Belize Soc. Dev. Ltd. v. Gov't of Belize

• Decision Date: 21 July 2015
• Docket Number: 14–7003,14–7018.,Nos. 14–7002,s. 14–7002
• Parties: BELIZE SOCIAL DEVELOPMENT LIMITED, Appellee v. GOVERNMENT OF BELIZE, Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

794 F.3d 99

BELIZE SOCIAL DEVELOPMENT LIMITED, Appellee

v.GOVERNMENT OF BELIZE, Appellant.

Nos. 14–7002

14–7003

14–7018.

United States Court of Appeals, District of Columbia Circuit.

Argued Jan. 16, 2015.

Decided July 21, 2015.

Rehearing En Banc Denied Sept. 28, 2015.

Creighton R. Magid argued the cause and filed the briefs for appellant. Marcus W. Sisk Jr. entered an appearance.

Louis B. Kimmelman argued the cause for appellee. With him on the brief were Dana C. MacGrath and Ryan C. Morris.

Before: GARLAND, Chief Judge, TATEL, Circuit Judge, and SENTELLE, Senior Circuit Judge.

Opinion

Opinion for the Court filed by Senior Circuit Judge SENTELLE.

SENTELLE, Senior Circuit Judge:

Belize Social Development Limited (“BSDL”) petitioned the district court to confirm an arbitration award rendered against the government of Belize. The arbitration award arises out of the alleged breach by Belize of a 2005 agreement between Belize and Belize Telemedia Limited, BSDL's predecessor in interest. Belize had declined to participate in the arbitration underlying the petition and took the position in the district court and before us that the Prime Minister at the time of the entry of the agreement lacked authority to enter either the underlying contract or the arbitration agreement and that therefore, the arbitration exception to the Foreign Sovereign Immunities Act, 28 U.S.C. § 1602, et seq., does not apply, so that Belize remains immune from this action and the courts of the United States do not have jurisdiction over this litigation. Because Belize had not provided support for its claim with respect to the arbitration agreement, the district court rejected the contention and entered judgment in favor of BSDL. Belize Soc. Dev. Ltd. v. Gov't of Belize, 5 F.Supp.3d 25, 33–34 (D.D.C.2013). For the same reason, we affirm the judgment of the district court.

BACKGROUND

In 2005, Belize, acting under the direction of then-Prime Minister Said Musa, entered into an agreement styled “The Accommodation Agreement” with Belize Telemedia Limited, Belize's largest private telecommunications company. Under the agreement, the company contracted to purchase properties from Belize which the country desired to sell “in order to better accommodate the Government's communication needs.” Belize Soc. Dev. Ltd. v. Gov't of Belize, 668 F.3d 724, 728 (D.C.Cir.2012). As part of the transaction, Telemedia was to obtain relief from tax and regulatory burdens otherwise applicable to the company, and receive other significant benefits. The agreement, among other things, (1) guaranteed Telemedia a 15% rate of return on investments, with any shortfall to be paid by Belize; (2) gave Telemedia preferential tax treatment; (3) excluded Telemedia from import duties; and (4) committed Belize to ensuring that “no person other than BTL and [Speednet Communications Limited, BTL's competitor,] have or will have or be granted any authority, permit or license in Belize to legally carry on, conduct, or provide telecommunication services involving or allowing the provision or transport of voice services.” Government Telecommunications Accommodation Agreement §§ 3.1, 6.1, 11.4, 11.3, September 19, 2005, Joint Appendix 129–160. The parties also agreed to an arbitration clause which stated:

Any dispute arising out of or in connection with this Agreement including any question regarding its existence, validity or termination, which cannot be resolved amicably between the parties shall be referred to and finally resolved by arbitration under the London Court of International Arbitration (LCIA) Rules which Rules are deemed to be incorporated by reference under this Section.

Id. at § 15.2.

The administration of Prime Minister Musa lasted only until 2008, when Prime Minister Dean Barrow took office. The new prime minister renounced the Accommodation Agreement, asserting that it was repugnant to the laws of Belize and therefore invalid. Belize then ceased to honor the contractual obligations as asserted by Telemedia. Telemedia repaired to the terms of the arbitration clause and submitted the dispute to arbitration before the LCIA in London. Belize refused to participate in the arbitration proceedings, contending, as it contends now, that the arbitration clause was invalid and that the arbitrators lacked jurisdiction. On March 18, 2009, the arbitral tribunal ruled that the Accommodation Agreement was valid and binding on Belize; that the tribunal had jurisdiction over Telemedia's claims; and that Belize had breached the accommodation agreement. Belize Soc. Dev. Ltd., 668 F.3d at 728. The arbitral tribunal granted Telemedia declaratory relief, and awarded over 38 million Belize dollars in damages. Id. Two days later, Telemedia assigned the monetary portion of its award to BSDL. Id.

In November 2009, BSDL brought suit in the District Court for the District of Columbia to confirm the arbitral award pursuant to section 207 of the Federal Arbitration Act (“FAA”), 9 U.S.C. § 207. Belize moved to stay confirmation of the award pending resolution of related litigation in Belize. The district court obliged; BSDL appealed. We reversed, noting that under the FAA, the stay order “was not in conformity with federal law and international commitments.” Belize Soc. Dev. Ltd., 668 F.3d at 733. We remanded and instructed the district court “to review and grant BSDL's petition to confirm the Final Award absent a finding that an enumerated exception to enforcement ... applie[s].” Id. On remand, Belize argued that the district court lacked subject matter jurisdiction over the dispute because it was entitled to sovereign immunity under the Foreign Sovereign Immunities Act (“FSIA”). Belize Soc. Dev. Ltd., 5 F.Supp.3d at 32. The district court held that jurisdiction was proper under the arbitration exception to the FSIA, and granted BSDL's petition to confirm the award. Id. at 33. This appeal followed.

ANALYSIS

The Foreign Sovereign Immunities Act is “the sole basis for obtaining jurisdiction over a foreign state in the courts of [the United States].” Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989). Its terms are absolute: Unless an enumerated exception applies, courts of this country lack jurisdiction over claims against a foreign nation. Saudi Arabia v. Nelson, 507 U.S. 349, 355, 113 S.Ct. 1471, 123 L.Ed.2d 47 (1993). BSDL claims the arbitration exception applies to this case.

The arbitration exception provides:

A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case ... in which the action is brought, either to enforce an agreement made by the foreign state with or for the benefit of a private party to submit to arbitration all or any differences which have arisen or which may arise between the parties with respect to a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration under the laws of the United States, or to confirm an award made pursuant to such an agreement to arbitrate, if ... the agreement or award is or may be governed by a treaty or other international agreement in force for the United States calling for the recognition and enforcement of arbitral awards.

28 U.S.C. § 1605(a)(6).

Where a plaintiff has asserted jurisdiction under the FSIA and the defendant foreign state has asserted “the jurisdictional defense of immunity,” the defendant state “bears the burden of proving that the plaintiff's allegations do not bring its case within a statutory exception to immunity.” Phoenix Consulting Inc. v. Republic of Angola, 216 F.3d 36, 40 (D.C.Cir.2000). Belize makes two arguments as to why the arbitration exception does not apply.

First, Belize argues that the arbitration exception to sovereign immunity does not apply because there was no “agreement made by the foreign state.” 28 U.S.C. § 1605(a)(6). Belize syllogizes as follows: The Prime Minister lacks actual authority to bind the sovereign in an unconstitutional agreement; the Accommodation Agreement violates the Constitution and laws of Belize; therefore, the Prime Minister lacked authority to bind Belize in the Accommodation Agreement. Pet. Br. 9–10. Belize concludes that because the Prime Minister lacked actual authority to execute the Accommodation Agreement on behalf of Belize, the agreement is void ab initio, and there is no “agreement made by the foreign state.” Id. at 19, 22.

Essential to Belize's analysis is the assumption that if the former Prime Minister lacked actual authority to execute the Accommodation Agreement, then every provision in the agreement, including the arbitration provision, is void. Because this assumption is incorrect, Belize's argument fails.

The language of the FSIA arbitration exception makes clear that the agreement to arbitrate is severable from the underlying contract. The exception only requires a valid “agreement ... to submit to arbitration,” 28 U.S.C. § 1605(a)(6). It also distinguishes between the underlying “legal relationship” and the agreement to arbitrate disputes arising from that relationship. Id. As we have previously noted, the agreement to arbitrate is “separate from the obligations the parties owe to each other under the remainder of the contract.” Marra v. Papandreou, 216 F.3d 1119, 1123, 1125 (D.C.Cir.2000). It is, for all intents and purposes, “a distinct contract in and of itself.” Id.; see Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403–04, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967) (distinguishing between the agreement to arbitrate and the underlying contract). In order to succeed in its claim that there was no “agreement made by the foreign state ... to submit to arbitration,” 28 U.S.C. § 1605(a)(6), Belize must show that the Prime Minister lacked authority to enter into the arbitration agreement. This Belize has failed to do.

In the district court, Belize argued that the Prime Minister lacked authority to enter...