Sovereign immunity

international law update Volume 23, October–December 2017
© 2017 International Law Group, LLC. All rights reserved. ISSN 1089-5450, ISSN 1943-1287 (on-line) |
Where ICSID panel issued an award
against Venezuela and creditors
brought ex parte action for recognition
of award under New York law, federal
district court denied Venezuela’s
subsequent motion to vacate judgment;
Second Circuit reverses because FSIA
is the sole basis for federal court
jurisdiction over foreign sovereigns in
actions to enforce ICSID awards
In the following case, the Second Circuit
harmonizes the ICSID Convention and its enabling
statutes, 22 U.S.C. Section 1650a, with the Foreign
Sovereign Immunities Act (FSIA), 28 U.S.C.
Sections 1330, 1391(f), 1441(d), 1602-1611.
Between 1962 and 1965, the World Bank
spearheaded the development of the ICSID
Convention, a multilateral treaty aimed at
encouraging and facilitating private foreign
investment in developing countries. e Convention
established an international organization, the
International Centre for Settlement of Investment
Disputes, based in Washington, D.C. (the “Centre”
or “ICSID”). Under ICSID, arbitration panels
may be convened to adjudicate disputes between
international investors and host governments in
“Contracting States” (countries who have adopted
the ICSID Convention). e Centre convenes
arbitral tribunals upon request by either a member
state or a national of a member state. At the
conclusion of a proceeding, the panels issue written
awards that address “every question submitted to
the Tribunal,” and “state the reasons upon which
[the award] is based.” ICSID Convention Art. 48.
Note that Article 53 of the Convention provides
that a party dissatised with an award may challenge
it on various grounds, but may do so only through
proceedings at the Centre and not collaterally
in the courts of member states. e Convention
envisions that participating sovereign states retain
their sovereign immunity.
In August 1966, after ratifying the Convention,
Congress adopted legislation to implement it. e
Sovereign Immunities Act of 1976 (FSIA), Pub.
L. 94-583, 90 Stat. 2891 (1976), governs the
jurisdiction of United States courts over actions
against foreign sovereigns. e FSIA provides that,
“[s]ubject to existing international agreements
to which the United States is a party,” foreign
sovereigns “shall be immune from the jurisdiction
of the courts of the United States and of the States
except as provided by one of the FSIA’s exceptions
to jurisdictional immunity. Federal courts, when
presented with requests to enter federal judgments
upon ICSID awards against foreign sovereigns,
have adopted various approaches to “recognition
and “enforcement” of ICSID awards. ere are
two distinct approaches. e rst approach permits
entry of judgment on an ICSID award through
an ex parte proceedings like the one at issue here.
e district courts adopting this approach interpret
the Convention and Section 1650a to require
some sort of summary procedure to recognize the
ICSID award, and generally look to state law for
the appropriate procedure. e second approach
requires award-creditors to pursue a plenary action
in compliance with the FSIA’s personal jurisdiction,
service, and venue requirements in order to enforce
an ICSID award.
Here, the parties do not dispute the basic facts
giving rise to the ICSID panel award. During the
1990s, Mobil (acting through subsidiaries) invested
in two oil development ventures in Venezuela
involving the government that went sour. On
October 9, 2014, after lengthy arbitral proceedings
in which both Mobil and Venezuela participated,
a panel of ICSID arbitrators issued a unanimous
award in Mobil’s favor. e day after the ICSID
panel announced the Award, Mobil led an ex
parte petition in the Southern District of New
York, asking the court to “recognize” the Award
“pursuant to 22 U.S.C. § 1650a,” and to enter
judgment directly on that Award in the amount
of the full $1.6 billion, plus accrued interest at
the rate specied in the Award. Immediately after
the judgment was entered, Mobil electronically
delivered to Venezuela’s legal counsel notice of the
judgment together with a demand for immediate
payment. Venezuela moved to vacate the judgment.

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