Termorio S.A. v. Electrificadora Del Atlantico

• Decision Date: 17 March 2006
• Docket Number: No. Civ.A. 03-2587(PLF).,Civ.A. 03-2587(PLF).
• Parties: TERMORIO S.A. E.S.P., et al., Plaintiffs, v. ELECTRIFICADORA DEL ATLANTICO S.A. E.S.P., et al., Defendants.
• Court: U.S. District Court — District of Columbia

421 F.Supp.2d 87

TERMORIO S.A. E.S.P., et al., Plaintiffs, v. ELECTRIFICADORA DEL ATLANTICO S.A. E.S.P., et al., Defendants.

No. Civ.A. 03-2587(PLF).

United States District Court, District of Columbia.

March 17, 2006.

Benjamin S. Sharp, Perkins Coie, LLP, Washington, DC, Stephanie Kay Hines, Jeffrey C. Dobbins, Paul T. Fortino, Thomas R. Johnson, Jr., Perkins Coie, LLP, Portland, OR, for Plaintiffs.

Paul J. Kiernan, Stephen Allan Bogorad, Holland & Knight LLP, Washington, DC, for Defendants.

MEMORANDUM

OBERDORFER, District Judge.

Plaintiffs sue in this United States district court to enforce an arbitral award rendered in the Republic of Columbia, by Columbian arbitrators, pursuant to an agreement between Columbian companies to buy and sell electrical power in Columbia. Separate from the enforceability case before us, defendants and plaintiffs also brought suit against each other in Columbia; one of those cases is still pending.

Currently pending in this case is Defendants' Motion to Dismiss Plaintiffs' Amended Complaint.¹ For reasons explained below, the motion is granted, and plaintiffs' complaint is dismissed on the merits. In the alternative, the complaint is dismissed on the ground of forum non conveniens because Columbia is an adequate and a more appropriate forum for resolution of this case.

I. The Complaint

A. Background

Plaintiffs' Amended Complaint alleges the following facts. Plaintiff TermoRio is a public utility corporation, incorporated under the laws of the Republic of Columbia, with its principal place of business in Barranquilla, Columbia. Plaintiff LeaseCo Group, LLC is an Oregon corporation with its principal place of business in Portland, Oregon.

Defendant Republic of Columbia is a foreign state. Defendant Electrificadora del Atlantico S.A. E.S.P. ("Electranta"), incorporated in 1957 to provide electricity services in and around Barranquilla, Columbia, was 87% owned and controlled by Columbia. Consequently, it is an agency or instrumentality of Columbia within the meaning of the Foreign Sovereign Immunities Act (28 U.S.C. § 1603(3)).

In the mid-1990s, Columbia's Atlantic coast experienced significant electricity shortages. In 1995 LeaseCo entered into discussions with Electranta to modernize Electranta's operations and build a new power plant in Columbia. A year later, LeaseCo and Electranta formed two Columbian entities seriatim: first, Coenergia, and then TermoRio. Coenergia owned 99.9% of all shares of TermoRio. Initially, LeaseCo and Electranta owned roughly equal shares of Coenergia, so that they accordingly owned roughly equal shares of TermoRio. However, at the time of Electranta's complaint (in June 2004), LeaseCo and Electranta were transferring sole ownership of the 99.9% of the shares of TermoRio to LeaseCo.

At the heart of this lawsuit is a Power Purchase Agreement between TermoRio and Electranta in June 1997 (the "Agreement"). Under this Agreement, TermoRio agreed to generate energy and Electranta agreed to buy it. In reliance on this Agreement, TermoRio invested more than $7 million to construct a power plant. The Agreement also provided that any dispute between the parties would be resolved by binding arbitration in Columbia.

However, in March 1998, Columbia announced a plan to sell the assets of all its Atlantic Coast utilities, including Electranta, to private owners and other Columbian utilities. On April 16, 1998, Columbia began to privatize by creating a new company, Electrocaribe, to receive and hold Electranta's assets and liabilities. However, at the behest of Columbia, Electranta did not transfer its duties under the Agreement to buy power from TermoRio. Electranta was left with obligations under the Agreement to buy power, but no resources to do so. As a result, Electranta failed to buy power from TermoRio and breached the Agreement.² This breach of the Agreement, plaintiffs allege, "had a direct effect in the United States affecting the extensive marketing of [Electrocaribe's] assets in the United States, by affecting the price of these assets, by causing United States purchasers to acquires a substantial interest in these assets, and by eliminating any obligation for Electrocaribe and [Reliant] to fulfill the [Agreement.]" Compl. 1122.

B. The Arbitration Clause in the Agreement

The Agreement's arbitration clause provides (as translated):

Any dispute or controversy arising between the Parties in connection to the execution, interpretation, performance or liquidation of the Contract shall be settled through mechanisms of conciliation, amiable composition or settlement, within a term no longer than three weeks. If no agreement is reached, either party may have recourse to an arbitral tribunal that shall be governed in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. The tribunal shall be made up of three (3) members appointed by the Chamber, and shall be seated in the city of Barranquilla. The award, which shall be binding on the parties, must be rendered within a maximum term of three months.³

Pursuant to this provision, after defendants failed to meet their obligations under the Agreement, the parties entered into a long arbitration process. On December 21, 2000, a Tribunal of three arbitrators, applying ICC procedural rules, determined that Electranta breached the Agreement at the direction of Columbia. The Tribunal ordered Electranta to pay TermoRio an award of $60.3 million USD.

C. Defendants'"Attack" on the Arbitration Process

Neither the Republic of Columbia nor Electranta has complied with the $60 million arbitral award, and both have refused to pay any portion of it. Plaintiffs allege that Columbia and Electranta have also sought to undermine the award in several other respects.

First, in 1998, Columbia (through a governmental agency) filed an action with a trial court in Barranquilla, seeking to invalidate the Agreement. The Columbian trial court dismissed the suit. The Council of State—Columbia's highest administrative court—upheld the dismissal. However, in 2001, shortly after the Tribunal issued its opinion and award, the Council of State reconsidered its decision and permitted Columbia's suit to go forward.

In a separate action, on December 23, 2000 (right after the Tribunal issued the award), Electranta filed an "extraordinary writ" with a court in Barranquilla, seeking to overturn the award. In response the Council of State vacated it. The Council of State reasoned that the arbitration had to be conducted in accordance with Columbian law, and Columbian law in effect as of the date of the Agreement did not expressly permit the use of ICC procedural rules in arbitration.

In yet another action, plaintiff TermoRio filed two lawsuits in Columbian courts to rescind the transfer of Electranta's assets and to hold Columbia liable for breach of the Agreement. A Columbian court dismissed the first action on procedural grounds. See Opp. 20. The second count is still pending in the Columbian court system. See Supp. Joint Briefing (Feb. 17, 2006). However, plaintiffs also state that in November 2005 TermoRio was liquidated and assigned its litigation rights to LeaseCo, and LeaseCo's attorney in Columbia resigned because of "out-of-court interferences." Moreover, in December 2005 LeaseCo "determined that it must withdraw the breach of contract action." Pltffs' Supp. Briefing (Feb. 17, 2006), at 1-2. To date, no evidence has been submitted that LeaseCo has done so.

Finally, according to the complaint:

At various times following the issuance of the Arbitral Award, [Columbia] initiated frivolous criminal charges and investigations against individuals associated with the arbitration, including the manager of the TermoRio project, the attorney for TermoRio during the arbitration proceeding, the independent economic experts who testified as to damages in the arbitration proceeding, and a member of LeaseCo. These charges were not based upon a good faith interpretation and application of Columbian law but were brought in bad faith to intimidate persons who might support the Arbitral Award, and to create the perception among the Columbian public that the Arbitral Award was unfair and corrupt.

Compl. ¶ 36.

D. Plaintiffs' Claims

Based on these facts, plaintiffs alleged four causes of action. However, pursuant to stipulation, they subsequently dropped two claims (fraudulent conveyance and expropriation). See Opp. at 2 n. 2. The claims for (1) enforcement of the Arbitral Award pursuant to the U.S. Arbitration Act, 9 U.S.C. § 201 et seq.; and (2) breach of contract remain.

1. Enforcement of the Arbitral Award

Plaintiffs maintain that the award of the Columbian Tribunal is enforceable in this court because the United States and Columbian have signed agreements to enforce other nation's arbitral awards.

The United States has ratified and codified two Conventions that allow courts in one country to enforce arbitral awards rendered in other signatory countries. See Inter-American Convention on International Commercial Arbitration (the "Panama Convention") (reprinted after 9 U.S.C. § 301), and The Convention on the Recognition and Enforcement of Arbitral Awards (the "New York Convention") (reprinted after 9 U.S.C. § 201). Columbia is a signatory to both of these Conventions. The New York Convention provides that signatory nations are to recognize and enforce arbitral awards rendered in other nations. See New York Convention Art. III. However, enforcement of awards "may be refused" if, inter alia, they were set aside by a competent authority in the country in which the award was made. See New York Convention Art. V(1)(e).

Plaintiffs maintain in this court that the arbitral award in this case falls under both the New York and Panama Conventions,⁴ and this court accordingly should enforce the Columbian award. Further, plaintiffs allege that Electranta falls under the Conventions because it is an...