Tmr Energy Ltd. v. State Property Fund of Ukraine, No. 03-7191.

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Writing for the CourtGinsburg
Citation411 F.3d 296
PartiesTMR ENERGY LIMITED, Appellee v. STATE PROPERTY FUND OF UKRAINE, Appellant
Decision Date17 June 2005
Docket NumberNo. 03-7191.
411 F.3d 296
TMR ENERGY LIMITED, Appellee
v.
STATE PROPERTY FUND OF UKRAINE, Appellant
No. 03-7191.
United States Court of Appeals, District of Columbia Circuit.
Argued November 15, 2004.
Decided June 17, 2005.

Page 297

Appeal from the United States District Court for the District of Columbia (No. 03cv00034).

Page 298

Thomas J. O'Brien argued the cause for appellant. With him on the briefs was Mark N. Bravin.

Samuel Rosenthal argued the cause for appellee. With him on the brief were Eliot Lauer and Scott D. Fischer.

Before: GINSBURG, Chief Judge, and TATEL and ROBERTS, Circuit Judges.

Opinion for the Court filed by Chief Judge GINSBURG.

GINSBURG, Chief Judge.


The State Property Fund of Ukraine (SPF) appeals from a judgment in favor of TMR Energy Limited (TMR), a Cyprian corporation, in an action TMR brought to confirm an arbitration award it obtained against the SPF in Sweden. The SPF claims the district court should have dismissed the case either for want of personal jurisdiction because the SPF did not have minimum contacts with the United States or because the District of Columbia is a forum non conveniens. On the merits, the SPF contends the district court should have refused to confirm the arbitration award because the arbitrators' determination of liability exceeded the scope of the arbitration agreement and violated public policy. We reject these arguments and affirm the judgment of the district court.

I. Background

In 1991, the year the Soviet Union dissolved and Ukraine proclaimed its independence, Lisichansk Oil Refining Works (LOR), a state-owned enterprise, entered into a joint venture with a Swiss company to upgrade an oil refinery located in the eastern region of Ukraine. The Swiss company then transferred to TMR its interest in the joint venture, which was known as Lisoil.

In 1993, TMR entered into two contracts with LOR — one that gave TMR and LOR each a 50% stake in Lisoil and another in which TMR agreed to finance and support the upgrading of several units at LOR's refinery in exchange for LOR's promise to provide feedstock (crude or partially processed oil product) to the upgraded units for refining. Lisoil would own some of the refined oil produced by the upgraded units, and TMR was to be paid out of the proceeds from the sale of that oil. Later in 1993, as part of Ukraine's program of privatization, LOR was transformed into a joint stock company known as Linos. The SPF, which had been created in 1992 to implement Ukraine's privatization plan, retained a 67% share in Linos on behalf of the State of Ukraine.

For several years Linos continued to meet LOR's obligations to Lisoil, but by 1997 Linos was experiencing financial difficulties and stopped providing Lisoil with its share of refined oil; as a result, Lisoil could no longer repay TMR. TMR repeatedly asked Linos to provide Lisoil the refined oil to which it was entitled under the 1993 contract, but Linos refused.

In 1999 TMR and the SPF entered into a contract in which, after declaring that the SPF had succeeded to LOR's 50% interest in Lisoil, they each agreed "not to undertake any actions that may damage the interests of [Lisoil,] ... not [to] abet such actions by a third party and not to [be] inactive in the event of such actions." Shortly after the contract was signed, TMR asked the SPF to fulfill its obligation by causing Linos to turn over to Lisoil the refined oil that LOR had promised in the 1993 contract. The SPF refused to exert any influence over Linos or to provide Lisoil the refined oil itself.

TMR continued to demand the SPF either compensate TMR for its breach of the 1999 contract or find some other solution to the impasse, but the SPF did not respond.

Page 299

Finally, on May 24, 2000 TMR sent the SPF a letter stating that, if the dispute was not resolved by June 3, then TMR would initiate arbitration as provided in the 1999 contract. On July 4 TMR did initiate an arbitration proceeding in Sweden against the SPF, Linos, and the State of Ukraine.

The case against the SPF went to a hearing and in May 2002 the arbitrators held the SPF had breached both the 1993 contract as LOR's successor-in-interest, and the 1999 contract, to which it was a signatory in its own right. The arbitrators awarded TMR $36.7 million in damages, plus interest and costs. In January 2003 TMR filed a petition for confirmation of the award in the United States District Court for the District of Columbia.

II. Analysis

The SPF argues first that the district court did not have personal jurisdiction over it, and in any event should have dismissed the case under the doctrine of forum non conveniens. On the merits, the SPF renews its substantive challenges to the arbitrators' determination of liability.

A. Personal Jurisdiction

Under the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. §§ 1330, 1602-1611, a foreign state is "presumptively immune from the jurisdiction of the United States courts," Saudi Arabia v. Nelson, 507 U.S. 349, 355, 113 S.Ct. 1471, 123 L.Ed.2d 47 (1993); that presumption is overcome only if the plaintiff shows that one of the exceptions to immunity provided in 28 U.S.C. §§ 1605-07 applies. See id.; 28 U.S.C. § 1604. The FSIA confers upon district courts subject matter jurisdiction as to "any claim for relief in personam with respect to which the foreign state is not entitled to immunity," 28 U.S.C. § 1330(a), and personal jurisdiction follows where proper "service has been made under § 1608." Id. § 1330(b); see also Practical Concepts, Inc. v. Republic of Bolivia, 811 F.2d 1543, 1548 n. 11 (D.C.Cir.1987) ("under the FSIA, subject matter jurisdiction plus service of process equals personal jurisdiction").

The SPF does not dispute that this case comes within 28 U.S.C. § 1605(a)(6)(B), the exception to immunity for any action brought to confirm an arbitration award that "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." See the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, better known as the New York Convention; Creighton Ltd. v. Government of the State of Qatar, 181 F.3d 118, 123-24 (D.C.Cir.1999) ("the New York Convention is exactly the sort of treaty Congress intended to include in the arbitration exception"). Nor does the SPF argue it was not properly served with process. That resolves the matter of personal jurisdiction insofar as the FSIA is concerned, but the SPF attempts to trump the statute on the ground that the Due Process Clause of the Fifth Amendment to the Constitution of the United States ("No person shall be ... deprived of life, liberty, or property, without due process of law") requires a nexus between it and the forum, here the District of Columbia, where the arbitration award is to be enforced. See International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (due process requires person not present within forum have "certain minimum contacts with it such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice"). The SPF argues it lacks the requisite "minimum contacts" because it has had no contact at all with,

Page 300

and has no property in, the United States, let alone the District of Columbia.

This court rejected a similar argument in Price v. Socialist People's Libyan Arab Jamahiriya, 294 F.3d 82 (2002). There we held a foreign state is not a "person" as that term is used in the due process clause. See id. at 96. We noted first that, "in common usage, the term `person' does not include the sovereign," and went on to observe that it would make no sense "to treat foreign sovereigns more favorably than `States of the Union,'" which are decidedly not `persons' within the meaning of the due process clause. Id. (citing South Carolina v. Katzenbach, 383 U.S. 301, 323-24, 86 S.Ct. 803, 15 L.Ed.2d 769 (1966)). That is not to say a foreign state is utterly without recourse but only that, "[u]nlike private entities, foreign nations [being] the juridical equals of the government that seeks to assert jurisdiction over them," have available "a panoply of mechanisms in the international arena through which to seek vindication or redress" if they believe they have been wrongly haled into court in the United States. Id. at 98. In short, it is not to the due process clause but to international law and to the comity among nations, as codified in part by the FSIA, that a foreign state must look for protection in the American legal system. Id. at 97.

Our holding in Price applies only to "an actual foreign government"; we expressly reserved the question "whether other entities that fall within the FSIA's definition of `foreign state' ... could yet be considered persons under the Due Process Clause." 294 F.3d at 99-100.* Accordingly, the SPF argues the rationale of Price does not extend to a mere "agency or instrumentality of a foreign state" — which is how the SPF portrays itself — because an agency or instrumentality, unlike a foreign state, is not the "juridical equal" of the United States.

For its part TMR argues that, pursuant to the standard we applied in Transaero, Inc. v. La Fuerza Aerea Boliviana, 30 F.3d 148 (1994), the SPF should not be treated as a legal personality separate from the State of Ukraine. In Transaero we held that for the purpose of determining the proper method of service under the FSIA, an entity that is an "integral part of a foreign state's political structure" is to be treated as the foreign state itself, whereas an entity the structure and core function of which are commercial is to be treated as an "agency or instrumentality" of the state. Id. at 151. In this regard TMR argues the SPF performs "classic government functions," such as "implement[ing] national policy," "issu[ing] regulations binding on state agencies of...

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108 practice notes
  • Garb v. Republic of Poland, Docket No. 02-7844.
    • United States
    • U.S. Court of Appeals — Second Circuit
    • March 3, 2006
    ...the District of Columbia Circuit has recently reaffirmed the holding of Transaero TMR Energy Ltd. v. State Prop. Fund of Ukraine, 411 F.3d 296, 300 (D.C.Cir.2005) ("In Transaero we held that for the purpose of determining the proper method of service under the FSIA, an entity that is an `in......
  • Figueiredo Ferraz E Engenharia De Projeto Ltda. v. Republic of Peru, Docket Nos. 09–3925–cv (L)
    • United States
    • U.S. Court of Appeals — Second Circuit
    • December 14, 2011
    ...property of a foreign nation located in the United States,’ ” id. at 375–76 (quoting TMR Energy Ltd. v. State Property Fund of Ukraine, 411 F.3d 296, 303 (D.C.Cir.2005)). In deeming a Peruvian forum inadequate for the stated reason, we think the District Court erred. It is no doubt true tha......
  • GSS Grp. Ltd. v. Nat'l Port Auth., No. 11–7093.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • May 25, 2012
    ...Due Process Clause—and thus have no right to assert a personal jurisdiction defense. See TMR Energy Ltd. v. State Prop. Fund of Ukraine, 411 F.3d 296, 300–01 (D.C.Cir.2005); Price v. Socialist People's Libyan Arab Jamahiriya, 294 F.3d 82, 96–97 (D.C.Cir.2002). In contrast to the Liberian go......
  • Frontera Resources Azerbaijan v. State Oil Co., No. 06 Civ. 1125(RJH).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • March 29, 2007
    ...in sufficient detail for the Court to determine whether SOCAR is an "agent of the state," TMR Energy. Ltd. v. State Prop. Fund of Ukr., 411 F.3d 296, 301 (D.C.Cir.2005), and thus exempt from due process protection. Second, and more Page 385 importantly, the holding of Texas Trading remains ......
  • Request a trial to view additional results
108 cases
  • Garb v. Republic of Poland, Docket No. 02-7844.
    • United States
    • U.S. Court of Appeals — Second Circuit
    • March 3, 2006
    ...the District of Columbia Circuit has recently reaffirmed the holding of Transaero TMR Energy Ltd. v. State Prop. Fund of Ukraine, 411 F.3d 296, 300 (D.C.Cir.2005) ("In Transaero we held that for the purpose of determining the proper method of service under the FSIA, an entity that is an `in......
  • Figueiredo Ferraz E Engenharia De Projeto Ltda. v. Republic of Peru, Docket Nos. 09–3925–cv (L)
    • United States
    • U.S. Court of Appeals — Second Circuit
    • December 14, 2011
    ...property of a foreign nation located in the United States,’ ” id. at 375–76 (quoting TMR Energy Ltd. v. State Property Fund of Ukraine, 411 F.3d 296, 303 (D.C.Cir.2005)). In deeming a Peruvian forum inadequate for the stated reason, we think the District Court erred. It is no doubt true tha......
  • GSS Grp. Ltd. v. Nat'l Port Auth., No. 11–7093.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • May 25, 2012
    ...Due Process Clause—and thus have no right to assert a personal jurisdiction defense. See TMR Energy Ltd. v. State Prop. Fund of Ukraine, 411 F.3d 296, 300–01 (D.C.Cir.2005); Price v. Socialist People's Libyan Arab Jamahiriya, 294 F.3d 82, 96–97 (D.C.Cir.2002). In contrast to the Liberian go......
  • Frontera Resources Azerbaijan v. State Oil Co., No. 06 Civ. 1125(RJH).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • March 29, 2007
    ...in sufficient detail for the Court to determine whether SOCAR is an "agent of the state," TMR Energy. Ltd. v. State Prop. Fund of Ukr., 411 F.3d 296, 301 (D.C.Cir.2005), and thus exempt from due process protection. Second, and more Page 385 importantly, the holding of Texas Trading remains ......
  • Request a trial to view additional results

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