LLC Komstroy v. Republic of Moldova
| Decision Date | 23 August 2019 |
| Docket Number | Case No. 14-cv-01921 (CRC) |
| Parties | LLC KOMSTROY, as successor in interest to LLC ENERGOALLIANCE, Petitioner, v. REPUBLIC OF MOLDOVA, Respondent. |
| Court | U.S. District Court — District of Columbia |
Ukraine-based LLC Komstroy, as successor in interest to LLC Energoalliance, petitions this Court to confirm an arbitral award issued in the latter's favor and against the Republic of Moldova. The award stemmed from a dispute over a series of contracts from 1999 and 2000 to supply electric power to a Moldovan state-owned utility, with payments passing through a third party. After the utility defaulted, the third party transferred its interest in the debt to Energoalliance, which eventually initiated arbitration proceedings against Moldova under the Energy Charter Treaty ("ECT"). In 2013, an arbitral tribunal in Paris concluded it had jurisdiction over the dispute by construing the debt originating from the contracts as an "investment" under the ECT. It then determined that Moldova had violated the treaty by denying Energoalliance the benefits of that investment and awarded Energoalliance almost $46.5 million.
Award in hand, Energoalliance commenced confirmation proceedings in a number of jurisdictions, including this Court in 2014. At the same time, Moldova filed an action to set aside the award with the Paris Court of Appeal, which in 2016 concluded that the tribunal had misinterpreted the subject debt as an "investment" under the ECT. Energoalliance then appealed that ruling to the highest civil court in France—the Court of Cassation—which reinstated the award in 2018 after finding that the intermediate court had introduced an additional requirement for "investment" not contained in the ECT. The case is now back before the Paris Court of Appeal to consider alternative arguments advanced by Moldova to set aside the award.
Meanwhile, in November 2018, this Court determined that because the award is presently enforceable under French law notwithstanding the pendency of the set-aside proceedings, it would be appropriate to lift a stay—which it had imposed when Moldova initiated the set-aside action—and proceed to the merits of the confirmation petition. See LLC Komstroy v. Republic of Moldova, No. 14-cv-1921 (CRC), 2018 WL 5993437 (D.D.C. Nov. 13, 2018). The Court does so now. In what follows, the Court first ensures that it has subject matter jurisdiction under the Foreign Sovereign Immunities Act before considering Moldova's objections to confirming the award. Concluding that the country has not met its substantial burden of resisting confirmation under the applicable treaty, the Court will grant the petition to confirm the award and deny Moldova's motion to dismiss.
This case began in November 2014, when Energoalliance filed a Petition to Confirm Foreign Arbitral Award pursuant to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention, as implemented by Chapter 2 of the Federal Arbitration Act. See Petition, ECF No. 1. The petition seeks recognition of a final arbitral award issued in October 2013 by an ad hoc tribunal in Paris, France in favor of Petitioner and against the Republic of Moldova. Id. ¶ 1.
The parties' dispute goes back decades.1 Before the collapse of the Soviet Union, Moldova received its electricity from Ukraine pursuant to economic plans approved by Moscow. See Ex. B, Part I to Decl. of Viacheslav Lych ("Award"), ECF No. 8-4, ¶ 187 (filed under seal). After the collapse, Energoalliance—a private Ukrainian company—undertook the task of providing power to Moldova pursuant to a series of supply contracts dating from February 1999. As relevant here, Agreement No. 1/01 provided that Energoalliance would purchase electricity from Ukraine's state-owned electricity producer for export to Moldova's state-owned utility, Moldtranselectro. Id. ¶ 69. Under Agreement No. 24/02, Energoalliance would sell the Ukrainian electricity to a third-party British Virgin Islands entity, Derimen, which would then resell the electricity to Moldtranselectro. Id. ¶¶ 70-71. The agreements were structured this way because if Energoalliance were to sell electricity directly to Moldtranselectro, it would bear the risk of steep regulatory fines pursuant to Ukrainian currency controls should the Moldovan entity fail to make timely payments. Id. ¶¶ 203-04, 217; see also Declaration of Viacheslav Lych ("Lych Decl.") in Supp. of Petition, ECF No. 1-3, ¶ 7. As it turned out, Moldova did fall behind on its payments to Derimen, leading Derimen in May 2000 to assign the debt to Energoalliance pursuant to Agreement No. 06/20. See Award ¶¶ 72-74.
Energoalliance's efforts to collect the debt directly from Moldtranselectro proved fruitless due in large part to interference by the Moldovan government. For instance, the government in October 2000 reorganized Moldtranselectro by transferring its assets and functions to a new state-owned company while leaving its obligations intact. Id. ¶¶ 87-88. In 2002, the Moldovan auditing chamber, in a quasi-judicial, ex parte proceeding, concluded that itcould not be proven that Energoalliance had provided electricity to Moldtranselectro, id. ¶ 101, and ordered the utility "to cancel its debts related to said electricity supplies," id. ¶ 102. Energoalliance's appeal of that determination was unsuccessful. Id. ¶ 106. Other efforts in Moldovan courts were similarly futile. Id. ¶¶ 113-16.
After a decade of unsuccessful collection efforts, Energoalliance instituted arbitration proceedings before an ad hoc tribunal in Paris, France in July 2010. Petition ¶¶ 17-18. The arbitration arose under the Energy Charter Treaty ("ECT"), 2080 U.N.T.S. 100—a multilateral treaty to which Moldova and Ukraine are parties—and was conducted under the United Nations Commission on International Trade Law ("UNCITRAL") Arbitration Rules. Id. ¶ 18. After a full exchange of written evidence and pleadings as well as a three-day hearing in July 2012, see Award ¶¶ 15-17, 19-20, 24, 37-39, 41-42, a majority of the tribunal concluded in October 2013 that it had jurisdiction under the ECT2 and that Moldova had breached its obligations under the treaty.3 It ordered Moldova to pay Energoalliance the following:
Id. ¶ 436. These items totaled almost $46.5 million based on the exchange rate on that date.
In November 2014, Moldova made a formal application to the Paris Court of Appeal to set aside the Award on grounds similar to those it advanced before the ad hoc tribunal—that the tribunal lacked jurisdiction over the claims under the ECT and that the Award violated public order. Petition ¶ 28. During the pendency of the set-aside proceeding before the Paris Court of Appeal, Petitioner requested and received from the High Court of Paris an "exequatur," or order to enforce the Award. Lych Decl. ¶ 16.
As previously noted, Petitioner initiated this case in November 2014. Moldova—acting through its Ministry of Justice and without entering an appearance by counsel4—submitted a document titled "Reference" received by this Court in July 2015. See ECF No. 12. The Court construed this submission as a motion to dismiss and directed Petitioner to respond, which it did. See ECF Nos. 14, 16, 17. Moldova then requested a stay pending resolution of the set-aside proceeding before the Paris Court of Appeal. See ECF No. 20. But before the Court could rule on that request, Petitioner informed the Court that the Paris Court of Appeal had, in April 2016, vacated the 2013 Award for lack of jurisdiction. See Pet'r Notice, ECF No. 21, at 1. The Paris court did not reach Moldova's argument regarding international public order. Petitioner informed this Court that it intended to appeal the adverse decision to the Cour de Cassation ("Court of Cassation"), the highest civil court in France, and requested a stay of this matter pending resolution of that appeal. Id. Moldova concurred in this stay request. See ECF No. 22. The Court thus stayed the case. See Apr. 22, 2016 Minute Order. Despite the stay, both partiescontinued to litigate the case—at least in part. Petitioner filed a more extensive reply to Moldova's motion to dismiss the petition, see ECF No. 27, and Moldova filed a renewed motion to dismiss, see Renewed Mot. to Dismiss ("Renewed MTD"), ECF No. 37.
A few years later, Petitioner informed the Court that in March 2018, the Court of Cassation had issued a decision in its favor. See Status Report re: Cour de Cassation Proceedings, ECF No. 32 at 2. That decision reversed and voided the 2016 Paris Court of Appeal's jurisdictional decision and remanded the case to a "differently composed" panel to consider Moldova's remaining arguments. See Ex. A to Status Report re: Cour de Cassation Proceedings ("Court of Cassation Decision"), ECF No. 32-1, at 2-3. Petitioner submitted that it was finally time for the Court to consider the confirmation petition on the merits. See Pet'r Mot. to Lift Stay, ECF No. 33. Moldova objected, asking the Court to extend the stay pending the renewed proceedings in the Paris Court of Appeal. See Motion to Extend Stay, ECF No. 35.
In light of the Court of Cassation's decision and finding that the exequatur made the Arbitral Award presently enforceable under French law, this Court lifted the stay in November 2018. See LLC Komstroy v. Republic of Moldova, No. 14-cv-1921 (CRC), 2018 WL 5993437 (D.D.C. Nov. 13, 2018). After proceeding without counsel for four years, Moldova finally retained representation. See ECF Nos. 46, 47. Counsel for Moldova then requested leave...
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