SRL v. Bolivarian Republic Venezuela

TIDEWATER INVESTMENT SRL et al., Plaintiffs, v. BOLIVARIAN REPUBLIC OF VENEZUELA, Defendant.

Civil Action No. 17-1457 (TJK)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

December 17, 2018

MEMORANDUM OPINION

Plaintiffs in this action, a foreign corporation and one of its subsidiaries, have filed a complaint seeking recognition and enforcement of an arbitration award entered by an international tribunal against the Bolivarian Republic of Venezuela. Venezuela was served by diplomatic pouch on April 6, 2018, and after it failed to respond to Plaintiffs' complaint or otherwise appear in this action within 60 days of the date of service, Plaintiffs filed a motion for default judgment. For the reasons explained below, the Court will grant the motion and enter judgment for Plaintiffs.

I. Background

A. The ICSID Convention

The International Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the "ICSID Convention" or "Convention"), Mar. 18, 1965, 17 U.S.T. 1270, 330 U.N.T.S. 3, is a "multilateral treaty aimed at encouraging and facilitating private foreign investment in developing countries." Mobil Cerro Negro, Ltd. v. Bolivarian Republic of Venezuela, 863 F.3d 96, 100 (2d Cir. 2017) (citing Anthony R. Parra, The History of ICSID 11-12, 24-26 (Oxford 2012)). The Convention provides a framework for resolving investment disputes between a "contracting state" to the Convention and a national of another contracting state, and it established the International Centre for Settlement of Investment Disputes—commonly referred to as "ICSID"—to administer arbitral proceedings, including the proceeding at issue in this case. ICSID Convention arts. 1-3, 25. ICSID "has the authority to convene 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) (internal quotation marks omitted) (quoting Mobil Cerro Negro, 863 F.3d at 101)).

Either a contracting state or a national of another contracting state may request that ICSID convene an arbitral tribunal. See ICSID Convention art. 36. The tribunal will then, upon considering the dispute, issue a written decision—called an "award." Id. art. 48. If either party objects to the award, it may seek an annulment, equivalent to pursuing a judicial appeal, before an ad hoc committee of three individuals who were not members of the original panel. Id. art. 52. Any award entered by ICSID under the Convention, which includes any decision interpreting or annulling the award, is binding on the parties. Id. art. 53. ICSID, however, is "not empowered to enforce awards." TECO Guatemala, 2018 WL 4705794, at *2. Instead, contracting states are required to "recognize an award . . . as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State." ICSID Convention art. 54.

The United States is a contracting state to the Convention, see ICSID, List of Contracting States and Other Signatories of the Convention (Aug. 27, 2018), and Congress has passed implementing legislation to give effect to the Convention's requirement that contracting states recognize and enforce ICSID awards. Specifically, 22 U.S.C. § 1650a(a) provides: "An award ofan arbitral tribunal rendered pursuant to [the ICSID 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." That section further provides that the Federal Arbitration Act "shall not apply to enforcement of awards rendered pursuant to the convention." Id. Lastly, § 1650a(b) confers exclusive jurisdiction over these actions on federal district courts.

B. Tidewater's Arbitration Proceedings

Plaintiff Tidewater Investment SRL, which is the corporate parent of Plaintiff Tidewater Caribe, C.A., (collectively, "Tidewater") is a company organized and existing under the laws of Barbados. See Compl. ¶ 2; ECF No. 14-2 ("ICSID Jurisdiction Opinion") ¶¶ 1-4. On February 16, 2010, Tidewater and several affiliates commenced an arbitration proceeding against Venezuela under the ICSID Convention concerning Venezuela's alleged expropriation of Tidewater's investments in certain ventures relating to the oil and gas industry in Venezuela in 2009. Compl. ¶ 13. Tidewater argued that ICSID had jurisdiction to arbitrate Tidewater's claims against Venezuela arising under two sources—the bilateral investment treaty between Venezuela and Barbados (the "BIT") and a Venezuelan statute providing protections for investments. Id.

On February 8, 2013, after briefing and a hearing, a panel of arbitrators issued a jurisdictional decision finding that only Tidewater's claims arising under the BIT were arbitrable under the Convention. See ICSID Jurisdiction Opinion. Following additional briefing and a hearing on the merits, on March 13, 2015, the panel issued a written opinion and judgment in favor of Tidewater—the Award—in the principal amount of $46.4 million plus interest accruing at an annual rate of 4.5% until full payment is made. See ECF No. 1-5 ("ICSID Award") ¶ 217.The Award also instructed Venezuela to partially reimburse Tidewater for its arbitration costs at an amount of $2.5 million. Id.

On July 9, 2015, Venezuela filed an application for annulment of the Award. ICSID convened a three-member ad hoc committee, which, after further briefing and a hearing, issued a decision on December 27, 2016, partially annulling the Award but leaving intact the remainder. See ECF No. 1-6 ("ICSID Annulment") ¶ 230. Specifically, the amount of the Award was reduced to $36.397 million, and Tidewater was instructed to partially compensate Venezuela for its annulment-proceeding costs. Id. Tidewater alleges that this amounted to $122,069, leaving a net award of costs owed by Venezuela of $2,377,931. See Declaration of Miguel López Forastier ("Forastier Decl."), ECF No. 14-1, ¶ 6.

According to Tidewater, Venezuela has failed to pay any part of the final amount of the Award. See Id. ¶ 13.

C. Tidewater's Lawsuit and Attempts to Serve Venezuela

On July 21, 2017, Tidewater commenced this action, filing a complaint requesting this Court to recognize the Award and enforce Venezuela's pecuniary obligations under it. ECF No. 1 ("Compl.").¹ The complaint sets forth a single count, under 22 U.S.C. § 1650a, for "recognition of the final award." Id. ¶¶ 30-35. Tidewater requests that, upon recognition of theAward and its pecuniary obligations, the Court order Venezuela to pay those outstanding amounts. Id. at 8.

According to counsel for Tidewater, on the same day that it filed its complaint in this matter, counsel emailed a copy of the complaint to Venezuela's counsel and asked if its counsel would accept service. Forastier Decl. ¶ 8. Venezuela's counsel, about three weeks later, refused. Id.

Tidewater next attempted service through the procedures established under the Hague Convention on Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the "Hague Convention"), Nov. 15, 1965, 20 U.S.T. 361, 658 U.N.T.S. 163, to which Venezuela is a party. See Hague Conference on Private International Law, Status Table: Convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (Nov. 29, 2018); Forastier Decl. ¶ 9. Under the Hague Convention, member states are required "to establish a central authority to receive requests for service of documents from other countries." Water Splash, Inc. v. Menon, 137 S. Ct. 1504, 1508 (2017) (quoting Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694, 698 (1988)); see also Hague Convention, arts. 5, 6. Tidewater's counsel indicates, however, that despite the Hague Convention's mandate, "the Venezuela Central Authority has failed to serve the summons, complaint, and accompanying initiating papers" on Venezuela. Forastier Decl. ¶ 9.

Concluding that service could not be made under the Hague Convention, Tidewater requested that the Clerk of Court serve copies of the summons, complaint, and notice of suit, together with a translation of each into Spanish, on the United States Department of State for diplomatic service pursuant to 28 U.S.C. § 1608(a)(4). See ECF Nos. 10, 11. And on May 7,2018, the Clerk of Court filed on the docket a letter from the Department of State providing proof of service on Venezuela on April 6, 2018. See ECF No. 13.

Venezuela did not file an answer within the 60 days afforded by statute, see 28 U.S.C. § 1608(d), and Tidewater subsequently filed a motion for default judgment on June 28, 2018, ECF No. 14 ("Mot."). On November 13, 2018, following a status hearing, the Court requested supplemental briefing from Tidewater regarding the propriety of service and the proper standard for recognizing an ICSID arbitration award, which Tidewater provided. See ECF No. 18. And on December 6, 2018, upon Tidewater's request and accompanying affidavit, the Clerk of Court declared Venezuela in default. See ECF No. 19.

Tidewater's motion for default judgment is now ripe for disposition.

II. Legal Standard

When a defendant fails to defend its case, a court has the power to enter default judgment in favor of the plaintiff. See Fed. R. Civ. P. 55; Keegel v. Key West & Caribbean Trading Co., Inc., 627 F.2d 372, 375 n.5 (D.C. Cir. 1980).² But under the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1330, 1602 et seq., "a court cannot simply enter default judgment; rather, out of respect for the principle of sovereign immunity, it must ensure that the plaintiffs have established their claim or right [to] relief by evidence that is satisfactory to the...