Second Circuit Follows and Reinforces Mobil Cerro in Micula

Nov 2, 2017 | Blog
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In a late October 2017 Summary Order with no precedential impact, a unanimous panel of the United States Court of Appeals for the Second Circuit, in Micula v. Gov’t of Romania, No. 15-3109 (2d Cir. October 23, 2017), (“Micula”), elucidated, followed, and reinforced that Court’s decision some three months earlier in Mobil Cerro Negro Ltd. v. Bolivarian Republic of Venezuela, 863 F.3d 96 (2d Cir. 2017), (“Mobil  Cerro”),  regarding the procedures governing the execution of ICSID arbitral awards against foreign sovereigns. Thus, it remains the law, in the Second Circuit at least, that a creditor plaintiff seeking to enforce such an award against a foreign sovereign (i) must commence a full plenary action (and not summary ex parte proceedings), in most instances, in the United States District Court for the District of Columbia and (ii) comply with the personal jurisdiction, service, and other requirements of the Foreign Sovereign Immunities Act (“FSIA”).

The facts in Micula, as in Mobil Cerro, were straightforward. Various Swedish nationals and affiliated entities (“Petitioners”) sought to enforce a substantial ICSID arbitral award in their favor against the Government of Romania (“Romania”) through summary ex parte proceedings in the U.S. District Court for the Southern District of New York (“SDNY”). The same day that Petitioners commenced the action, the SDNY, per Buchwald, J., granted their petition. Thereafter, Romania filed a motion to amend, vacate, or stay the SDNY’s judgment, arguing, in essence, that the FSIA controlled and barred Petitioners’ summary proceedings, and that under the FSIA venue was improper in the SDNY. The SDNY, per Schofield, J., denied that motion, ruling, inter alia, that the FSIA was inapplicable to the enforcement of ICSID awards. Romania then moved for reconsideration. Judge Schofield denied that motion, as well. Romania appealed. A unanimous Second Circuit panel, reversed, vacated the underlying judgment, and remanded in the referenced Summary Order.

The Second Circuit panel, consisting of Judges Winter, Chin, and Droney, citing Mobil Cerro, made four key points. First, the FSIA and its “procedural mandates” govern the enforcement of ICSID awards against foreign sovereigns. Second, the FSIA provides the “exclusive mechanism” for enforcement of ICSID awards against foreign sovereigns in federal court, and summary ex parte proceedings conducted without service on a foreign state are “incompatible with the FSIA.” Third, the District Court lacked jurisdiction over Romania under the FSIA owing to the lack of service on it. And fourth, “venue was improper in the Southern District of New York because the FSIA requires a plenary action to be brought in the District of Columbia ‘unless a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated,’ in another district.”

The teaching of Micula is simple. Mobil Cerro is good law. The FSIA unquestionably governs ICSID award enforcement actions against foreign sovereigns in the Second Circuit and, perhaps, elsewhere. In sum, Micula changes nothing in the law, as pronounced this past July in Mobil Cerro.

If you have questions about international arbitration or litigation, please contact James J. McGuire.