The period since July of this year has been noteworthy with respect to Second Circuit law on the procedures governing enforcement of ICSID awards against foreign sovereigns in U.S. District Courts. As previously noted, the Second Circuit in July 2017 held, in Mobil Cerro Negro, Ltd. v. Bolivarian Republic of Venezuela, 863 F.3d 96 (2d. Cir. 2017), (“Mobil Cerro”), that the Foreign Sovereign Immunities Act (“FSIA”) requires a creditor plaintiff seeking to enforce such an award against a foreign sovereign to commence a full plenary action (not institute ex parte or summary proceedings) and abide by the personal jurisdiction, venue, and service requirements of that legislation.

In a late October 2017 Summary Order with no precedential impact, a unanimous Second Circuit panel, in Micula v. Gov’t of Romania, No. 15-3109 (2d Cir. Oct. 23, 2017), (“Micula”), elucidated, followed, and reinforced Mobil Cerro.  The facts in Micula, as in Mobil Cerro, were straightforward. Various Swedish nationals and affiliated entities (“Petitioners”) sought to enforce a substantial ICSID arbitral award in their favor against the Government of Romania (“Romania”) through summary ex parte proceedings in the U.S. District Court for the Southern District of New York (“SDNY”). The same day that Petitioners commenced the action, the SDNY, per Buchwald, J., granted their petition, and judgment was entered. Thereafter, Romania filed a motion to amend, vacate, or stay the SDNY’s judgment, arguing, in essence, that the FSIA controlled and barred Petitioners’ summary proceedings, and that under the FSIA venue was improper in the SDNY. The SDNY, per Schofield, J., denied that motion, ruling, inter alia, that the FSIA was inapplicable to the enforcement of ICSID awards. Romania then moved for reconsideration. Judge Schofield denied that motion, as well. Romania appealed.

A unanimous appellate panel, consisting of Judges Winter, Chin, and Droney, reversed, vacated the underlying judgment, and remanded in the referenced Summary Order. Citing Mobil Cerro, the panel made four key points. First, the FSIA and its “procedural mandates” govern the enforcement of ICSID awards against foreign sovereigns. Second, the FSIA provides the “exclusive mechanism” for enforcement of such awards against foreign sovereigns in federal court, and summary ex parte proceedings conducted without service on a foreign state are “incompatible with the FSIA.” Third, the SDNY lacked jurisdiction over Romania under the FSIA owing to the lack of service on it. And fourth, venue was improper in the SDNY, because “the FSIA requires a plenary action to be brought in the District of Columbia ‘unless a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated,’ in another district.”

Likewise, in Eiser Infrastructure Limited et al. v. Kingdom of Spain, No. 17-CV-3808 (LAK) (S.D.N.Y. Nov. 13, 2017), two foreign entities sought to enforce a May 2017 ICSID arbitral award in their favor of approximately $151 million (USD) against the Kingdom of Spain (“Spain”) by filing, that same month, an ex parte petition in the SDNY. In late June 2017, shortly before issuance of the Mobil Cerro decision, Judge Kaplan granted the petition and entered judgment against Spain. The day after issuance of Mobil Cerro, Spain notified Judge Kaplan about the ruling and requested that he vacate that judgment. Petitioners thereafter objected, arguing that Micula was before the Second Circuit, presented similar issues, and could alter the “legal landscape.” Petitioners, thus, asked the District Court to demur in ruling on Spain’s application until the Second Circuit decided Micula. Judge Kaplan rendered no ruling for over two months. Then, in late October 2017, Micula came down, upholding and following Mobil Cerro. The day following publication of Micula, Spain alerted Judge Kaplan thereto and again asked that he vacate the judgment in favor of Petitioners. Spain asserted that “[t]he Second Circuit has now issued its decision in Micula which reaffirms the holdings in Mobil that the FSIA governs actions to enforce ICSID awards, that the FSIA does not permit the use of summary ex parte enforcement procedures and that the Petitioners were, instead, required to file a plenary action to enforce their ICSID award.”

On November 13, 2017, Judge Kaplan agreed, caused Spain’s earlier “Notice of Motion to Vacate Ex Parte Judgment” to be stamped “Memo Endorsed,” and tersely vacated his prior ruling, expressly relying on Mobil Cerro and Micula. 

In sum, Micula and Eiser leave little doubt that Mobil Cerro is entrenched as good law in the Second Circuit.

If you have questions about international arbitration or litigation, please contact James J. McGuire.