Influential U.S. Court of Appeals for 2nd Circ. Holds FSIA Is Sole Basis for Jurisdiction in ICSID Enforcement Proceedings - international litigation blog
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Influential U.S. Court of Appeals for 2nd Circ. Holds FSIA Is Sole Basis for Jurisdiction in ICSID Enforcement Proceedings

Influential U.S. Court of Appeals for 2nd Circ. Holds FSIA Is Sole Basis for Jurisdiction in ICSID Enforcement Proceedings

On 11 July 2017, the United States Court of Appeals for the Second Circuit (the Second Circuit) rendered a decision in which it held that the Foreign Sovereign Immunities Act (the FSIA) provided the sole basis for jurisdiction over a foreign State in actions to enforce ICSID awards in the United States. Consequently, the Second Circuit also ruled that an award-creditor had to provide notice to the foreign State in order to enforce an ICSID award against that State. This ruling thereby effectively prevents ex parte enforcement of ICSID awards against foreign States in the United States.

This case concerned a Venezuelan subsidiary of ExxonMobil (Mobil) which was granted an award against Venezuela. Following the issuance of this award, Mobil then filed an ex parte petition before the U.S. District Court for the Southern District of New York asking it to recognize and enforce the award. The District Court granted the petition.

Venezuela subsequently moved to vacate this judgment. The District Court judge, however, denied Venezuela’s motion on the basis that 22 U.S.C. § 1650(a) (§ 1650(a)i.e. the U.S. statute enabling the United States’ participation in the ICSID Convention) provided an exception to the FSIA’s exclusive grant of jurisdiction. The District Court held that, as a result of this procedural gap, it was permitted to rely on New York State law which allows summary procedures for recognizing and enforcing foreign judgments.

Venezuela then appealed to the Second Circuit, which reversed the District Court’s order denying Venezuela’s motion to vacate. In particular, the Second Circuit rejected Mobil’s argument that § 1650(a) provided “an independent grant of subject-matter jurisdiction for actions against foreign sovereigns” and found that “the FSIA provides the sole basis for subject-matter jurisdiction over actions to enforce ICSID awards against a foreign sovereign“. Consequently, the Second Circuit found that Mobil was required to comply with the FSIA’s procedural requirements and therefore was not permitted to use summary ex parte proceedings.

Although the decision rendered by the Second Circuit is in line with case law adopted by other courts in the United States (especially the courts of the District of Columbia), it nevertheless creates asymmetry between foreign States and private award-creditors, as States seeking to enforce an ICSID award for costs against a claimant are not subject to the FSIA requirements and are therefore allowed to seek enforcement on an ex parte basis.

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