ESSO Exploration & Prod. Nigeria Ltd. v. Nigerian Nat'l Petroleum Corp.

• Decision Date: 08 July 2022
• Docket Number: Docket Nos. 19-3159 (L),19-3361,August Term, 2020
• Citation: 40 F.4th 56
• Parties: ESSO EXPLORATION AND PRODUCTION NIGERIA LIMITED, Shell Nigeria Exploration and Production Company Limited, Petitioners-Appellants–Cross-Appellees, v. NIGERIAN NATIONAL PETROLEUM CORPORATION, Respondent-Appellee–Cross-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

40 F.4th 56

ESSO EXPLORATION AND PRODUCTION NIGERIA LIMITED, Shell Nigeria Exploration and Production Company Limited, Petitioners-Appellants–Cross-Appellees,

v.NIGERIAN NATIONAL PETROLEUM CORPORATION, Respondent-Appellee–Cross-Appellant.

Docket Nos. 19-3159 (L)

19-3361

August Term, 2020

United States Court of Appeals, Second Circuit.

Argued: January 22, 2021

Decided: July 8, 2022

Aaron R. Marcu (Elliot Friedman, David Y. Livshiz, Shannon M. Leitner, Paige von Mehren, Christian Vandergeest, on the brief), Freshfields Bruckhaus Deringer US LLP, New York, NY; Elizabeth Anne Snodgrass, Luke Sobota, Three Crowns (US) LLP, Washington, DC, for Appellants–Cross-Appellees.

Cecilia F. Moss (Peter R. Chaffetz, Andreas A. Frischknecht, Joshua D. Anders, David M. Berman, on the brief), Chaffetz Lindsey, LLP, New York, NY, for Appellee–Cross-Appellant.

Peter B. Rutledge, Law Office of Peter B. Rutledge, Athens, GA; Steven P. Lehotsky, Jonathan Urick, U.S. Chamber Litigation Center, Washington, DC; Peter Toldsorf, Erica Klenicki, Manufacturers’ Center for Legal Action, Washington, DC, for Amici Curiae the Chamber of Commerce of the United States of America, National Trade Council, and National Association of Manufacturers.

Richard D. Deutsch, Andrew G. McBride, McGuireWoods LLP, Houston, TX, Washington, DC; Ben Norris, American Petroleum Institute, Washington, DC, for Amicus Curiae American Petroleum Institute.

Alexander A. Yanos, Carlos Ramos-Mrosovksy, Raja Rana, Hanna Robbins, Alston & Bird LLP, New York, NY, for Amici Curiae Chief Mike A.A. Ozekhome, Professor Ikponmwonsa O. Omoruyi, Professor Offornze D. Amucheazi.

Lauren A. Mandell, Apoorva J. Patel, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, DC, for Amicus Curiae Professor George A. Bermann.

Peter A. Sullivan, Christina G. Hioureas, Foley Hoag LLP, New York, NY, for Amicus Curiae the Nigerian Federal Ministry of Justice.

Mallory B. Silberman, R. Stanton Jones, Sally L. Pei, Janine M. Lopez, Arnold & Porter Kaye LLP, Washington, DC, for Amici Curiae Federal Inland Revenue Service, Federal Ministry of Finance, Budget, and National Planning of the Federal Republic of Nigeria.

Before: Sack and Carney, Circuit Judges, and Kovner, District Judge.¹

Carney, Circuit Judge:

Esso Exploration and Production Nigeria Limited, the Nigerian subsidiary of an international oil corporation, has asked federal courts in the United States to enforce an arbitral award of $1.8 billion, plus interest, against the Nigerian National Petroleum Corporation ("NNPC") that Nigerian courts have partially set aside. The underlying dispute relates to an agreement between Esso and NNPC regarding oil production at the Nigerian-governed Erha oil field on the Gulf of Guinea. Since 1993, Nigeria has allowed Esso to develop Erha and extract its oil for profit; in return, NNPC became contractually entitled to obtain (or "lift") portions of the extracted oil. NNPC uses this lifted oil first to satisfy Esso's statutory tax obligations and royalties owed to the Nigerian government, and then to serve as its own share in the operation's profit. In 2007, less than two years after Esso began production at Erha, NNPC began lifting more oil than Esso believed it was entitled to extract.

Esso took its grievances to an arbitral panel—convened in Nigeria pursuant to its contract with NNPC—which found that NNPC had taken more oil than it was allowed and entered an award of almost $1.8 billion, plus interest, in Esso's favor (the "Award"). NNPC challenged the Award in Nigerian courts. Ultimately, in two separate judgments, the Nigerian Court of Appeal set aside part of the Award as arising from an inarbitrable tax dispute, concluding that it must instead be decided by a Nigerian tax tribunal. While multiple appeals remained pending in Nigerian fora, Esso petitioned the U.S. District Court for the Southern District of New York to enforce the entire Award against NNPC under the New York Convention. See 9 U.S.C. § 207.

The New York Convention generally obligates signatory states to enforce an award made by an arbitral panel in another signatory state, referred to as the "primary jurisdiction." It establishes an exception to the enforcement obligation, however, for awards that have been set aside by a court in the primary jurisdiction. In that circumstance, a court considering a petition for enforcement may—but is not required to—enforce the award.

In this Circuit, the district court may exercise its discretion to enforce a set-aside award only where the primary jurisdiction's judgment vacating the award is "repugnant to fundamental notions of what is decent and just" in the United States, a standard that we have cautioned is "high, and infrequently met." Corporación Mexicana de Mantenimiento Integral, S. de R.L. de C.V. v. Pemex-Exploración y Producción , 832 F.3d 92, 106 (2d Cir. 2016) (" Pemex ") (internal quotation marks omitted). Otherwise, the district court is obligated to afford comity to the foreign court's judgment and must decline to enforce the arbitral award that the foreign court set aside.

Here, in addition to opposing Esso's enforcement petition on its merits, NNPC urged the district court to dismiss the petition for want of personal jurisdiction over NNPC and on the ground of forum non conveniens . The district court rejected these threshold arguments but ultimately denied Esso's enforcement petition on the merits. After comparing the circumstances presented in Pemex to those found here, the district court concluded that, unlike the primary jurisdiction's judgment setting aside the contested award in Pemex , the Nigerian court's judgments here are owed comity.

Esso appealed the district court's merits judgment and NNPC cross-appealed its threshold determinations. Looking first at the cross-appeal, we agree with the district court's rulings on both personal jurisdiction and forum non conveniens , identifying no error in either the court's well-supported factual determinations or its legal conclusions. On the merits, we determine that the district court's analysis hewed more closely than it should have to the particular considerations at play in Pemex . Nonetheless, based on the record presented here, we agree with the district court's conclusion that comity should be extended to the judgments of the Nigerian Court of Appeal. But the district court overshot the limits of its conclusion by denying Esso's petition in full: it should have enforced the portions of the Award that the Nigerian judgments left intact.

We therefore affirm the district court's judgment insofar as it denied NNPC's motion to dismiss for lack of personal jurisdiction or on forum non conveniens grounds. We further affirm the judgment to the extent that it denied Esso's petition to enforce the whole of the Award, but we vacate the judgment as to those parts of the Award that were not struck by the Nigerian judgments. As to the latter, we remand this case to the district court so that it may first determine precisely which aspects of the Award are enforceable under the Nigerian judgments, and then enter a partial enforcement order based on that determination.

The judgment of the district court is AFFIRMED IN PART and VACATED IN PART, and the case is REMANDED for further proceedings.

BACKGROUND

I. The New York Convention

The New York Convention, which governs enforcement of foreign arbitral awards, serves the goals of encouraging and standardizing "the recognition and enforcement of commercial arbitration agreements in international contracts" in signatory states. Scherk v. Alberto-Culver Co. , 417 U.S. 506, 520 n.15, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974) ; see Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38 ("N.Y. Convention").² As a signatory state, the United States has implemented the New York Convention under the express provisions of chapter 2 of the Federal Arbitration Act ("FAA"). See 9 U.S.C. § 201 (providing that the New York Convention "shall be enforced in United States courts in accordance with [other provisions of the FAA]").

Under the New York Convention, the country in which an arbitral award is rendered "is said to have primary jurisdiction over the arbitration award." CBF Indústria de Gusa S/A v. AMCI Holdings, Inc. , 850 F.3d 58, 71 (2017) (quoting Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara , 500 F.3d 111, 115 n.1 (2d Cir. 2007) ). The state with primary jurisdiction is "free to set aside or modify an award in accordance with its domestic arbitral law and its full panoply of express and implied grounds for relief." Yusuf Ahmed Alghanim & Sons v. Toys "R" Us, Inc. , 126 F.3d 15, 23 (2d Cir. 1997) (citing N.Y. Convention art. V(1)(e)). All other signatory states are "secondary jurisdictions," and these states may decide only whether to enforce the arbitral award. CBF Indústria , 850 F.3d at 71 (emphasis omitted). In essence, the Convention allows for "a single-step process for reducing a foreign arbitral award to a domestic judgment." Id. at 72 (internal quotation marks omitted). This process occurs in "a summary proceeding that merely makes what is already a final arbitration award a judgment of the court." Id. at 73 (quoting Toys "R" Us , 126 F.3d at 23 ).

The New York Convention "evince[s] a pro-enforcement bias" by obligating courts in a secondary jurisdiction to enforce a foreign arbitral award, subject only to limited exceptions. Pemex , 832 F.3d at 105–06 (internal quotation marks omitted); see 9 U.S.C. § 207 ("The court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the ... Convention."³ ). Article V of the Convention sets out the limited circumstances in which a court is not bound to enforce an award. As relevant here, a court sitting in secondary jurisdiction may refuse to confirm an arbitral award at the request of the party...