United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 15, 2004 Decided June 17, 2005
No. 03-7191
TMR ENERGY LIMITED ,
APPELLEE
v.
STATE PROPERTY FUND OF UKRAINE,
APPELLANT
Appeal from the United States District Court
for the District of Columbia
(No. 03cv00034)
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
2
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.
3
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. 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.
4
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 (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;
5
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 (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, 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 (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
6
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
*
Section 1603(a) of Title 28 defines a “foreign state” to include,
except for the purpose of service of process, “a political subdivision
of a foreign state or an agency or instrumentality of a foreign state as
defined in subsection (b),” which in turn provides:
An “agency or instrumentality of a foreign state” means any
entity—
(1) which is a separate legal person, corporate or otherwise, and
(2) which is an organ of a foreign state or political subdivision
thereof, or a majority of whose shares or other ownership interest
is owned by a foreign state or political subdivision thereof, and
(3) which is neither a citizen of a State of the United States as
defined in section 1332(c) and (d) of this title, nor created under
the laws of any third country.
7
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 executive power,” and
“participat[ing] in the development and conclusion of
international agreements on property and use of state-owned
property.” The SPF, in contrast, emphasizes that it “operates in
the field of commerce and the dispute underlying this litigation
arose out of a commercial transaction,” and contends that its
status is roughly equivalent to that of a state-owned corporation,
which is presumptively considered separate and distinct from the
sovereign. See, e.g., Transamerica Leasing, Inc. v. La
Republica de Venezuela, 200 F.3d 843, 847 (D.C. Cir. 2000).
Regardless whether the SPF performs predominantly
governmental functions and would therefore be treated as the
foreign state itself under the “core functions” test of Transaero,
or should be treated as a state-owned enterprise because this
case arose from a commercial context, we think a different
analysis is indicated where the issue is not service of process
under the FSIA but whether an agency or instrumentality of a
foreign state is entitled to the protection of the due process
clause. In Transaero, we were concerned with the meaning of
the statutory terms “foreign state” and “agency or
instrumentality”; here we must decide whether the SPF is a
“person” within the meaning of the due process clause of the
fifth amendment. To that end we must determine whether the
SPF has a constitutional status different from that of the State of
8
Ukraine, a question with respect to which the Supreme Court’s
decision in First National City Bank v. Banco Para el Comercio
Exterior de Cuba (Bancec), 462 U.S. 611 (1983), guides our
way.
Bancec involved an attempt by a bank in the United States
to set off the value of its assets seized by the Cuban government
against a letter of credit it had issued to Bancec, a bank
established and owned by the Government of Cuba but with
“full juridical capacity ... of its own.” Id. at 613. Bancec
claimed that, under the FSIA, its separate juridical status
shielded it from liability for the actions of the Cuban
government. Id. The Supreme Court held the FSIA “was not
intended to affect the substantive law determining the liability
of a foreign state or instrumentality,” and looked instead to
principles of international law and federal common law to
determine whether Bancec could be held liable for the acts of
the Cuban government. Id. at 620–21. At the outset of that
inquiry the Court observed that “government instrumentalities
established as juridical entities distinct and independent from
their sovereign should normally be treated as such,” id. at
626–27, but it then determined that presumption would be
overcome where the foreign state so extensively controlled the
instrumentality “that a relationship of principal and agent is
created,” id. at 629, or where — as in the case before it —
“adher[ing] blindly to the corporate form ... would cause ...
injustice.” Id. at 632.
In Foremost-McKesson v. Islamic Republic of Iran, 905
F.2d 438 (1990), we held the presumption of independent status
detailed in Bancec also applies to the question of subject matter
jurisdiction under the FSIA; that is, a foreign state is amenable
to suit based upon an exception in the FSIA and the acts of its
instrumentality only if the sovereign exerts “sufficient control
9
[over the instrumentality] ... to create a relationship of principal
to agent.” Id. at 446–47. We believe the same analysis must
govern whether the SPF is a “person” within the meaning of the
due process clause: If the State of Ukraine exerted sufficient
control over the SPF to make it an agent of the State, then there
is no reason to extend to the SPF a constitutional right that is
denied to the sovereign itself.
The record in this case shows the State of Ukraine had
plenary control over the SPF. The first provision of the
regulations approved in the Resolution of the Supreme Rada
[Parliament] of Ukraine creating the SPF states, “The [SPF] is
a body of the State which implements national policies in the
area of privatization.” The second provision states, “In the
course of its activities, the [SPF] shall be subordinated and
accountable to the Supreme Rada .... The activities of the [SPF]
shall be governed by the Constitution and legislative acts of
Ukraine, the Cabinet of Ministers of Ukraine and these
Regulations.” Further, the SPF’s chairman is “appointed and
discharged by the President of Ukraine subject to the consent of
the Supreme Rada,” and the members of its board must be
“approved by the Presidium of the Supreme Rada.” Finally, the
SPF’s expenses are paid from the budget of the State of Ukraine.
From these structural features it is apparent that the SPF is an
agent of the State, barely distinguishable from an executive
department of the government, and should not be treated as an
independent juridical entity. Therefore, the SPF — like its
principal, the State of Ukraine — is not a “person” for purposes
of the due process clause and cannot invoke the minimum
contacts test to avoid the personal jurisdiction of the district
court.*
*
It is far from obvious that even an independent SPF would be
entitled to the protection of the fifth amendment, see United States v.
10
The SPF next argues minimum contacts with the forum are
a jurisdictional prerequisite under customary international law
if not under the due process clause. We shall assume as much,
but solely for the sake of the argument, which fails nonetheless.
Customary international law comes into play only “where there
is no treaty, and no controlling executive or legislative act or
Verdugo-Urquidez, 494 U.S. 259, 271 (1990) (“aliens receive
constitutional protections [only] when they have come within the
territory of the United States and developed substantial connections
with this country”); see also Jifry v. FAA, 370 F.3d 1174, 1182 (D.C.
Cir. 2004) (“non-resident aliens who have insufficient contacts with
the United States are not entitled to Fifth Amendment protections”),
but TMR has not argued the point and hence we express no view upon
the question. We note only that, although courts often assume the
minimum contacts test applies in suits against foreign “persons,” that
assumption appears never to have been challenged. See, e.g., Afram
Export Corp. v. Metallurgiki Halyps, S.A., 772 F.2d 1358, 1362 (7th
Cir. 1985).
Our holding that the minimum contacts test does not apply also
makes it unnecessary to reach TMR’s alternative contention that the
SPF waived its right to challenge pers onal jurisdiction because the
State of Ukraine is a signatory to the New York Convention. Cf.
Creighton, 181 F.3d at 123 (quoting, with approval, Seetransport
Wiking Trader v. Navimpex Centrala, 989 F.2d 572, 578 (2d Cir.
1993) (“when a country becomes a signatory to the Convention, by the
very provisions of the Convention, the signatory state must have
contemplated enforcement actions in other signatory states”)).
Furthermore, because the SPF acknowledges that it is an “agency
or instrumentality” of the State of Ukraine within the meaning of the
FSIA, we have no occasion to consider whether or under what
circumstances an entity that is not an “agency or instrumentality”
would be without the protection of the fifth amendment because a
foreign state exerts control over it.
11
judicial decision.” The Paquete Habana, 175 U.S. 677, 700
(1900); see J. GOLDSMITH & E. POSNER, THE LIMIT S OF
INTERNATIONAL LAW 77 (2005) (“political branches have the
final say about whether and how [customary international law]
applies in the United States and whether or not the United States
will comply with it”). Never does customary international law
prevail over a contrary federal statute. See, e.g., Comm. of U.S.
Citizens Living in Nicar. v. Reagan, 859 F.2d 929, 939 (D.C.
Cir. 1988); United States v. Yousef, 327 F.3d 56, 91 (2d Cir.
2003).
In this case, the controlling federal statute is 28 U.S.C. §
1330(b): “Personal jurisdiction over a foreign state shall exist
as to every claim for relief over which the district courts have
jurisdiction under subsection (a) where service has been made
under section 1608 of this title.” That provision clearly
expresses the decision of the Congress to confer upon the federal
courts personal jurisdiction over a properly served foreign state
— and hence its agent — coextensive with the exceptions to
foreign sovereign immunity in the FSIA. We therefore reject
the SPF’s attempt to condition the jurisdiction of the courts of
the United States upon the “minimum contacts” purportedly
required under customary international law; we hold the district
court properly asserted personal jurisdiction over the SPF based
solely upon the requirements of the FSIA.
B. Forum Non Conveniens
The SPF argues that, even if the district court had personal
jurisdiction, upon considering the public interest and the
interests of the litigants, it should have dismissed this
enforcement action under the doctrine of forum non conveniens,
and remitted the plaintiff to a more appropriate forum. See Am.
Dredging Co. v. Miller, 510 U.S. 443, 447–48 (1994). We may
12
reverse a forum non conveniens determination of the district
court only for a “clear abuse of discretion.” Piper Aircraft Co.
v. Reyno, 454 U.S. 235, 257 (1981).
According to the SPF, the district court clearly did abuse its
discretion because it failed to consider the relevant public and
private interest factors favoring dismissal. See Am. Dredging,
510 U.S. at 448 (listing some factors). The district court need
not weigh any factors favoring dismissal, however, if no other
forum to which the plaintiff may repair can grant the relief it
may obtain in the forum it chose. See El-Fadl v. Cent. Bank of
Jordan, 75 F.3d 668, 677 (D.C. Cir. 1996); see also Piper
Aircraft, 454 U.S. at 254 n.22.
As the defendant, the SPF has the burden of showing there
is another forum adequate to the plaintiff’s case. See El-Fadl,
75 F.3d at 677. Pointing out that TMR has already filed actions
against it in the courts of Sweden and of Ukraine, the SPF
contends those courts are adequate to enforce the arbitration
award. As TMR notes in response, however, only a court of the
United States (or of one of them) may attach the commercial
property of a foreign nation located in the United States. See 28
U.S.C. §§ 1609 (foreign state immune from attachment except
as provided in § 1610), 1610(a)(6) (permitting attachment of
“property in the United States of a foreign state ... used for a
commercial activity in the United States” upon judgment entered
by court of the United States or of a state “based on an order
confirming an arbitral award rendered against the foreign
state”).
The SPF next maintains the district court should have
dismissed this action because the SPF has no assets in the
United States against which a judgment can be enforced. Even
if the SPF currently has no attachable property in the United
13
States, however, it may own property here in the future, and
TMR’s having a judgment in hand will expedite the process of
attachment. In any event, the possibility that the judgment of
the district court may go unenforced does not bear upon whether
that court is an inconvenient forum in which to defend. The SPF
also speculates that TMR’s true motive is to go after the
property of the State of Ukraine, but TMR’s motive is
immaterial and whether TMR could properly attach such
property is not before us.
Because there is no other forum in which TMR could reach
the SPF’s property, if any, in the United States, we affirm the
district court’s refusal to dismiss this action based upon the
doctrine of forum non conveniens.*
C. The New York Convention
The SPF raises three challenges to the arbitration award
assertedly based upon Article V of the New York Convention,
which enumerates the few reasons for which a court may refuse
to enforce an arbitration award and assigns the burden of
persuasion to the party opposing enforcement. See Indus. Risk
Insurers v. M.A.N. Gutehoffnungschutte GmbH, 141 F.3d 1434,
1441–42 (11th Cir. 1998). Because they raise purely legal
issues, we address the SPF’s arguments de novo. Id. at 1443.
Two of the SPF’s challenges are based upon Article V.1(c),
which provides that enforcement of an arbitration award may be
*
Accordingly, we do not consider TMR’s alternative contention
that, contrary to the Second Circuit’s decision In re Arbitration
Between Monegasque de Reassurances S.A.M. v. NAK Naftogaz of
Ukraine, 311 F.3d 488 (2002), the doctrine has no place in an action
to enforce an arbitration award.
14
refused if the “award deals with a difference not contemplated
by or not falling within the terms of the submission to
arbitration, or it contains decisions on matters beyond the scope
of the submission to arbitration.” The SPF first contends the
arbitrators exceeded the scope of their authority by deciding the
SPF was liable under the 1993 agreement, to which it was not a
party. As for the 1999 agreement, to which it was a party, the
SPF argues it assumed therein only Linos’s ownership interest
in Lisoil, not Linos’s obligations under the 1993 agreement;
therefore, the question of liability under the 1993 agreement was
not properly before the arbitrators.
TMR points out that, although the arbitrators first held the
SPF was liable as LOR’s successor-in-interest to the 1993
agreement, they went on to hold the SPF also had duties under
the 1999 agreement both to refrain from any activity that might
damage the interests of Lisoil and to take an active role in
preventing harm resulting from the acts of a third party. In the
latter regard the arbitrators found “not a shred of evidence” that
the SPF took any action in response to Linos’s refusal to turn
over the refined oil to which Lisoil was entitled under the 1993
agreement. Therefore, TMR maintains, and we agree, the
arbitrators’ determination of liability was ultimately grounded
in the 1999 agreement, which was properly before them,
wherefor we have no authority to second-guess their
determination.
The SPF next argues the arbitrators exceeded their
jurisdiction because they refused to enforce the provision of the
1999 agreement requiring TMR to initiate the arbitration process
within 60 days after it had become clear that the parties could
not settle the dispute through negotiation. According to the SPF,
the arbitrators rendered a decision outside the bounds of the
arbitration agreement when they ignored the choice of law
15
provision — which called for the application of Ukranian law —
and instead applied Swedish law to decide the timeliness of
TMR’s filing.
TMR responds that the parties disputed the choice-of-law
point before the arbitrators, who resolved it in favor of TMR,
and the SPF’s challenge to the arbitrators’ decision is not
grounded in one of the bases for non-enforcement listed in
Article V of the New York Convention. We agree. The
arbitrators explained that, as a procedural question, timeliness
was governed by Swedish law, and added that, in any event, “no
Ukrainian law brought to their attention ... would change the
conclusions reached ... regarding the time limit.” As the
Supreme Court held in Howsam v. Dean Witter Reynolds, Inc.,
537 U.S. 79 (2002), a time limitation for invoking arbitration is
the sort of “gateway question,” like waiver and delay, that is
presumptively for the arbitrator, not the court, to decide. Id. at
84–85. The SPF points to nothing in the 1999 agreement that
suggests the parties intended to change that presumptive
allocation of authority.
Finally, the SPF argues this court should refuse to enforce
the arbitration award pursuant to Article V.2(b) on the ground
that it violates public policy. Specifically, the SPF contends it
could not have compelled Linos to deliver to Lisoil the share of
refined oil to which Lisoil was entitled under the 1993
agreement because, from 1996 through the arbitration
proceedings, Linos was in bankruptcy; therefore, such delivery
would have constituted a preference in violation of Ukrainian
bankruptcy law.
This argument attacks a straw man, for the arbitrators did
not say the SPF should have caused Linos to deliver oil to
Lisoil; indeed they did not specify what action the SPF should
have taken in order to satisfy its contractual obligation. Rather,
16
the arbitrators held the SPF intentionally caused Lisoil harm by
doing nothing “to comply with or ... to make Linos ... comply
with” the 1993 agreement. In any event, as TMR observes, the
arbitrators could only presume, and expressly did presume, the
SPF knew of the legal constraints imposed upon Linos by
Ukrainian bankruptcy law when it signed the 1999 agreement
with TMR; therefore, they held the SPF breached the contract by
“put[ting] itself in such a situation of conflicting duties and
choos[ing] to refrain from action” that could have mitigated the
harm to Lisoil’s economic interest.
In sum, the SPF has not shown that Article V of the New
York Convention provides any ground for non-enforcement of
the arbitration award. Accordingly, we hold the district court
correctly entered judgment against the SPF.
III. Conclusion
We hold the district court had personal jurisdiction over the
SPF under the arbitration exception to foreign sovereign
immunity in the FSIA. The minimum contacts requirement of
the due process clause does not apply to the SPF because, as an
agent of the State of Ukraine, the SPF is not a juridical entity
distinct from the State itself, and is therefore not a “person”
within the meaning of the fifth amendment.
We also hold the district court did not abuse its discretion
in denying the SPF’s motion to dismiss under the doctrine of
forum non conveniens nor, when it turned to the merits of the
case, did it err in rejecting the SPF’s challenges to enforcement
of the arbitration award under Article V of the New York
Convention. For these reasons, the judgment of the district court
is
Affirmed.