motion for leave to take jurisdictional discovery on September 13, 2007.

The defendant seeks to dismiss the Amended Complaint on two grounds. First, it argues that the Court lacks subject-matter jurisdiction over this dispute under the doctrine of sovereign immunity as codified in the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1330, 1391, 1441, 1602-11 (2001) (the "FSIA" or the "Act"). Def. Mem. at 1-3, 7-22; Def. Reply at 1-16. Second, the defendant argues that the plaintiff has failed to state a claim for which relief can be provided because (1) the plaintiffs complaint must be referred to arbitration in the first instance Def. Mem. at 23-24; Def. Reply at 16, (2) the plaintiffs suit is barred by the applicable statute of limitations, Def. Mem. at 24-26; Def. Reply at 16, 18-23, and (3) the plaintiff has released its claims against the defendant by participating in the IDRO process, Def. Mem. at 24, 26-29; Def. Reply at 16, 23-25. In raising this last argument, the defendant relies heavily on documents generated as part of the IDRO review process. Def. Mem. at 26-29; Def. Reply at 23-25.

The plaintiff argues in its opposition to the defendant's motion to dismiss that this suit falls within two of the statutory exceptions to a foreign nation's sovereign immunity provided by the FSIA: the exception for actions based upon a foreign nation's commercial activity outside the United States that has a "direct effect" within the United States set forth in 28 U.S.C. § 1605(a)(2), Pl. Opp'n at 4-5, 10-20, and the exception in § 1605(a)(6) for actions brought to enforce an arbitration agreement capable of enforcement in the United States, id. at 5, 20-24.⁷ The plaintiff further argues that the defendant's timeliness argument cannot be resolved on a motion to dismiss under Rule 12(b)(6), id. at 25-31, and that the plaintiffs release of any claims in the IDRO process was a limited one that does not cover the claims at issue in this suit, id. at 32-41. The plaintiff also seeks discovery with respect to its "direct effect" argument on the issue of sovereign immunity and with respect to the defendant's affirmative defenses. Pl. Discovery Mem. at 4-6.

The parties agree that the defendant's affirmative defenses of timeliness and release should be addressed in arbitration in the first instance, but they arrive at different results based on this conclusion. The plaintiff asserts that the Court should enter an order directing the parties to arbitrate their dispute pursuant to the terms of the Contract. Pl. Opp'n at 24-25. The defendant, on the other hand, argues that the Contract's arbitration clause requires dismissal of the plaintiffs suit because the plaintiff has not made a demand on the defendant for arbitration. Pl. Reply at 16. Under either approach, the defendant's arguments...