UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNIÓN FENOSA GAS, S.A.,
Plaintiff,
v. Civil Action No. 18-2395 (JEB)
ARAB REPUBLIC OF EGYPT,
Defendant.
MEMORANDUM OPINION
To stay or not to stay; that is the question. Plaintiff Unión Fenosa Gas, S.A. claims that
Defendant Arab Republic of Egypt reneged on its obligation to provide natural gas to UFG’s
liquefaction plant in that country, forcing the plant to close down entirely. An arbitral tribunal
assembled under the auspices of the International Centre for the Settlement of Investment
Disputes concluded that Egypt’s actions had indeed violated various treaty obligations, and it
awarded Plaintiff over $2 billion for the losses it had incurred, one of the largest awards in
ICSID’s history.
UFG has shifted forums and now seeks this Court’s recognition and enforcement of the
award. Egypt offers a procedural counter, asking the Court to stay the case until the ICSID rules
on its annulment petition there. While the Court is sympathetic to Plaintiff’s interest in finally
concluding this multi-year dispute, it ultimately finds that the unique considerations of this case
warrant imposing a stay here. The Court will therefore grant Egypt’s Motion to Stay and deny
UFG’s Motion for Entry of Default Judgment.
1
I. Factual and Procedural Background
Plaintiff is a specialized natural-gas corporation organized under the laws of Spain. See
ECF No. 1 (Complaint), ¶ 2. In 2000, its predecessor-in-interest entered into a Sale and Purchase
Agreement with the national oil company of Egypt (formerly the Egyptian General Petroleum
Corporation and now the Egyptian Natural Gas Holding Company). Id., ¶¶ 9,10. Under the
SPA, the state-owned oil corporation agreed to supply a certain amount of natural gas to UFG for
at least 25 years. Id., ¶ 10. This energy supply would be critical to the economic viability of
UFG’s proposed natural-gas liquefaction plant to be located in Damietta, a Mediterranean port
city in northeast Egypt. Id., ¶¶ 7, 10.
Following the execution of the SPA, UFG built the Damietta Plant –– then the largest
single-train liquefaction plant in the world –– at a cost of approximately $1.3 billion. Id., ¶ 14.
Almost since the plant’s inception, however, Plaintiff has faced difficulties in procuring the
guaranteed supply of natural gas from Defendant. From 2006 through 2012, Egypt
systematically undersupplied UFG while continuing to raise gas prices. Id., ¶ 16. By 2013, the
supply had been reduced to such unsustainably low volumes that UFG was forced to shut down
the Plant. Id., ¶¶ 19–20.
Egypt’s alleged violation of the SPA implicated a series of interlocking treaties. First, in
1994, Spain and Egypt entered into a bilateral investment treaty pursuant to which each nation,
among other things, “guarantee[d] in its territory fair and equitable treatment for the investments
made by investors of the other Party.” Id., ¶¶ 21–24; see also Compl., Exh.C (Agreement on the
Reciprocal Promotion and Protection of Investments between the Kingdom of Spain and the
Arab Republic of Egypt), ¶ 9. Article 11 of the Treaty additionally provides that unresolved
disputes among the parties shall be submitted “at the choice of the investor” (in this case, UFG)
2
to one of several potential arbitration bodies, including the ICSID. See Compl., ¶ 27. The
ICSID was established via the “ICSID Convention,” a multilateral agreement signed by over 160
states — including Spain, Egypt, and the United States — to “facilitat[e] private foreign
investment in developing countries.” Mobil Cerro Negro, Ltd. v. Bolivarian Republic of
Venezuela, 863 F.3d 96, 100, n.1 (2d Cir. 2017). The ICSID provides a “legal framework to
resolve disputes between private investors and governments,” including the convening of
“arbitration panels to adjudicate disputes between international investors and host governments
in ‘Contracting States.’” TECO Guatemala Holdings, LLC v. Republic of Guatemala, No. 17-
102, 2018 WL 4705794, at *1 (D.D.C. Sept. 30, 2018) (alterations and quotation marks omitted).
With its plant closed as a result of Egypt’s alleged machinations, UFG filed a request for
arbitration with the ICSID in 2014. See Compl., ¶ 31. An ICSID tribunal ultimately conducted a
hearing and issued an award on August 31, 2018. Id., ¶¶ 34–35. The tribunal found that: (1) it
had jurisdiction over the dispute; and (2) on the merits, Egypt’s conduct had, among other things,
violated its obligation to provide “fair and equitable treatment” to Spanish investors under the
BIT. See id., ¶¶ 36–37; see also Compl., Exh. A (ICSID Award). The Tribunal awarded Plaintiff
over $2 billion in damages and $10 million in legal costs, along with both pre- and post-award
interest, the latter of which has continued to accrue since the date of the award. See Compl.,
¶ 38.
One member of the three-person panel –– who formerly served as the State Department’s
Assistant Legal Adviser for International Claims and Investment Disputes –– dissented. See
ICSID Award at ECF p. 333. He concluded that the tribunal lacked jurisdiction because UFG
had secured the SPA by corrupt means, specifically by bribing someone with influence over the
Egyptian government. Id. at 333–37. He also determined that even if the ICSID tribunal
3
retained jurisdiction, UFG’s claims failed on the merits, id. at 337–44, and that, in any event, the
tribunal had “greatly overstated” the damages amount. Id. at 345.
On October 17, 2018, UFG initiated the present action, seeking recognition of the award
and an entry of judgment against Egypt. See ECF No. 16 (Pl. Motion for Default Judgment),
Exh. 2 (Declaration of Charlene C. Sun), ¶ 5. Plaintiff successfully served Defendant on
November 17, 2018. Id., ¶ 7. The following month, Egypt submitted an application to annul the
award in the ICSID, and that same day, the Secretary of the ICSID issued a preliminary stay of
enforcement. Id. A duly constituted annulment committee granted Egypt’s request for a stay
pending the decision on its petition, but the committee made the stay subject to certain
conditions, such as Egypt’s posting of a security. Id. Defendant failed to comply with the
conditions of the stay, and the committee thus terminated it on January 24, 2020. Id. The parties
have completed briefing on Egypt’s application before the annulment committee, and a final
hearing is scheduled for next month. See ECF No. 18 (Def. Motion to Set Aside Entry of
Judgment and to Stay), Exh. 6 (Procedural Order) at 17.
Meanwhile in this Court, because Egypt had failed to file an answer or otherwise respond
to UFG’s Complaint within sixty days of service, the Clerk of Court entered default against
Defendant. See ECF No. 15. Plaintiff next moved for default judgment as required by Federal
Rule of Civil Procedure 55. Egypt responded with a Motion to Set Aside the Clerk’s Default,
along with a Motion to Stay this proceeding pending the outcome of its annulment petition.
Mercifully streamlining matters, UFG has not opposed the Clerk’s vacating of the entry of
default and now only contests Defendant’s Motion to Stay. See ECF No. 21 (Pl. Opp.) at 2
(“[N]ow that Egypt has appeared in this action, UFG would not object to vacatur of the Clerk’s
4
entry of default provided that the action move forward expeditiously and without any further
unjustified delay by Egypt.”). This is wise given that a default judgment was quite unlikely here.
II. Jurisdiction
The ICSID Convention requires the United States to “‘recognize an award’ and ‘enforce
the pecuniary obligations imposed by that award.’” Teco Guatemala Holdings, LLC, 2018 WL
4705794, at *4 (quoting ICSID Convention art. 54). Accordingly, 22 U.S.C. § 1650(a) – the
enabling statue for United States participation in the ICSID Convention – provides:
An award of an arbitral tribunal rendered pursuant to chapter IV of
the convention shall create a right arising under a treaty of the
United States. The pecuniary obligations imposed by such an award
shall be enforced and shall be given the same full faith and credit as
if the award were a final judgment of a court of general jurisdiction
of one of the several States.
Subsection (b) of § 1650 further grants the federal district courts “exclusive jurisdiction over
actions and proceedings under subsection (a) . . . regardless of the amount in controversy.”
III. Analysis
As explained above, the only currently contested issue is whether to stay enforcement of
the ICSID award pending the decision of the annulment committee. Having already waited years
to recover damages for the Damietta Plant fiasco, UFG understandably wants to keep these
proceedings moving. Egypt, for its part, seeks to forestall remitting over $2 billion from its
coffers.
First up: the ground rules guiding the Court’s decision on Defendant’s request for a stay.
“[T]he power to stay proceedings is incidental to the power inherent in every court to control the
disposition of the causes on its docket with economy of time and effort for itself, for counsel, and
for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). In deciding whether to grant a
stay, courts generally “‘weigh competing interests and maintain an even balance’ between the
5
court’s interests in judicial economy and any possible hardship to the parties.” Belize Soc. Dev.
Ltd. v. Gov’t of Belize, 668 F.3d 724, 732–33 (D.C. Cir. 2012) (quoting Landis, 299 U.S. at
254–55). District courts “may not ‘order a stay of indefinite duration in the absence of a pressing
need.’” Novenergia II - Energy & Env’t (SCA) v. Kingdom of Spain, No. 18-cv-1148, 2020 WL
417794, at *2 (D.D.C. Jan. 27, 2020) (alteration omitted) (quoting Belize, 668 F.3d at 731–32).
UFG’s Complaint implicates unique concerns because Plaintiff seeks enforcement of an
award imposed by an international arbitral body and currently on appeal. Courts “have broad
discretion in deciding whether to stay proceedings pending the resolution of independent legal
proceedings.” Id. (citing Landis, 299 U.S. at 254). Adjournment of proceedings to enforce
foreign arbitral awards, however, may “impede[] the goals of arbitration – the expeditious
resolution of disputes and the avoidance of protracted and expensive litigation.” Europcar Italia,
S.p.A. v. Maiellano Tours, Inc., 156 F.3d 310, 317 (2d Cir. 1998). Such adjournments also
implicate “federal courts’ obligations under international treaties to promptly recognize these
awards.” Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, 397 F. Supp. 3d 34, 39
(D.D.C. 2019). “‘On the other hand,’ premature enforcement risks ‘conflicting results and a
consequent offense to international comity.’” Id. (alterations omitted) (quoting Europcar, 156
F.3d at 317).
In deciding the question of whether to stay arbitral enforcement proceedings, courts in
this district have sometimes employed the six-factor test developed by the Second Circuit 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). Here, the Court’s analysis under this Circuit’s more
generally applicable stay framework leads it through the most relevant factors identified by
Europcar. See 156 F.3d at 317–18 (courts should consider, inter alia, balance of hardships to the
6
parties, status of foreign proceedings, and “any other [relevant] circumstances”). Additionally,
the Second Circuit’s test is not binding, and the parties did not brief it. The Court thus sees no
reason to apply the full Europcar list seriatim.
Turning to the merits, as a threshold matter, considerations of judicial economy favor a
stay. The ICSID Convention affords the Court “little discretion in refusing or deferring
enforcement of foreign arbitral awards,” but it “expressly contemplate[s] refusal for awards that
have been set aside.” Hulley Enterprises Ltd. v. Russian Fed’n, 211 F. Supp. 3d 269, 283
(D.D.C. 2016) (quotation marks omitted) (granting stay pending conclusion of foreign
proceeding relevant to case). Here, “a parallel proceeding is ongoing[,] . . . and there is a
possibility that the award will be set aside.” Higgins v. SPX Corp., 2006 WL 1008677, at *4
(W.D. Mich. Apr. 18, 2006) (quoting Europcar, 156 F.3d at 317). “Although a stay would
immediately delay the resolution of the parties’ dispute, it would still likely be shorter than the
possible delay that would occur if this Court were to confirm the award and the ICSID were to
then set it aside.” Masdar, 397 F. Supp. 3d at 39 (alteration omitted) (quoting Matter of
Arbitration of Certain Controversies Between Getma Int’l & Republic of Guinea, 142 F. Supp.
3d 110, 114 (D.D.C. 2015)); see also Telcordia Technologies, Inc. v. Telkom SA, Ltd., 95 F.
App’x 361, 362–63 (D.C. Cir. 2004) (affirming district court’s decision to “adjourn”
enforcement of arbitral award pending appeal of decision in High Court of South Africa);
CPConstruction Pioneers Baugesellschaft Anstalt (Liechtenstein) v. Republic of Ghana, Ministry
of Roads & Transp., 578 F. Supp. 2d 50, 54 (D.D.C. 2008) (“Far from being at odds with the
nature of arbitration confirmation proceedings, adjournments pending the completion of set-aside
proceedings are an integral part of such proceedings.”).
7
The Court finds it significant that the possibility of the award being set aside, or at least
modified, is not merely wishful thinking on the part of Egypt. The award was not only one of
the largest secured in the ICSID’s history, but it also garnered a dissent, a relatively rare outcome
in such cases. See Anton Strezhnev, You Only Dissent Once: Re-Appointment and Legal
Practices in Investment Arbitration 2 (Nov. 8, 2015), http://scholar.harvard.edu/files/astrezhnev
/files/dissent_draft_1.pdf (describing “dissent aversion” in international investment arbitration
and noting that from January 1972 through April 2015, roughly 80% of ICSID final awards were
unanimous and fewer than 15% included a dissent). Additionally, the dissent found fault with all
aspects of the majority’s award: its jurisdictional holding, merits conclusion, and calculation of
damages. See ICSID Award at ECF pp. 333–47.
Even if UFG prevails before the annulment committee, moreover, there is merit in
pausing to permit consideration of the grounds for that committee’s decision. Egypt explains
that some of the arguments raised in its annulment petition are identical to those that it will offer
to this Court in defending against UFG’s Complaint, including that the ICSID tribunal lacked
jurisdiction over the dispute. See Def. Mot. to Stay at 14–15. While Plaintiff casts doubt on
these arguments’ likelihoods of success, “‘[l]itigating essentially the same issues in two separate
forums is not in the interest of judicial economy or in the parties’ best interest.’” Novenergia II,
2020 WL 417794, at *3 (quoting Naegele v. Albers, 355 F. Supp. 2d 129, 141 (D.D.C. 2005)).
And given the nature of Egypt’s overlapping arguments, “at a minimum” the annulment
proceedings “may affect this Court’s determinations . . . by virtue of the[ir] persuasive
value.” Masdar, 397 F. Supp. 3d at 40 (quoting Hulley Enterprises Ltd., 211 F. Supp. 3d at 284);
see also Novernergia II, 2020 WL 417994, at *3 (finding that consistent argument in both forums
regarding arbitration panel’s jurisdiction weighed in favor of stay).
8
Second, the balance of hardships also favors Egypt. Whenever a contested award is on
appeal, one party –– in this case, Defendant –– “will undeniably be burdened by having to attack
the validity of the arbitral award in two forums, and perhaps in ultimately having to recover
assets seized during this action should the annulment proceeding go its way.” Masdar, 397 F.
Supp. 3d at 40. While that concern is not dispositive, it is heightened here by the enormity of
this award. See ECF No. 25 (Def. Reply), Exh. A (King & Spalding Secures Landmark US $2.2
Billion ICSID Award for Spanish Client, King & Spalding (Sept. 9, 2018)). Egypt explains,
quite candidly, that it currently faces a massive fiscal crisis exacerbated by the ongoing global
COVID-19 pandemic. See Def. Reply at 12–13 (Egypt’s “already fragile economy,” with state
$12 billion in debt to the International Monetary Fund, faces “immense shock” if COVID-19
crisis lasts even 3-6 months). The Court is loath to plunge so deeply into a sovereign’s treasury
during a period of immense uncertainty if there is a chance that the award might be set aside or
mitigated to some extent.
To be sure, UFG faces hardships of its own in withstanding more delay in this case, and
the Court does not take that privation lightly. See Pl. Opp. at 7 (noting that it “took UFG over
four years in arbitration to obtain the ICSID Award”). Yet many of UFG’s complaints about
delay would be better aimed at the ICSID itself, which has generated no dearth of criticism in
recent years for its “drawn-out” arbitrations. See Adam Raviv, A Few Steps to a Faster ICSID, 8
Global Arb. Rev. 23 (Nov. 13, 2013). At this stage, the parties are, in fact, quite near the finish
line. As mentioned above, a final hearing on Egypt’s annulment petition will take place in July,
and therefore a decision should be rendered about seven months from now. Id. at 26 (explaining
that annulment committee deliberations from 2007 through 2012 took average of six months).
While this might seem a long time to wait, it is short relative to the length of the entire arbitration
9
process. Indeed, courts in this district have granted a stay to enforce arbitration awards in the
face of far greater expected delays. See, e.g., Hulley Enterprises Ltd., 211 F. Supp. 3d at 288
(granting stay where set-aside proceedings were expected to conclude “within two and a half
years”); Novenergia II, 2020 WL 417794, at *3 (permitting stay where delay expected to be
between one and two years). A delay of months, rather than years, thus mitigates UFG’s
hardship somewhat, and in the meantime, Plaintiff “will be compensated for any delay because
the award includes interest.” Id., at *4.
UFG counters that a stay is not warranted because the ICSID lifted its own stay of
enforcement following Egypt’s failure to post the required security. See Pl. Opp. at 11. The
conditions predicate for a stay in the ICSID, however, are not synonymous with those pertinent
here. For one, “courts in this Circuit generally have not required foreign sovereigns to post
security” in order to secure a stay. Id. at *6. Ultimately, the ICSID’s lifting of the stay merely
permits but does not require a signatory state to enforce the award, and, for the reasons
articulated, the Court finds a stay to be the appropriate course. “Many courts have reached the
same conclusion in similar circumstances.” Masdar, 397 F. Supp. 3d at 40 (granting stay
pending decision of ICSID annulment committee and collecting numerous other cases). Finally,
while UFG relies on a decision in this district where a court refused to stay enforcement of an
ICSID award because the ICSID itself had not stayed enforcement, that conclusion was reached
after the ICSID annulment committee had released its decision, meaning there were no further
proceedings to await. TECO Guatemala Holdings, 414 F. Supp. 3d 94, 99, 108 (D.D.C. 2019).
In sum, the Court finds that a stay pending the decision of the ICSID annulment
committee is proper here. This decision does not suggest that a stay is always or even often
warranted whenever a losing party petitions to annul an ICSID award. Rather, this case involves
10
several unique circumstances that, taken in conjunction, counsel in favor of a stay –– namely, the
size of the award, the nature of the divided panel opinion, the duplicative arguments in play both
here and before the ICSID, and uncertainties regarding an unprecedented global pandemic.
Finally, the Court will not passively await further proceedings. The circumstances justifying this
stay will be reviewed with regularity, and the Court will promptly turn to the merits of UFG’s
Complaint upon the conclusion of the ICSID proceedings.
IV. Conclusion
For the foregoing reasons, the Court grants Defendant’s Motion to Stay and to Set Aside
the Entry of Default and it denies Plaintiff’s Motion for Default Judgment. A separate Order so
stating will issue this day.
/s/ James E. Boasberg
JAMES E. BOASBERG
United States District Judge
Date: June 4, 2020
11