Hulley Enters. v. The Russian Fed'n

HULLEY ENTERPRISES LTD., et al., Petitioners, v. THE RUSSIAN FEDERATION, Respondent.

Civil Action No. 14-1996 (BAH)

United States District Court, District of Columbia

April 13, 2022

MEMORANDUM OPINION

BERYL A. HOWELL CHIEF JUDGE

For the fifth time since 2016, one of the parties in this long-running litigation to confirm an arbitral award of over $50, 000, 000, 000 against respondent, the Russian Federation, seeks to stay this litigation pending resolution in the Netherlands of set-aside proceedings, which were initiated almost eight years ago and are now on remand from the Dutch Supreme Court before the Amsterdam Court of Appeal. The most recent stay lapsed in November 2021 with the resolution of proceedings in the Dutch Supreme Court. See Order (Nov. 20, 2020) (“2020 Stay Order”), ECF No. 193; Min. Order (Dec. 2, 2021). As in 2020, when this Court last entered a stay order, the Russian Federation is again the party seeking the stay, in this instance until the conclusion of remand proceedings ongoing since January 2022 in the Amsterdam Court of Appeal. Resp't's Mot. to Extend Stay of Litigation (“Resp't's Mot.”), ECF No. 201; Resp't's Mem. Supp. of Mot. to Extend Stay (“Resp't's Mem.”), ECF No. 201-1; see also Resp't's Mot. to Stay, ECF No. 179 (June 2020 request for stay).

Despite the Dutch Supreme Court's rejection of all but one of its arguments seeking to invalidate the arbitral award at issue see Resp't's Mem. at 1; Pet'rs' Opp'n to Resp't's Mot. to Stay (“Pet'rs' Opp'n”), Ex. 4 (November 2021 Dutch Supreme Court Decision), at 36, ECF No. 204-8 the Russian Federation insists that a stay remains necessary because, on remand, “the Amsterdam Court of Appeal will be faced with adjudicating[, ] for the first time in any jurisdiction[, ]” the Russian Federation's allegations that “procedural frauds” took place during the arbitration that gave rise to the award Resp't's Mem. at 5. Petitioners Hulley Enterprises Ltd., Yukos Universal Ltd., and Veteran Petroleum Ltd. (collectively, the “Shareholders”) vigorously oppose extension of the stay, emphasizing that “[t]his seven-year-old confirmation proceeding has not yet taken its very first step, which is to resolve the Russian Federation's defense of sovereign immunity, ” Pet'rs' Opp'n at 1, and that-should they succeed on the merits of this confirmation action-“[f]inding and executing on [Russian Federation] assets [in the United States] will be far more difficult as a result of the[] sanctions” and other economic measures enacted against the Russian Federation following its invasion of Ukraine Pet'rs' Resp. to Status Report at 2, ECF No. 225.^[1]

Notwithstanding the focus of the ongoing Dutch proceedings on only the Russian Federation's allegations of procedural fraud, the protracted nature of this litigation, recent D.C. Circuit precedent directing prompt resolution of sovereign immunity claims in the arbitral context, and concerns about asset liquidation in the wake of the Russian Federation's war against Ukraine, all counsel-for reasons more fully explained below-against granting a further stay in this case. Accordingly, the Russian Federation's second motion to stay is denied. At a minimum, the Russian Federation's still-pending-and already fully briefed-motion to dismiss this confirmation action for lack of jurisdiction must proceed to resolution.

I. BACKGROUND

The history underlying this litigation has been recounted in this Court's previous decisions resolving two earlier motions to stay. See Hulley Enterprises Ltd. v. Russian Federation (“Hulley II”), 502 F.Supp.3d 144, 148-152, (D.D.C. 2020); Hulley Enterprises Ltd. v. Russian Federation (“Hulley I”), 211 F.Supp.3d 269, 272-276 (D.D.C. 2016). Only the factual and procedural developments relevant to resolving the Russian Federation's instant motion to stay are thus addressed here.

This case traces its origins to a decade-long arbitration in the Netherlands that the Shareholders initiated in November 2004 under the Energy Charter Treaty (“ECT”), “to which the Russian Federation was a signatory between December 1994 and October 2009.” Hulley II, 502 F.Supp.3d at 148.^[2] The Shareholders were the majority owners of Yukos Oil Company (“Yukos”), “a Russian . . . company that became the nation's largest and first fully privatized oil company following the dissolution of the Soviet Union.” Hulley I, 211 F.Supp.3d at 272. At the arbitration, the Shareholders claimed that the Russian Federation violated the ECT through a series of adverse measures intended to “bankrupt Yukos, appropriate the company's assets, and silence the company's head, Mikhail Khodorkovsky, ” due to Khodorkovsky's support for political parties opposed to President Vladimir Putin and the company's proposed integration with Western oil interests. Hulley II, 502 F.Supp.3d at 148. On July 18, 2014, following a three-week hearing, an Arbitral Tribunal issued three final awards determining that, by engaging in such adverse measures, “the Russian Federation had violated its obligations under the ECT, and [thus] owed the Shareholders $50, 020, 867, 798 in damages, plus interest, $60, 000, 000 in attorneys' fees, and €4, 240, 000 in arbitration costs.” Id.

About four months later, on November 10, 2014, the Russian Federation “petitioned the District Court of the Hague (‘Dutch District Court') to set the [a]wards aside, ” which was followed promptly by the Shareholders' filing of a petition in this Court to confirm the awards on November 25, 2014. Id. at 149. The parties thereafter completed a round of briefing in this Court in connection with the “Russian Federation's motions seeking to dismiss the petition for lack of jurisdiction and to deny confirmation of the [a]wards.” Id.^[3]

Upon the Shareholders' request and over the Russian Federation's objection, this matter was first stayed in September 2016 pending the Shareholders' appeal of an April 2016 Dutch District Court ruling setting aside the awards. Id.^[4] That 2016 Stay Order paused proceedings “until January 21, 2019, or until resolution of proceedings in the Netherlands to set aside [the Awards], whichever date occurs earlier.” Order (Sept. 30, 2016) (“2016 Stay Order”), ECF No. 153.

More than two years later, on December 27, 2018, the parties jointly moved to extend the 2016 Stay Order until January 21, 2020, citing that the Court of Appeal of The Hague was not anticipated to issue its decision on the Shareholders' appeal of the set-aside judgment until “either late 2019 or early 2020.” Parties' Joint Mot. to Extend Stay at 3, ECF No. 171. This motion was granted that same day. Min. Order (Dec. 27, 2018). Again, on October 10, 2019, the parties jointly moved to extend the 2016 Stay Order until May 20, 2020, upon being notified that the Court of Appeal of The Hague would be rendering its decision regarding the Shareholders' appeal of the set-aside judgment on February 18, 2020. See Joint Status Report, ECF No. 175; This second joint extension request was also granted. Min. Order (Oct. 10, 2019).

On February 18, 2020, almost four years after the original 2016 Stay Order took effect, the Court of Appeal of The Hague “issued a judgment reversing the 2016 Dutch District Court Judgment and rejecting additional arguments by the Russian Federation” seeking to invalidate the awards. Hulley II, 502 F.Supp.3d at 150. Following the lifting of the 2016 Stay Order in May 2020, the Russian Federation promptly moved, on June 15, 2020, to impose a second stay in this action pending its appeal to the Dutch Supreme Court of the February 2020 Court of Appeal of The Hague decision. Id. at 150-151. After extensive briefing on this motion was completed on October 5, 2020, the Russian Federation's motion was granted on November 20, 2020 and this case stayed “until the earlier of November 18, 2022 or the conclusion of the proceedings to set aside the Awards in the Dutch Supreme Court.” Id. at 164; see also 2020 Stay Order at 1. In so doing, the Court concluded, inter alia, “that the enforceability of the arbitral award [was] in flux to such a degree that a stay is warranted, ” Hulley II, 502 F.Supp.3d at 157, and expressed concern that “any conclusion reached [in this Court] may be upended by contrary findings by the Dutch Supreme Court, ” id. at 155.

Dissatisfied with the continued pause in their efforts to confirm the awards in the United States now that developments in the Dutch courts had turned to their favor, the Shareholders appealed the 2020 Stay Order to the D.C. Circuit, see Notice of Appeal, ECF No. 195, which heard oral argument on October 15, 2021. Less than three weeks later, however, on November 5, 2021, the Dutch Supreme Court rendered a decision on the Russian Federation's appeal that automatically lifted the 2020 Stay Order. See 2020 Stay Order at 1 (staying proceedings “until November 18, 2022, or until resolution of proceedings in the Dutch Supreme Court”).

Consequently, the Shareholders consented to dismiss their appeal of the 2020 Stay Order. See Consent Mot. to Dismiss, Case No. 20-7113 (D.C. Cir. Nov. 17, 2021). Following the D.C. Circuit's granting of the Shareholders' consent motion to dismiss their appeal, the mandate remanding the case to this Court issued on December 1, 2021. See Mandate, ECF No. 200.

The next day, on December 2, 2021, after noting “that the stay imposed on November 20, 2020 is now lifted with ‘resolution of proceedings in the Dutch Supreme Court '” this Court directed the parties to brief whether this case should be subject to a stay “pending resolution of proceedings on remand from the Dutch Supreme Court.” Min. Order (Dec. 2, 2021) (quoting 2020 Stay Order). In addition to responding to this order, the Russian Federation filed the pending motion to stay this...