Gretton Limited v. Republic of Uzbekistan

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

GRETTON LTD.,

Petitioner,
v. Civil Action No. 18-1755 (JEB)
REPUBLIC OF UZBEKISTAN,

Respondent.

MEMORANDUM OPINION

Petitioner Gretton Ltd. seeks to enforce a foreign arbitral award assessed against the

Republic of Uzbekistan. Gretton itself, however, never had any direct dealings with Uzbekistan.

Rather, the dispute arose between the Central Asian country and a company called Oxus Gold,

PLC over Oxus’s investments in two gold-mining operations there. Although the underlying

Award is still working its way through direct-appeal proceedings in France, Gretton — Oxus’s

litigation funder and assignee of the Award’s proceeds — has clamored to have its day in court in

the United States. Uzbekistan has now moved to dismiss the Petition, lodging a host of

jurisdictional objections to enforcement of the Award, or alternatively to stay the case. Finding it

appropriate to stay these proceedings pending the decision of the Paris Court of Appeal, the

Court will grant Uzbekistan’s Motion in part without treating its arguments to dismiss the suit

entirely.

I. Background

The underlying controversy stems from Oxus’s involvement in two projects related to

mining and exploration of gold deposits in Uzbekistan. On August 31, 2011, it filed a notice of

arbitration against Uzbekistan seeking $1.2 billion for the purported expropriation of its

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investments. See ECF No. 5-2 (Arbitral Award), ¶¶ 60, 1019. The arbitral panel, sitting in Paris,

issued its Award on December 17, 2015. Id. at 1. It found Uzbekistan liable for only

$10,299,572 plus interest that — based on Petitioner’s calculations — brings the grand total to

$13,026,908.12. Id. at 396; see also ECF No. 5-8 (Declaration of Kevin N. Ainsworth), ¶ 5.

On April 26, 2016, Oxus initiated a proceeding before a court in Paris, seeking

recognition of the Award. See ECF No. 17-13 (Declaration of Andrea Pinna), ¶ 4. Having

received that recognition, it then filed a request on July 26, 2016, before the Paris Court of

Appeal for partial vacatur of the Award — namely, it sought to set aside certain portions of the

Award denying its claims but to leave intact the portion for which damages were already

awarded. Id., ¶ 5. Uzbekistan has naturally opposed; it has also argued that, if the Paris court

were to set aside any of the Award, it should vacate the entire Award, rather than merely the

portion Oxus lost in arbitration. The parties have submitted several rounds of briefing, and the

Paris Court of Appeal is scheduled to hold a hearing on March 26, 2019. Id., ¶¶ 7–8.

While these proceedings were pending in Paris, Gretton filed its Petition against

Uzbekistan in this Court in July 2018 seeking to enforce the piece of the Award in which Oxus

prevailed. See ECF No. 1 (Petition to Confirm Arbitration Award). It has represented that Oxus

assigned it the proceeds of the Award back in 2012. Id. at 2–3. Uzbekistan now moves to

dismiss the Petition on several grounds. See ECF No. 17 (Motion to Dismiss or Stay). It has

also moved, in the alternative, for the Court to stay the case pending the outcome of the set-aside

proceedings in Paris. Id.

II. Legal Standard

The Federal Arbitration Act, 9 U.S.C. §§ 201–208, codifies the Convention on the

Recognition and Enforcement of Foreign Arbitral Awards, better known as the New York

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Convention. Pursuant to the Convention, a district court “shall confirm [an] [arbitral] award

unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the

award specified in the said Convention.” 9 U.S.C. § 207. “Consistent with the ‘emphatic federal

policy in favor of arbitral dispute resolution’ recognized by the Supreme Court[,] . . . the FAA

affords the district court little discretion in refusing or deferring enforcement of foreign arbitral

awards.” Belize Social Development Ltd. v. Government of Belize, 668 F.3d 724, 727 (D.C. Cir.

2012) (quoting Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 631

(1985)).

Under the Convention, however, district courts do have discretion to stay proceedings if

“an application for the setting aside or suspension of the award has been made to a competent

authority.” New York Convention art. VI. Because “the adjournment of enforcement

proceedings impedes the goals of arbitration — the expeditious resolution of disputes and the

avoidance of protracted and expensive litigation” — “[a] stay of confirmation should not be

lightly granted.” Europcar Italia, S.p.A. v. Maiellano Tours, Inc., 156 F.3d 310, 317 (2d Cir.

1998).

III. Analysis

Uzbekistan challenges the Petition to enforce the Award on several bases. It argues that

the Court lacks subject-matter jurisdiction because no exception to immunity has been satisfied

under the Foreign Sovereign Immunities Act. See Mot. at 2. It also contends that Gretton’s

efforts to effect service were defective and that personal jurisdiction therefore does not exist. Id.

Finally, Respondent urges dismissal under the forum non conveniens doctrine because France is

an adequate alternative forum for adjudication. Id. In the event the Court declines to dismiss,

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Uzbekistan last maintains that this “case should be stayed pending the outcome of proceedings to

set aside the Award.” Id. at 3.

Ordinarily, courts must begin by assuring themselves of their own jurisdiction. See Steel

Co. v. Citizens for a Better Environment, 523 U.S. 83, 94–95 (1998). There are, however,

exceptions to that general precept. The Court first concludes that it is proper to treat the stay

question without ruling on the jurisdictional issues and then explains why a stay is appropriate

here.

A. Addressing Stay First

Although a court must establish its jurisdiction to hear a case before analyzing any merits

issue, see Foster v. Chatman, 136 S. Ct. 1737, 1745 (2016), it may — “when considerations of

convenience, fairness, and judicial economy so warrant” — “deny[] audience to a case on the

merits” on a non-jurisdictional “threshold ground[].” Sinochem Int’l Co. v. Malaysia Int’l

Shipping Co., 549 U.S. 422, 425, 431–32, 436 (2007) (citations omitted). In Sinochem, the

Court reasoned that it could make a forum non conveniens determination before resolving

subject-matter jurisdiction because — while the FNC analysis could “involve a brush with

factual and legal issues of the underlying dispute” — it was nonetheless a “threshold, nonmerits

issue” since “[r]esolving [it] does not entail any assumption by the court of substantive law-

declaring power.” Id. at 433 (internal quotation marks and citation omitted); see also Pub.

Citizen v. U.S. Dist. Court for the Dist. of Columbia, 486 F.3d 1342, 1348 (D.C. Cir. 2007)

(“[C]ertain non-merits, nonjurisdictional issues may be addressed preliminarily because

‘[j]urisdiction is vital only if the court proposes to issue a judgment on the merits.’”) (quoting

Sinochem, 549 U.S. at 431).

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 The stay of a petition to enforce an arbitration award, likewise, is a threshold issue that

the Court may properly consider before jurisdiction. Analyzing its propriety involves no

question relating to the merits of the underlying dispute. Indeed, without first resolving

outstanding questions about their jurisdiction, both the D.C. Circuit and another district court in

this circuit have determined it appropriate to stay such a petition where there were ongoing

proceedings related to the award in a foreign jurisdiction. See Telcordia Technologies, Inc. v.

Telkom SA, Ltd., 95 F. App’x 361, 362–63 (D.C. Cir. 2004); Hulley Enterprises, Ltd. v. Russian

Fed’n, 211 F. Supp. 3d 269, 277–80 (D.D.C. 2016) (“A stay of proceedings in this case is exactly

the type of nonmerits action the Sinochem decision contemplates.”). This Court will follow the

same course here because, as the analysis in the next section indicates, a stay will serve several

important interests in this case.

B. Merits of Stay

Uzbekistan contends that a stay is warranted because Oxus, Gretton’s assignor, is seeking

to set aside the Award in the Paris Court of Appeal. The Court, Respondent believes, would be

wiser to await the outcome there before proceeding. See Mot. at 19–22. There is no dispute here

that the Court can stay the case under the New York Convention. See Art. VI (authorizing

district courts to “adjourn the decision . . . [i]f an application for the setting aside or suspension

of the award has been made to a competent authority”); see also Mot. at 19–20; ECF No. 18

(Opp.) at 18–19. The only question is whether it should. In that regard, neither the Convention

nor the Federal Arbitration Act elucidates how a court ought to exercise its discretion in

weighing a stay. Courts in this circuit, however, have looked to the six factors set out in the

Second Circuit’s decision in Europcar, 156 F.3d at 317–18. See e.g., Hardy Exploration &

Production Inc. v. Gov’t of India, 314 F. Supp. 3d 95, 105 (D.D.C. 2018); Chevron Corp. v.

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Republic of Ecuador, 949 F. Supp. 2d 57, 71–72 (D.D.C. 2013); Cont’l Transfert Technique Ltd.

v. Fed. Gov’t of Nigeria, 697 F. Supp. 2d 46, 59–60 (D.D.C. 2010). Given this widespread

adoption, and the fact that both parties tailor their arguments to these factors, the Court will

follow suit.

Europcar instructs courts to consider:

(1) the general objectives of arbitration—the expeditious resolution
of disputes and the avoidance of protracted and expensive litigation;

(2) the status of the foreign proceedings and the estimated time for
those proceedings to be resolved;

(3) whether the award sought to be enforced will receive greater
scrutiny in the foreign proceedings under a less deferential standard
of review;

(4) the characteristics of the foreign proceedings including (i)
whether they were brought to enforce an award (which would tend
to weigh in favor of a stay) or to set the award aside (which would
tend to weigh in favor of enforcement); (ii) whether they were
initiated before the underlying enforcement proceeding so as to raise
concerns of international comity; (iii) whether they were initiated by
the party now seeking to enforce the award in federal court; and (iv)
whether they were initiated under circumstances indicating an intent
to hinder or delay resolution of the dispute;

(5) A balance of the possible hardships to the parties . . . ; and

(6) Any other circumstances that could tend to shift the balance in
favor of or against adjournment . . . .

156 F.3d at 317–18. Each side claims the factors as its own. Uzbekistan, for its part, emphasizes

that a stay could avoid “unnecessary protracted litigation” during the pendency of French

proceedings and that it would “only be necessary for a modest amount of time.” See Mot. at 21.

Gretton, unsurprisingly, takes the opposite position, maintaining that a stay would unduly delay

enforcement of an executable judgment without advancing any adjudicative interest. For the

reasons that follow, Uzbekistan gets the better of the argument.

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 Before jumping into the factors, the Court notes the unusual posture of the stay request in

this case. Ordinarily, the party seeking a stay is also the party seeking to set aside the award in

parallel foreign proceedings. That such a party would seek a stay is understandable, for it

typically hopes that a subsequent victory in foreign proceedings will render the U.S. ones

unnecessary. This case is different. Uzbekistan, the party asking for a stay, is not the one that

initiated proceedings to set aside the Award; instead, it is the opposite side that is responsible for

the foreign proceedings. Given this posture, Uzbekistan’s motivations are somewhat different

from those of the ordinary stay-seeking party. Its request is presumably based on a desire to

avoid defending itself in two fora simultaneously and to limit the likelihood of piecemeal

enforcement of the Award in the United States. As the Court will explain, this unusual posture

influences the direction of several factors and ultimately favors staying the case.

Objectives of Arbitration

The first factor, the general objectives of arbitration, weighs in favor of a stay. As noted,

arbitration promotes “the expeditious resolution of disputes and the avoidance of protracted and

expensive litigation.” Europcar, 156 F.3d at 317. Issuing a stay often contravenes these goals,

since it typically delays resolution in U.S. courts until the foreign proceedings conclude. See,

e.g., Hardy Exploration, 314 F. Supp. 3d at 106; Gold Reserve Inc. v. Bolivarian Republic of

Venezuela, 146 F. Supp. 3d 112, 135 (D.D.C. 2015). Not so here, however. That is because the

stay — and, more importantly, the party seeking it — is not responsible for dragging out this

litigation. Rather, it is Gretton and Oxus, via their efforts in the French courts, who are the

culprits, and those proceedings would not end upon this Court’s confirmation of the arbitral

award. So, if anyone is delaying “the expeditious resolution” of this dispute and lengthening

already “protracted and expensive litigation,” it is Gretton. See EDF Intern. S.A. v. YPF S.A.,

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676 F. Supp. 2d 317, 318 (D. Del. 2009) (noting that party seeking confirmation of arbitral award

“also filed a challenge” to it abroad).

A stay here will, in fact, serve the purposes of arbitration by reducing the likelihood of

unnecessary and expensive piecemeal litigation. If the Court were to side with Gretton now and

then Oxus were to win on appeal in Paris, one of them could well be back in a U.S. court seeking

to enforce a greater award amount and litigating some of the issues raised in this case all over

again. That is hardly the kind of efficient dispute resolution that arbitration is meant to serve.

Cf. InterDigital Comms., Inc. v. Huawei Invest. & Holding Co., 166 F. Supp. 3d 463, 471

(S.D.N.Y. 2016) (finding stay appropriate given “duplication and delay from pursuing this

enforcement proceeding”). It also seems unfair to require Uzbekistan to contest similar issues

multiple times in multiple litigations.

In finding that this factor favors a stay, the Court acknowledges that it does not do so

unequivocally. The New York Convention favors the immediate enforcement of arbitral awards.

See art. III. Back in 2016, Oxus obtained an order from the French courts making the $10

million award immediately executable. See Pinna Decl., ¶ 4. The Award has since apparently

passed to Gretton, see ECF No. 17-3 (Mortgage), even while Oxus — presumably funded by

Gretton — continues to appeal the claims that it lost in arbitration. See ECF No. 17-5 (Litigation

Funding Agreement). Petitioner understandably has an interest in collecting on the Award, which

has now lain unredeemed since late 2015. Ultimately, however, that interest is not so substantial

as to outweigh Gretton’s own responsibility for lengthening the proceedings and creating the

possibility of avoidable litigation.

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 Status of Foreign Proceedings

The second factor — the status of the foreign proceedings and the estimated time for their

resolution — weighs strongly in favor of Uzbekistan. All written submissions were due to the

Paris Court of Appeal on January 24, 2019, and a hearing is scheduled for March 26, 2019. See

Pinna Decl., ¶ 7. Respondent has represented — and Gretton has not contested — that the court

typically decides matters within two months of the hearing. Id. The parties can thus expect a

decision by the end of May 2019. In the context of the many years of litigation over this matter,

for which both parties have been responsible, another four months is a comparatively short time

for Gretton to wait. See InterDigital Comms., 166 F. Supp. 3d at 471–72 (finding stay

appropriate given mere months until resolution of foreign proceedings); In re Arbitration of

Certain Controversies between Getma Int’l & Republic of Guinea, 142 F. Supp. 3d 110, 115–16

(D.D.C. 2015) (finding second factor weighs in favor of stay because proceedings will resolve

within year of issuance of opinion).

Gretton replies that the May 2019 timeframe does not account for the possibility of

appeals to the French Supreme Court. See Opp. at 21–22. To the extent it suggests that Oxus

may appeal, the Court is not especially sympathetic. It is possible, however, that if Uzbekistan

loses, it might attempt to lengthen proceedings in some manner. The Court, accordingly, will

stay these proceedings only until the Paris Court of Appeal releases its decision in this matter,

which it expects will occur in the next several months. At that point it can reweigh the factors

depending on how the parties expect to proceed overseas.

Scrutiny of Award in Foreign Proceedings

The third Europcar factor — whether the Award will receive greater scrutiny in foreign

proceedings — favors neither side. The issues in the Paris proceedings appear to have little

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overlap with those here because they address claims that Oxus lost, which are not (currently) part

of the Award Gretton seeks to enforce in this case. Any difference in standard of review thus has

little relevance to the need for a stay.

Characteristics of Foreign Proceeding

Though styled as a single factor, the fourth actually involves several related but distinct

considerations pertaining to the foreign proceeding. The first of those is whether that proceeding

is one to enforce an award (weighing in favor of a stay) or one to set aside an award (weighing

against). It is true that the Paris proceeding seeks to set aside the Award. Yet that posture does

not weigh against a stay. To understand why, consider the reason stays are disfavored when a

foreign proceeding is one to set aside an award. It is, in short, because such a proceeding “might

frivolously delay proper enforcement of the Award.” Gold Reserve, 146 F. Supp. 3d at 136.

Here, though, no concern of frivolous delay on Uzbekistan’s part exists because it is not the party

that initiated the set aside. This consideration thus does not favor a stay.

The second consideration is whether the foreign proceedings “were initiated before the

underlying enforcement proceeding so as to raise concerns of international comity.” Europcar,

156 F.3d at 318. This one unquestionably favors Uzbekistan. Oxus challenged the arbitral

award in the Paris Court of Appeal on July 26, 2016. See Pinna Decl., ¶ 5. Yet Gretton, as

noted, did not file the Petition in this Court until two full years later. See Petition. (That delay,

furthermore, was not attributable to the assignment of rights to Gretton, which occurred in 2012

and was noticed to Uzbekistan in January 2016.) To intervene and issue a decision on the

enforcement of the Award now when those proceedings are so near to wrapping up would raise

significant international-comity concerns. See Hulley Enterprises, 211 F. Supp. 3d at 287

(explaining that “comity considerations support granting a stay” in part because “foreign

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proceedings were initiated prior to the instant action”); see also Telcordia, 95 F. App’x at 362–63

(finding stay appropriate when foreign proceedings began before suit filed in district court). This

consideration thus strongly counsels in favor of staying the Court’s pen.

Third, waiting may be appropriate if the proceedings abroad “were initiated by the party

now seeking to enforce the award in federal court.” Europcar, 156 F.3d at 318. Since

Petitioner’s assignor, Oxus, is the one pursuing the foreign proceedings — and Gretton appears

to be funding its efforts there, see Litigation Funding Agreement — this one favors Respondent.

The fourth and final consideration is whether the foreign proceedings “were initiated

under circumstances indicating an intent to hinder or delay resolution of the dispute.” Europcar,

156 F.3d at 318. The intuition here is that a stay should not be granted if the party seeking it

initiated the foreign proceedings merely to delay resolution of the case. See Gold Reserve, 146

F. Supp. 3d at 136. Because Uzbekistan is not the one that initiated the proceedings abroad, it

could not have acted therein to delay the case. Gretton thus finds no recourse on this

consideration either.

Balance of Hardships

The fifth factor addresses the balance of possible hardships to the parties. Europcar, 156

F.3d at 318. Not surprisingly, both sides argue that this tips in their favor. Uzbekistan

emphasizes that it will have to expend significant resources defending itself simultaneously here

and in Paris and that Gretton will suffer little harm from just a few months’ more delay. See

Mot. at 22. Petitioner, conversely, contends that “a foreign sovereign of immense resources is

not substantially harmed by the enforcement of the award” and that there will be no further

litigation in this Court because Uzbekistan lacks any basis to defend against the Award. See

Opp. at 23.

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 The Court finds that the balance again favors the country. To be sure, Respondent is a

foreign sovereign with substantial resources, and the $10 million arbitral award has been

executable for several years. At the same time, Gretton has not explained what particular harms

it will suffer from a several-month stay. Given Petitioner’s responsibility for lengthening

proceedings abroad, and the risks of duplicative litigation over enforcement of the Award arising

from them, the Court finds that the balance tips in favor of a short stay. Taking this course

conserves judicial resources — the jurisdictional issues Uzbekistan raises are thorny and

deserving of substantial attention. It also, more importantly, conserves the parties’ resources.

Even if the Court sided with Gretton and also refused to allow further briefing on the merits of

confirming the Award, Respondent would be within its rights to appeal to the D.C. Circuit. It

seems improbable that the matter would be resolved before the Paris Court of Appeal issues its

decision. Ruling now would be imprudent while also doing little to advance Gretton’s interests

in immediate satisfaction of the Award. See InterDigital Comms., 166 F. Supp. 3d at 471 (noting

that “[w]hatever result this Court reached on the merits would be subject to appeal with the

associated delay and expense”). In all, the balance easily favors a short stay.

Other Considerations

The sixth and final factor looks at “any other circumstances” that might shift the balance.

See Europcar, 156 F.3d at 318. Two such circumstances are worthy of note, both favoring

Gretton slightly. The first is that the Court is unsure how likely the Paris proceedings are to

overturn the portion of the Award subject to the enforcement Petition in this case. That risk may

well be little: Oxus has there appealed certain of the issues it lost in arbitration, and Uzbekistan

has not cross-appealed. See Pinna Decl., ¶¶ 4–5. Still, Respondent has argued in the alternative

that if the Paris court were to side with Oxus on appeal, it should vacate the entire arbitral award.

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Id. So there remains at least some possibility that the underlying Award in this case will be

vacated. The relevant point, however, is that the Award before this Court may not be going

anywhere. That consideration weighs against a stay, as it means there is less concern about

conflicting decisions or orders between the courts. It is not enough, however, to tip the balance

in Gretton’s favor. As noted, numerous values counsel in favor of a stay, including concerns

about duplicative enforcement proceedings in U.S. courts, the unfairness to Uzbekistan of having

to defend itself simultaneously in two fora, and the international-comity issues associated with

issuing a decision mere months before the Paris court is likely to do so.

The second circumstance is that Gretton is not technically the same party involved in the

foreign proceedings. That is, instead, its assignor, Oxus. While this might mitigate in some

small way the concerns the Court raised about Petitioner’s responsibility for the foreign

proceedings, it does not affect the conclusion. Oxus is Gretton’s assignor, and Gretton

presumably will receive the benefits, if any, of the set-aside proceedings in Paris. Indeed, while

the Court does not have the entire litigation funding agreement before it, Gretton may well be

funding or controlling Oxus’s continued actions in the Paris courts. See Litigation Funding

Agreement. Needless to say, it makes sense to treat them as one when their interests and

activities are so closely aligned.

IV. Conclusion

For these reasons, the Court will grant Respondent’s Motion and stay proceedings until

the Paris Court of Appeal has issued its ruling. A separate Order so stating will issue this day.

/s/ James E. Boasberg
JAMES E. BOASBERG
United States District Judge
Date: February 6, 2019

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