LLC SPC Stileks v. Republic of Mold.

• Decision Date: 15 January 2021
• Docket Number: No. 19-7106,C/w 19-7142,19-7106
• Citation: 985 F.3d 871
• Parties: LLC SPC STILEKS, Appellee v. The REPUBLIC OF MOLDOVA, Appellant
• Court: U.S. Court of Appeals — District of Columbia Circuit

985 F.3d 871

LLC SPC STILEKS, Appellee

v.The REPUBLIC OF MOLDOVA, Appellant

No. 19-7106

C/w 19-7142

United States Court of Appeals, District of Columbia Circuit.

Argued October 23, 2020

Decided January 15, 2021

George C. Grasso argued the cause and filed the briefs for appellant.

Gene M. Burd, Washington, DC, argued the cause and filed the brief for appellee.

Before: Henderson and Rogers, Circuit Judges, and Ginsburg, Senior Circuit Judge.

Karen LeCraft Henderson, Circuit Judge:

This appeal arises from a long-running dispute between the Republic of Moldova and a Ukrainian energy provider called Energoalliance. For the better part of 1999 and 2000, Energoalliance sold electricity to a Moldovan state-owned utility. After the utility failed to pay its bill in full, Energoalliance alleged that Moldova violated its obligations under the Energy Charter Treaty. An arbitration panel agreed and a company called Stileks—which company, through a series of corporate transactions, owns the right to Energoalliance's arbitration award—now attempts to recover. Stileks and Moldova are proceeding against each other in multiple forums. In this court, the main issue is whether the district court correctly confirmed the arbitration award which, with interest, now exceeds $58 million. We uphold confirmation of the award but remand for the district court to consider whether Moldova had a settled expectation that an adverse judgment would be denominated in Moldovan lei rather than U.S. dollars.

I. Background

Ukraine and Moldova have highly interconnected electrical systems—a legacy of the years when both states were subject to direction from Moscow. When the Soviet Union collapsed, contracts and treaties replaced central planning. An example is the Energy Charter Treaty (ECT), a multilateral agreement signed by governments on both sides of the old Iron Curtain, including Ukraine and Moldova. See Energy Charter Treaty, Dec. 17, 1994, 2080 U.N.T.S. 95 [hereinafter ECT]. Its purpose is to encourage and protect cross-border investment in the energy industry.

In 1999, Energoalliance signed a series of contracts to sell electricity to Moldtranselectro, a utility owned by the Republic of Moldova. These were not ordinary sales contracts. Ukrenergo, a Ukrainian state-owned utility, sold electricity to Energoalliance, which sold it to a British Virgin Islands (BVI) entity called Derimen Properties; that entity sold it to Moldtranselectro. The agreements were structured this way because Energoalliance wanted to avoid certain implications of the Ukrainian government's currency controls. But Energoalliance still assumed the risk of non-payment by Moldtranselectro in May 2000—after Moldtranselectro had fallen behind on its payments—and Derimen assigned the debt to Energoalliance.

Energoalliance sought recourse in Moldovan courts to collect this debt. These decade-long proceedings were unsuccessful, due in significant part to the Moldovan government's actions. To give one example, the government transferred most of Moldtranselectro's assets to several new state-owned entities, leaving the old utility with financial obligations and few tangible assets. Energoalliance claimed Moldova's actions violated the ECT. Unable to reach an amicable resolution, Energoalliance initiated arbitration proceedings under the rules of the United Nations Commission on International Trade Law (UNCITRAL) pursuant to Article 26 of the ECT.

In the summer of 2012, a three-day arbitral proceeding took place in Paris. On October 23 of the following year, the tribunal issued an award in favor of Energoalliance in the amount of some 593 million Moldovan lei in damages and interest plus 540,000 U.S. dollars in attorneys’ fees and costs. Energoalliance soon began enforcement proceedings in multiple jurisdictions, including the United States, where it filed a petition to confirm the arbitral award pursuant to 9 U.S.C. § 207. Confirmation is the process by which an arbitration award is converted to a legal judgment. Once Energoalliance had a judgment in hand, it could go about enforcing the arbitration award by, for example, attaching Moldova's commercial assets in the United States.

But Moldova was not ready to concede. In its view, the tribunal lacked jurisdiction to arbitrate the dispute because the byzantine arrangement that Energoalliance struck with Derimen to avoid Ukrainian currency controls was not an "investment" within the meaning of the ECT. Moldova made this and other arguments to the Paris Court of Appeal, seeking to annul the award. The Paris court agreed with Moldova and annulled the arbitration award on Moldova's jurisdictional theory. Energoalliance appealed to France's highest civil court, the Court of Cassation. In March 2018, that court vacated the Paris court's judgment, reinstated the award and remanded Moldova's annulment application to the Paris court.

Back to the United States. After Moldova filed its annulment application with the Paris court, it submitted a letter to the U.S. District Court for the District of Columbia, requesting a stay pending resolution of its application. Before the district court could rule, the Paris court had ruled in Moldova's favor. The tables now turned, a company called Komstroy—by this point the successor-in-interest to Energoalliance—consented to Moldova's request for stay pending Komstroy's appeal to the Court of Cassation. The district court entered the stay. But in March 2018, after the Court of Cassation reinstated the award, Energoalliance moved to lift the stay and confirm the award. Moldova opposed lifting the stay until the Paris court could resolve its remaining challenges to the award. The district court sided with Energoalliance, lifting the stay. See LLC Komstroy v. Republic of Moldova , No. 14-cv-01921, 2018 WL 5993437, at *4 (D.D.C. Nov. 13, 2018).

Once the substantive confirmation proceedings were underway, Moldova argued for dismissal on grounds of sovereign immunity, forum non conveniens and various defenses under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), June 10, 1958, 21 U.S.T. 2517. The district court rejected each argument and confirmed the arbitral award. See LLC Komstroy v. Republic of Moldova , No. 14-cv-01921, 2019 WL 3997385, at *14 (D.D.C. Aug. 23, 2019). It also awarded Komstroy prejudgment interest and ordered that the resulting judgment be converted from Moldovan lei into U.S. dollars. Pursuant to the district court's instructions, Komstroy filed a proposed order of judgment, calculating a total judgment amount. Rather than responding to Komstroy's calculations, Moldova filed a notice of appeal and a response, arguing that the appeal divested the district court of jurisdiction. The district court confirmed its jurisdiction and entered a judgment in favor of Komstroy. See LLC Komstroy v. Republic of Moldova , No. 14-cv-1921, 2019 WL 4860826, at *1 (D.D.C. Oct. 2, 2019). Moldova now appeals the district court's stay-lifting order, the confirmation of the arbitral award and the final judgment. The judgment is defended by Stileks, Komstroy's assignee in bankruptcy.

II. Analysis

This appeal presents four major issues. First, Moldova claims that the district court lacked jurisdiction under the Foreign Sovereign Immunities Act. Second, even if the district court had jurisdiction, Moldova says that it was error to confirm the arbitral award during the pendency of certain foreign proceedings. We reject both of these arguments and affirm the district court's confirmation of the award.¹ The third and fourth issues deal with how the district court calculated and denominated its judgment. Moldova argues that the district court should not have awarded prejudgment interest and that, in any event, the judgment and any interest should have been denominated in Moldovan lei instead of U.S. dollars. We think the district court did not abuse its discretion in awarding prejudgment interest to appropriately compensate Stileks for the time value of money. When it converted the award to U.S. dollars without considering Moldova's settled expectation that the award would be payable in Moldovan lei, however, we believe it abused its discretion. We vacate that portion of its order and remand for evaluation of Moldova's reliance interests.

A.

In 1976, the Congress enacted the Foreign Sovereign Immunities Act (FSIA). Under the FSIA, foreign governments are generally immune from the jurisdiction of federal and state courts. See 28 U.S.C. § 1604. But the FSIA also established various exceptions, see 28 U.S.C. § 1605 (general exceptions), id at § 1607 (exception for counterclaims), which provide "the sole basis for obtaining jurisdiction over a foreign state in our courts." Argentine Republic v. Amerada Hess Shipping Corp. , 488 U.S. 428, 434, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989).

The district court determined that it had jurisdiction under the so-called "arbitration exception." See 28 U.S.C. § 1605(a)(6). Our first task is to determine whether that exception applies. See Creighton Ltd. v. Gov't of State of Qatar , 181 F.3d 118, 121 (D.C. Cir. 1999).² We review the district court's determination de novo . See Kirkham v. Societe Air France , 429 F.3d 288, 291 (D.C. Cir. 2005).

Under the FSIA's arbitration exception, a foreign state is not immune from jurisdiction of U.S. courts in any case:

in which the action is brought ... 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). In Chevron Corp. v. Republic of Ecuador , we clarified that jurisdiction under the arbitration exception requires more than a claim invoking an arbitration award. See 795 F.3d 200, 204 (D.C. Cir. 2015). Rather, the existence of an arbitration agreement, an arbitration award and...