RUDOLPH CONTRERAS, United States District Judge.
Petitioner Crystallex International Corporation (Crystallex)—a Canadian company—invested
In 1996, Canada and Venezuela entered into a bilateral investment treaty (BIT) to promote economic cooperation and investment opportunities between the two nations. See generally Agreement Between the Government of Canada and the Government of the Republic of Venezuela for the Promotion and Protection of Investments (BIT), ECF 2-2, Ex. 2. The BIT required both nations to, inter alia, give investments by investors of the other nation
As part of the BIT, Canada and Venezuela gave their "unconditional consent to the submission of a dispute to international arbitration" in accordance with various provisions. BIT, Art. XII(5). Arbitration was provided for disputes "between one [nation] and an investor of the other [nation], relating to a claim by the investor that a measure taken or not taken by the [nation] is in breach of [the BIT], and that the investor . . . has incurred a loss or damage by reason of . . . that breach." BIT, Art. XII(1). Tribunals hearing claims under the BIT were instructed to apply the BIT itself and "applicable rules of international law." BIT, Art. VII(7). The BIT specified that arbitrations would proceed under either the International Centre for the Settlement of Investment Disputes (ICSID) rules, the ICSID Additional Facility Rules, or the United Nations Commission on International Trade Law (UNCITRAL) rules. BIT, Art. XII(4).
Crystallex, a Canadian corporation, entered into the Mine Operating Contract (MOC) in 2002 with the Corporación Venezolana de Guayana (CVG).
Before it could begin operations at Las Cristinas, Crystallex needed various permits, including an Authorization to Affect National Resources from the Venezuela Ministry of Environment (the permit). Award ¶ 21. Obtaining the permit was a lengthy process that required Crystallex to obtain a land occupation permit, submit a feasibility study, and submit an environmental impact study. Award ¶ 21. Between 2003 and 2007, Crystallex completed many of these prerequisites. Award ¶¶ 22-41. On May 16, 2007, the Ministry of Environment informed Crystallex that it was prepared to "hand over" the permit once Crystallex paid a bond and fees. Award ¶ 43; see also Award ¶ 561 ("Once the Bond has been posted, checked, and found to be compliant by this Office, [the permit] . . . will be handed over."). Crystallex posted such a bond and paid the required fees. Award ¶ 41. On June 14, 2007, Crystallex announced to the market that it had fulfilled the requirements to receive the permit. Award ¶ 42.
However, despite the Ministry of Environment's earlier statements, the permit did not issue. After a delay of almost a year, the Ministry of Environment officially denied Crystallex the permit on April 14, 2008. Award ¶¶ 44, 589-90. Later in 2008, a press release from the Venezuelan government indicated that Las Cristinas would be operated and exploited by the Venezuelan government. Award ¶ 678. Crystallex responded by submitting its Notice of Dispute under the BIT on November 24, 2008. Award ¶ 53. In early 2009, then-Venezuelan-President Hugo Chávez announced "this year the Venezuelan State has taken over the exploitation and control of the gold deposits of Las Cristinas," Award ¶ 605. After two more years, during which Crystallex continued to bear the costs associated with control of the Las Cristinas site, the CVG officially rescinded the MOC (1) "for reasons of opportunity and convenience" and (2) due to "the cessation of activities for more than one (1) year." Award ¶¶ 59, 606.
Crystallex initiated arbitration proceedings against Venezuela in 2011 under the BIT. Award ¶ 64. Crystallex claimed that Venezuela had breached the BIT by (1) denying Crystallex's investments "fair and equitable treatment" and (2) expropriating Crystallex's investments. ¶ 184. The arbitration proceeded under the ICSID's "Additional Facility" rules.
A brief summary of the Tribunal's findings follows. As a threshold matter, Venezuela argued to the Tribunal that the Tribunal lacked jurisdiction over Crystallex's claims because they were contract—not treaty—claims. Award ¶¶ 459-64. The Tribunal rejected this argument and concluded that the claims at issue were treaty claims. Award ¶¶ 471-83.
The Tribunal identified two separate violations of the BIT. First, the Tribunal found that Venezuela had violated the guarantee of "fair and equitable treatment" found in Article II(2) of the BIT
The Tribunal then addressed the appropriate measure of compensation. See generally Award ¶¶ 719-960. The Tribunal determined that it would apply the "full reparation" principal to calculating compensation, as described in the Chorzów case before the Permanent Court of International Justice. Award ¶¶ 846-47. The Tribunal averaged together the results of two different calculations to award Crystallex $1.202 billion. Award ¶ 917.
The first method of calculating damages that the Tribunal considered was the stock market method, "a comparative valuation methodology that seeks to assess the damage to Crystallex's stock price by reference to the evolution of stock prices for other, similarly placed, gold mining companies not affected by Venezuela's expropriatory measures." Award ¶ 804; see generally Award ¶¶ 804-817. By setting the "last clean date" as June 14, 2007, Award ¶ 891, and the "valuation date" as April 13, 2008, the method yielded a damages amount of $1.295 billion.
The second method the Tribunal considered for calculating damages was the market multiples method, which "estimates the value of an asset or company by examining the market valuation of companies holding properties of similar characteristics." Award ¶ 901; see also Award ¶ 793-803. By comparing Crystallex's market valuation
The Tribunal concluded that the damages amounts suggested by each method
In April of 2016, Crystallex petitioned this Court
First, this Court addresses its jurisdiction. Jurisdiction is proper under the Foreign Sovereign Immunities Act (FSIA). Under 28 U.S.C. § 1330, "[t]he district courts shall have original jurisdiction. . . of any nonjury civil action against a foreign state . . . with respect to which the foreign state is not entitled to immunity either under sections 1605-1607 of this title or under any applicable international agreement." Jurisdiction over actions against foreign states is thus limited to the enumerated exceptions to immunity in the FSIA. See Saudi Arabia v. Nelson, 507 U.S. 349,
Here, the exception in § 1605(a)(6) applies. Section 1605(a)(6) grants jurisdiction over actions "to confirm an award made pursuant to an arbitration agreement governed by an international treaty." Chevron Corp. v. Ecuador, 795 F.3d 200, 203 (D.C. Cir. 2015). In this action, Crystallex seeks to confirm an award made pursuant to the BIT and governed by the New York Convention, 9 U.S.C. §§ 201 et seq. The D.C. Circuit has held that actions to confirm arbitration awards under the New York Convention fall into exception § 1605(a)(6) "by its terms." Creighton Ltd. v. Gov't of State of Qatar, 181 F.3d 118, 123 (D.C. Cir. 1999). Here, Crystallex has met the requirements of § 1605(a)(6), which requires the petitioner to show that "(1) a foreign state has agreed to arbitrate; (2) there is an award based on that agreement; and (3) the award is governed by a treaty signed by the United States calling for the recognition and enforcement of arbitral awards." Chevron Corp. v. Ecuador, 795 F.3d 200, 204 (D.C. Cir. 2015) (internal quotation marks and citations omitted). Crystallex has produced the BIT, the arbitral award against Venezuela under the BIT, and refers to the New York Convention. Cf. Chevron, 795 F.3d at 205. This Court thus has jurisdiction because the BIT demonstrates Venezuela's agreement to arbitrate, and the award is based on the BIT and governed by the New York Convention.
Second, the Court addresses the appropriate standard of review. In general, courts apply a deferential standard when reviewing arbitral awards. "Consistent with the `emphatic federal policy in favor of arbitral dispute resolution' . . . the FAA affords the district court little discretion in refusing or deferring enforcement of foreign arbitral awards." Belize Social Development Ltd. v. Gov't of Belize, 668 F.3d 724, 727 (D.C. Cir. 2012) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985)).
This deferential standard is akin to the deferential standard used when reviewing domestic arbitral awards. See Oxford Health Plans LLC v. Sutter, ____ U.S. ____, 133 S.Ct. 2064, 2068, 186 L.Ed.2d 113 (2013) ("Under the FAA, courts may vacate an arbitrator's decision `only in very unusual circumstances.' . . . If parties could take `full-bore legal and evidentiary appeals,' arbitration would become `merely a prelude to a more cumbersome and
In addition to the deference due the arbitral decision, a district court "may refuse to enforce the award [under the New York Convention] only on the grounds explicitly set forth in Article V of the Convention." TermoRio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928, 935 (D.C. Cir. 2007) (citation omitted); see also Int'l Trading & Indus. Inv. Co. v. DynCorp Aerospace Tech., 763 F.Supp.2d 12, 20 (D.D.C. 2011) ("Confirmation proceedings are generally summary in nature" because "the New York Convention provides only several narrow circumstances when a court may deny confirmation of an arbitral award." (citing Zeiler v. Deitsch, 500 F.3d 157, 169 (2d Cir. 2007)). "The party resisting confirmation . . . bears the heavy burden of establishing that one of the grounds for denying confirmation in Article V applies." Gold Reserve Inc. v. Bolivarian Republic of Venezuela, 146 F.Supp.3d 112, 120 (D.D.C. 2015) (citations omitted), appeal docketed, No. 15-7158 (D.C. Cir. Dec. 30, 2015).
Here, Venezuela alleges that Article V(1)(c) and V(2)(b) of the New York Convention warrant vacatur, as does the Tribunal's manifest disregard of the law. Mindful of the narrow scope of its review, the Court addresses each in turn.
Venezuela argues that the Tribunal exceeded the scope of Venezuela's consent to arbitrate by addressing matters the BIT did not consign to arbitration. Article V(1)(c) of the New York Convention provides that a court may refuse to confirm an award if the award "deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration." Venezuela argues that the Tribunal stepped beyond the bounds of the BIT in two ways—first, by considering claims that
Before considering each of these challenges, this Court must determine the amount of deference to grant the Tribunal's determination of its scope. Although, as discussed previously, district courts generally defer to the conclusions of arbitral tribunals, Venezuela argues that questions of "arbitrability"—or the scope of the parties' consent to arbitrate—are an exception to the standard rule and should receive de novo review. See, e.g., Mot. Vacate at 27-29, ECF No. 11; Venezuela's Resp. Crystallex's Pet. Confirm Arbitral Award (Opp'n Confirm) at 19-22, ECF No. 15; Venezuela's Reply Mem. P. & A. Supp. Mot. Vacate Arbitral Award (Reply Vacate) at 5-10, ECF No. 25. In support, Venezuela cites a line of Supreme Court precedent that identifies a distinction in the presumptive standard of review for questions of "arbitrability" and more procedural questions. See generally BG Group PLC v. Republic of Argentina, ___ U.S. ___, 134 S.Ct. 1198, 188 L.Ed.2d 220 (2014) (holding that issues of arbitrability presumptively receive de novo review, while procedural jurisdiction questions presumptively receive deferential review). That line of cases however, including BG Group, dealt only with the presumptive standard when the treaty itself was silent as to whether the tribunal or the court should decide the tribunal's jurisdiction. Id. at 1206. BG Group left intact the principle that "it is up to the parties to determine whether a particular matter is primarily for arbitrators or for courts to decide." Id. at 1206. In other words, when the parties explicitly agree that the tribunal should decide the scope of its own inquiry, then courts should review that determination deferentially. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) ("[A] court must defer to an arbitrator's arbitrability decision when the parties submitted that matter to arbitration.").
Determining that the parties submitted questions of arbitrability to the tribunal requires clear and unmistakable evidence. Id. at 944, 115 S.Ct. 1920. In this case, such unmistakable evidence exists in the form of Venezuela's explicit consent in the BIT to the ICSID Additional Facility Rules.
To dispute this conclusion, Venezuela argues that Canada's intervention in a different case (United Mexican States v. Cargill, Inc.), before a different court (a Canadian tribunal), based on a different bilateral investment treaty (NAFTA), demonstrates the "shared expectation[] of the contracting parties" that the tribunal's determination of arbitrability be reviewed de novo. Reply Vacate at 7-10, ECF No. 25. In Cargill, the attorney general of Canada intervened to argue that the tribunal's determination that it had jurisdiction over "up-stream" damages
Because the question of the jurisdiction of the Tribunal was assigned to the Tribunal to decide, this Court will deferentially review the Tribunal's conclusions. In such a deferential review, a court "should give considerable leeway to the arbitrator, setting aside his or her decision only in certain narrow circumstances." First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995); cf. Schneider v. Kingdom of Thailand, 688 F.3d 68, 74 (2d Cir. 2012) (holding that when the parties "clearly and unmistakably agreed to arbitrate issues of arbitrability" the objecting party "is not entitled to an independent judicial redetermination of that same question"). With this deferential lens in place, the Court turns to each of Venezuela's alleged examples of the Tribunal exceeding its scope.
Venezuela argues that the Tribunal exceeded its jurisdiction by considering claims based on the rescission of the Mining Operation Contract (MOC) that were contractual in nature. Mot. Vacate at 9-13, ECF No. 11. Both Crystallex and Venezuela agreed throughout the arbitration process—and here—that the Tribunal had jurisdiction over "alleged breaches of the BIT."
Venezuela next argues that the MOC was terminated by the CVG, an "autonomous institution which is legally separate from the Venezuelan State," rather than by the state exercising its sovereign authority.
Award ¶ 700. The Tribunal reached this decision because the rescission was intended "to give effect to the superior policy decisions dictated by the higher governmental spheres." Award ¶ 701. Furthermore, the CVG justified the rescission through its "power of self-adjudication and self-enforcement (autotutela), a power that only entities acting as an authority (and not a contractual party) may exercise" and "specifically invoked reasons of `opportunity and convenience' to terminate the MOC, which constitutes an example of an exorbitant public law prerogative deriving from sovereign authority or ius imperium under Venezuelan law." Award ¶ 706 (footnotes omitted).
This Court declines to disturb any of the Tribunal's conclusions in light of the deferential standard of review.
Venezuela also argues that the Tribunal exceeded its scope by using improper methods to calculate the amount of the award. For the same reasons previously discussed, the Court concludes that deferential review of the amount of the Tribunal's award is appropriate.
Venezuela claims to identify two flaws in the Tribunal's methodology for calculating damages. First, Venezuela argues that the Tribunal incorrectly considered dates prior to the date of the expropriation in applying the stock market method. Mot. Vacate at 18-22. Second, Venezuela argues that the Tribunal used unreliable assumptions in applying the market multiples method. Mot. Vacate at 22-25. For the reasons set forth below, applying the deferential standard of review, the Court rejects both arguments.
Venezuela argues that the Tribunal erred in its application of the stock market method. Mot. Vacate at 18-22, ECF No. 11. The Tribunal selected a valuation date, and then used the stock market method to adjust the value of Crystallex's investments on that date to compensate for wrongful, value-decreasing acts by Venezuela prior to the valuation date. Venezuela objected to this approach for two reasons—first, on the grounds that there were no wrongful acts prior to the valuation date, Reply Vacate at 19, ECF No. 25; and second, on the grounds that the BIT limited the Tribunal to considering the value of Crystallex's investment immediately prior to the expropriation. Mot. Vacate at 13-14 (citing BIT, art. VII(1)). Both arguments fail.
The stock market method looks at two different dates: first, a date before any wrongful acts—the last clean date—and second, the desired valuation date. The method compares the change in Crystallex's stock price during that interval to the change in the stock prices of comparator companies that were not affected by Venezuela's actions. See Award ¶ 804. The method can thus estimate what effect Venezuela's conduct had on Crystallex's stock price. The overall purpose of the method is still to calculate a value for Crystallex's investment on the valuation date, but the hypothetical value that the investment would have had but for Venezuela's inequitable actions. See Award ¶ 891. The Tribunal found that the stock market method was appropriate because "Crystallex was a one-asset company and the rights which Crystallex enjoyed under the MOC in relation to Las Cristinas were that single asset." Award ¶ 890. The Tribunal applied the method by comparing Crystallex's share price to other junior mining companies. Award ¶ 892.
The Tribunal selected June 14, 2007—the day Crystallex announced to the market that it had fulfilled the requirements for the permit and paid the required taxes and bond—as the "last clean date." Award ¶ 891. The Tribunal found that this was the last date prior to Venezuela's wrongful acts affecting the stock price because "after 14 June 2007 the actual stock price of Crystallex became [negatively] affected by the absence of positive news on permitting." Award ¶ 891. Venezuela did not propose
Venezuela advances two objections to the Tribunal's application of the stock market method. First, Venezuela argues that the Tribunal did not need to consider any dates prior to the date of expropriation because Venezuela did not commit any wrongful acts before the date of expropriation. Second, Venezuela argues that the text of the BIT prohibits the Tribunal from considering any dates prior to the date of expropriation.
Venezuela appears to seek substantive review of the Tribunal's conclusion that Venezuela committed wrongful acts prior to refusing the permit, asserting that "[t]here was no basis to find any other value-depressing conduct prior to [the valuation date] under the terms of the Treaty." Reply Vacate at 19, ECF No. 25. The existence and timing of Venezuela's violations of the BIT is a question already decided by the Tribunal, which this Court reviews deferentially. The Tribunal identified a series of violations of the requirement of fair and equitable treatment, see generally Award ¶¶ 546-614, among them that Venezuela violated Crystallex's reasonable expectations based on Venezuela's letter that it was prepared to "hand over" the permit, Award ¶ 564. The Tribunal found that the refusal to hand over the permit negatively affected Crystallex's stock price through the "absence of positive news on permitting" after Crystallex had announced that the permit would imminently be granted. Award ¶ 891. In challenging the Tribunal's factual finding, Venezuela seeks essentially a "full-bore legal and evidentiary appeal[]," which the Supreme Court has held inappropriate in reviewing arbitral awards. Oxford Health Plans LLC v. Sutter, ___ U.S. ___, 133 S.Ct. 2064, 2068, 186 L.Ed.2d 113 (2013) (quoting Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 588, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008)).
In addition to its objections to the Tribunal's factual findings, Venezuela argues that the text of the BIT barred consideration of dates prior to the date of expropriation. Venezuela's interpretation is incorrect and relies upon removing a short phrase in the BIT from its context. Read in its entirety, it is clear that the language of the BIT upon which Venezuela's argument relies discusses only the amount of compensation which must be provided in the context of expropriation:
BIT, art. VII(1) (emphasis added). Even if Venezuela's restrictive interpretation of the phrase is correct, that restriction applies only to compensation offered in exchange for an expropriation, to prevent the expropriation from violating the BIT. Indeed, the rest of the BIT is silent as to the method to be used to calculate an appropriate award, stating simply that the Tribunal should "decide the issues in dispute in accordance with this Agreement and the
The Tribunal considered these same arguments advanced by Venezuela and determined that it was not restricted by this text of the BIT to only consider the value of Crystallex on the valuation date. The Tribunal appropriately concluded that the "standard" described by Venezuela "is only concerned with expropriation, and not breaches of other BIT standards." Award ¶ 846. Instead, the Tribunal turned to international law and determined that because it "found breaches of [fair and equitable treatment] (in addition to an expropriation),. . . the `full reparation' principle under customary international law" must be applied.
In conducting its deferential review, this Court will not disturb the Tribunal's selection of the "full reparation" standard
Venezuela further argues that the Tribunal used improper assumptions to implement the market multiples method of calculating damages. Mot. Vacate at 22-25, ECF No. 11. According to Venezuela, the Tribunal rejected certain assumptions developed by Crystallex's experts when it
The market multiples method "estimates the value of an asset or company by examining the market valuation of companies holding similar properties of similar characteristics." Award ¶ 901. The Tribunal relied upon calculations by experts that compared the valuation of Crystallex to that of similar mining companies. See Award ¶ 902. To increase the accuracy of these comparisons, experts considered the relationship between the gold reserves of the comparator companies and Crystallex's projected gold reserves. Award ¶ 902. Because Crystallex never operated a mine at Las Cristinas, the experts used projections—possibly the same projections rejected in the indirect sales comparison method. Crystallex and Venezuela disagree over which precise projections were rejected by the Tribunal, but neither provides a clear citation to the record to resolve the dispute. See Mot. Vacate at 23-24; Pet.'s Mem. P. & A. Opp'n Mot. Vacate Arbitral Award (Opp'n Vacate) at 38, ECF No. 17; Reply Vacate at 20-21. The Court need not resolve this issue because, either way, the Tribunal committed no more than a "serious error," and even a serious error is insufficient to permit this Court to disturb the Tribunal's conclusion.
Article V(2)(b) of the New York Convention permits a court to deny confirmation of an award if the award "would be contrary to the public policy" of the country in which confirmation is sought. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 638, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). Relying upon this provision, Venezuela argues that confirming the award would harm the "public policy of the United States that States have the sovereign right to regulate the environmental impact of industrial activities" because Venezuela's conduct toward Crystallex was intended to protect Venezuela's environment. Opp'n Confirm at 3. This argument also fails.
The "public policy" escape-hatch of Article V(2)(b) is "construed narrowly" and "merits vacating an award only when the award `would violate the forum state's most basic notions of morality and justice.'" Gold Reserve Inc. v. Bolivarian Republic of Venezuela, 146 F.Supp.3d 112, 132 (D.D.C. 2015) (citing Ministry of Def. & Support for the Armed Forces of the Islamic Republic of Iran v. Cubic Def.
First, in determining that Venezuela's conduct regarding Crystallex violated the BIT's guarantee of fair and equitable treatment, the Tribunal cast serious doubt on whether Venezuela's assertions of environmental concerns motivated its actions. The Tribunal found that Venezuela's denial of the permit was "not based on legal standards" and constituted "arbitrary conduct" based on documents "so fundamentally deficient that, to the eyes of a reasonable third person, they surprise a sense of juridical propriety."
Second, enforcing this award does not risk violating public policy. The award does not interfere with Venezuela's environmental rules or regulations, but only requires Venezuela to compensate Crystallex for the results of its inequitable actions and expropriation. Venezuela fails to meet the demanding threshold by demonstrating that holding it to the terms of its own treaty would violate our basic notions of morality or justice. The Court thus concludes that public policy does not bar confirmation of the award.
Independent of its challenges under the New York Convention, Venezuela argues that the award should be vacated because the Tribunal manifestly disregarded the law. In this context, manifest disregard of the law occurs when "(1) the arbitrators knew of a legal principle yet refused to apply it or ignored it altogether and (2) the law ignored by the arbitrators was well defined, explicit, and clearly applicable to the case." LaPrade v. Kidder, Peabody & Co., 246 F.3d 702, 706 (D.C. Cir. 2001). Assuming, arguendo, that the doctrine is still good law,
In an attempt to demonstrate the Tribunal's manifest disregard, Venezuela repurposes its previous arguments, claiming that the Tribunal (1) exceeded its scope by improperly addressing contract claims and (2) exceeded its scope by using defective valuation methods to set the award. Mot. Vacate at 28, ECF No. 11. Neither claim can succeed.
First, this Court's rejection, supra, of Venezuela's position on both fronts illustrates that the principles of law cited by Venezuela are not "well defined, explicit, and clearly applicable to this case." Although the Court did not apply a searching review to the Tribunal's conclusions, the standard for manifest disregard of the law—like the standard for vacating an arbitral award—requires egregious conduct and cannot be satisfied by a merely shaky conclusion of the Tribunal.
Second, the Tribunal clearly engaged with and considered the law cited by Venezuela in reaching its conclusions. As to the dispute over permissible claims, the Tribunal repeatedly emphasized that its role was cabined to reviewing treaty claims. Award ¶ 471 ("It is clear . . . that the sphere of disputes that can be referred to international arbitration under the BIT is limited to disputes relating to alleged breaches of the BIT."); Award ¶ 475 ("To determine whether, as a matter of jurisdiction, the Claimant is bringing contract or treaty claims, the Tribunal must consider. . . the fundamental basis of the [Claimant's] claim." (internal quotation marks and citations omitted)); Award ¶ 610 ("The Tribunal recalls that it is not called upon to pass judgment on whether there were any contract breaches in relation to the MOC."). Nor did the Tribunal simply state this standard and then ignore it. The Tribunal carefully avoided actually adjudicating the parties' rights under the MOC. Similarly, as to the dispute over the amount of the award, the Tribunal carefully considered the appropriate valuation date, see Award ¶ 890-91, and whether the estimates of Crystallex's losses were speculative, see Award ¶ 918 ("The result reached is, in the Tribunal's view, not speculative . . ."). In neither case did the Tribunal merely pay "lip service" to the applicable law. The Court is therefore confident that the Tribunal did not manifestly disregard the law.
Crystallex asserts, and Venezuela does not dispute, that the Court must confirm the award if it does not vacate, modify, or correct it. See 9 U.S.C. § 9 ("[T]he court must grant [an order affirming the award] unless the award is vacated, modified, or corrected . . ."); 9 U.S.C. § 207 ("The court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the [New York] Convention."). Thus, having rejected Venezuela's arguments for vacating the award, the Court will confirm the award.
For the foregoing reasons, Petitioner's petition to confirm the award (ECF No. 1) is
Moreover, the Court concludes in its analysis of the merits here, infra, that Venezuela did agree to arbitrate the claims at issue here in the BIT and that the Tribunal reached its award based on the BIT.
In fact, Venezuela's consent to use any of three arbitration methods, each of which explicitly assigns questions of scope to the arbitrator, strengthens the case for deference here. See Chevron Corp. v. Republic of Ecuador, 949 F.Supp.2d 57, 67 (D.D.C. 2013) ("In this Circuit, clear and binding precedent dictates that in the context of a bilateral investment treaty, `incorporation of the UNCITRAL Rules provides clear[] and unmistakabl[e] evidence[] that the parties intended for the arbitrator to decide questions of arbitrability.' (quoting Republic of Argentina v. BG Group PLC, 665 F.3d 1363, 1371 (D.C. Cir. 2012)), aff'd, 795 F.3d 200 (D.C. Cir. 2015); see also Republic of Ecuador v. Chevron Corp., 638 F.3d 384, 394 (2d Cir. 2011) ("By signing the BIT, Ecuador agreed to resolve investment disputes through arbitration under the UNCITRAL rules. . . . Therefore, Ecuador consented to sending challenges to the `validity' of the arbitration agreement to the arbitral panel."); Wal-Mart Stores, Inc. v. PT Multipolar Corp., 202 F.3d 280 (9th Cir. 1999) (holding that incorporation of the UNCITRAL rules demonstrated that "the parties agreed to abide by a system in which the tribunal rules on objections to its jurisdiction and the arbitrator, rather than the district court, should decide whether the parties' disputes are arbitrable").
For example, in Chesapeake Appalachia, LLC v. Scout Petroleum, LLC the Third Circuit held that "[v]irtually every circuit to have considered the issue has determined that incorporation of the [AAA] arbitration rules constitutes clear and unmistakable evidence that the parties agreed to arbitrate arbitrability" but applied an exception for issues of class arbitrability. 809 F.3d 746, 763 (3d Cir.), cert. denied, ___ U.S. ___, 137 S.Ct. 40, 196 L.Ed.2d 27 (2016). The remainder of Venezuela's examples are no more helpful.
In Katz v. Feinberg, the Second Circuit avoided the default rule because the agreement at issue contained a specific provision which assigned the relevant questions to a separate authority. 290 F.3d 95 (2d Cir. 2002). In Taubman Cherry Creek Shopping Ctr., LLC v. Neiman-Marcus Grp., Inc., the court concluded that "[i]f parties to an arbitration agreement have explicitly incorporated a rule that empowers the arbiter to determine arbitrability, numerous courts agree . . . that such incorporation constitutes clear and unmistakable evidence of the parties' intent to delegate that issue to the arbiter" but did not apply that general rule in the instant case because the parties had signed their agreement prior to the year when the AAA incorporated such a default rule. 251 P.3d 1091 (Colo. App. 2010). James & Jackson, LLC v. Willie Gary, LLC also concluded that "reference to the AAA rules evidences a clear and unmistakable intent to submit arbitrability issues to an arbitrator," but decided the issue on an explicit carve-out found in the particular agreement at issue. 906 A.2d 76, 80 (Del. 2006). Finally, the court in Allstate Ins. Co. v. Toll Bros., Inc. found that "[v]irtually every circuit to have considered the issue has determined that incorporation of the AAA rules constitutes clear and unmistakable evidence that the parties agreed to arbitrate arbitrability" but found an exception to that default rule because the specific agreement incorporated two different sets of rules (and the other did not assign questions of arbitrability to the tribunal) and, additionally, one of the parties was unsophisticated. 171 F.Supp.3d 417, 427 (E.D. Pa. 2016) (quoting Chesapeake Appalachia, LLC v. Scout Petroleum, LLC, 809 F.3d 746, 763 (3d Cir. 2016)).
Venezuela also cites a comment to a tentative draft of the Restatement (Third) of the U.S. Law of International Commercial Arbitration. Reply Vacate at 6-7 & n.3. This comment, of course, is not binding authority on this Court, and, as discussed above, does not accurately reflect the practice of the majority of jurisdictions to consider this issue.
Venezuela presents no authority for the proposition that the simultaneous existence of contract claims serves to remove arbitral jurisdiction from related treaty violations, nor is such a limitation found in the BIT. The lone arbitration Venezuela cites in support of its assertion that contract claims fall outside of the arbitrator's jurisdiction, see Mot. Vacate at 12-13, actually holds to the contrary. See Oxus Gold v. Republic of Uzbekistan, Final Award ¶ 398 (UNCITRAL Dec. 17, 2015), http://www.italaw.com/sites/default/files/case-documents/italaw7238_2.pdf ("Mere contractual breaches in principle fall outside the jurisdiction of the Arbitral Tribunal, unless they constitute at the same time a breach of Respondent's obligations under the BIT . . ." (emphasis added)).
Venezuela does argue that behavior violating a treaty must go "beyond that which an ordinary contracting party could adopt" to be an exercise of sovereign power. See, e.g., Opp'n Confirm at 26 (internal citation omitted). The Tribunal considered this standard and found that the rescission of the MOC did involve sovereign authority because the decision was made at high policy levels, not based on Crystallex's compliance with the terms of the MOC, and justified with the principal of "autotutela," an exercise of sovereign authority. Award ¶¶ 692-706. Moreover, the actions concerning denial of the permit—including a series of governmental announcements from several agencies and then-President Chávez that Venezuela would take back Las Cristinas, Award ¶¶ 675-82, 708—intertwined to constitute additional sovereign acts distinct from any breach of the MOC.
Similarly, because no contract claims were involved, it is immaterial whether the BIT included an umbrella clause which would grant the Tribunal jurisdiction over contract claims, or what forum or choice-of-law the MOC dictated for contract violations. Cf. Opp'n Confirm at 23-24; Mot. Vacate at 10.
To the extent that it thus denies Venezuela a more searching review, the Court notes that the authorities Venezuela itself identifies as examples of overturned awards used a deferential standard. See, e.g., Alken-Zeigler, Inc. v. UAW, Local Union 985, 134 Fed.Appx. 866, 867 (6th Cir. 2005) (holding that "our review is extremely deferential" (cited by Venezuela at Mot. Vacate at 35; Reply Vacate at 22)). This standard, of course, is "not toothless," id. at 868, and will on occasion warrant vacating an award.
Crystallex likely preferred a later valuation date because the price of gold continued to rise through February of 2011. Award ¶ 753. The Tribunal rejected Crystallex's suggestion for various reasons, including that Crystallex indicated on November 24, 2008 that it believed the BIT had been breached by submitting its Notice of Dispute. Award ¶ 857. Neither party here argues for using a date after the date of the expropriation—such as the date of the award—as the valuation date. Award ¶ 844.
While Venezuela at times alludes to an argument that the Tribunal awarded damages for events prior to the period of dispute between the parties, see, e.g., Mot. Vacate at 37-38, these arguments are not fleshed out and Crystallex's Notice of Dispute is phrased broadly to include all treaty violations, see generally Request for Arbitration, ECF No. 2-5.
Because the arbitral decision at issue in Hall Street was governed by the domestic arbitration provisions of the FAA rather than the New York Convention, additional uncertainty surrounds the application of manifest disregard to the enforcement of foreign arbitral awards. See, e.g., Int'l Trading & Indus. Inv. Co. v. DynCorp Aerospace Tech., 763 F.Supp.2d 12, 26-27 (D.D.C. 2011) (noting that the "`manifest disregard of the law' standard. . . is one that historically has been applied to actions to vacate an arbitral award under Section 10(a) of the FAA, and not proceedings to confirm arbitral awards under the New York Convention").
However, "because the petitioners in this case have not established the arbitrators' `manifest disregard' of the law, the court need not decide once and for all the viability of the `manifest disregard' standard in order to resolve this case." Affinity Fin. Corp. v. AARP Fin., Inc., 794 F.Supp.2d 117, 120 n.1 (D.D.C. 2011), aff'd, 468 Fed.Appx. 4 (D.C. Cir. 2012). The Court therefore does not take a position on the current validity of manifest disregard of the law as justification to vacate or modify an award under the New York Convention.
