Mobil Cerro – – Second Circuit Clarifies Procedures For Enforcing ICSID Arbitration Awards

Sep 14, 2017 | Blog

For more than thirty years prior to this summer, the procedures governing how the holder of a monetary award against a foreign sovereign issued in an arbitration before the International Centre for Settlement of Investment Disputes (“ICSID”) could enforce that award, that is, turn it into an enforceable judgment, were not at all clear. Two lines of authority developed — one permitting the ICSID award-holder to pursue summary, often ex parte proceedings, and the other requiring the award-holder to commence a full plenary action, with notice and other protections provided to the sovereign. Several weeks ago, in Mobil Cerro Negro, Ltd. v. Bolivarian Republic of Venezuela, No. 15-707 (2d Cir. July 11, 2017) (“Mobil Cerro”), a unanimous Second Circuit panel clarified matters, reversing a Southern District of New York ruling authorizing the former approach and holding that U.S. District Court actions to enforce ICSID awards must comply with the personal jurisdiction, service, and venue requirements of the Foreign Sovereign Immunities Act (“FSIA”) and afford full plenary proceedings upon notice to the sovereign.

As commentators have recognized, Mobil Cerro surely will engender changes in the procedures controlling federal actions to enforce ICSID awards against foreign sovereigns, including:

  • Most such actions must now be commenced in the U.S. District Court for the District of Columbia, unless a substantial component of the claim or property involved arises in another District;
  • Summary, ex parte proceedings will now be banned under the FSIA;
  • Service upon the foreign sovereign in many cases will be conducted pursuant to the “Hague Service Convention” of 1965, if the sovereign is a signatory thereto;
  • The prior practice of certain District Courts first “recognizing” ICSID awards before “enforcing” them will disappear as superfluous; and
  • Such actions will generally take longer to conclude than they did before Mobil Cerro.

However, Mobil Cerro did not alter many aspects of such actions, including:

  • U.S. District Courts still have exclusive jurisdiction over them;
  • The “New York Convention” on foreign arbitral awards still does not apply;
  • The foreign sovereign still may not challenge an ICSID award on substantive grounds, with only non-merits or jurisdictional objections available to it;
  • The usual FSIA exceptions to the general “jurisdictional immunity” of the foreign sovereign, including those of “waiver” and “arbitration,” are still available; and
  • U.S. District Courts must still accord an ICSID award the same “full faith and credit” that they give to a final judgment of another federal District Court or a state court.

Two final points bear mention. First, Mobil Cerro will likely have a much larger impact on the procedures governing, than the substantive outcomes of, ICSID enforcement actions against foreign sovereigns. And second, Mobil Cerro has little, if anything, to say about the next (and usually much trickier) step in the litigation process after enforcement of an ICSID award and receipt of a federal court judgment premised thereupon — actually executing upon the property or assets of the foreign sovereign.