We Are Open For Business

Introduction. In NextEra Energy Global Holdings B.V. v. Kingdom of Spain, ___ F.4th ___, 2024 WL 3837484 (D.C. Cir. 2024), the United States Court of Appeals for the District of Columbia Circuit addressed two issues: the jurisdiction of an American court to evaluate an arbitration award issued by an international panel with its seat in Washington D.C. and in Geneva, Switzerland, for confirmation or vacatur; and the scope of jurisdiction to the extent it does or does not empower an American court to preclude the party challenging the award from simultaneously pursuing “anti-suit” relief in European courts.

Background. Dutch and Luxembourgish energy companies invested in Spain relying upon Spain’s promise of economic subsidies to encourage such investment. Several years later, Spain withdrew such subsidies. The companies initiated arbitration proceedings to challenge Spain’s action, relying upon a clause in the Energy Charter Treaty that provided for arbitration. The Treaty in question was described by the Court as a multilateral investment treaty whose signatories included Spain, the Netherlands, and Luxembourg.

The companies prevailed at arbitration, and were awarded “multi-million-euro awards.” The companies then had to confront European Union law about the enforceability of such an award that was declared while the arbitration proceedings were ongoing. That is, the EU adopted the position that the Treaty’s arbitration clause did not apply to disputes between an EU Member State and a citizen/entity of another EU Member State. As a result, the companies determined that the award would likely be declared invalid under EU law.

The companies then turned their gaze westward, and concluded that the United States would be a suitable place to seek enforcement. They reached this conclusion on two bases: (1) the U.S. is not a signatory to the Treaty in question; and (2) the U.S. is a signatory to the ICSID Convention and the New York Convention, both of which obligate it to enforce certain foreign arbitral awards.

The companies thus sued for enforcement in two different cases in the United States District Court for the District of Columbia. One suit was filed by NextEra Energy; and the other suit was filed by Blasket Renewable Investments.

Issues Presented. In response to these lawsuits, Spain contended first that it was immune from suit on the basis of the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1602. Spain further contended that it had filed its own lawsuits against the companies in the courts of the Netherlands and Luxembourg, seeking (in part) an anti-suit injunction to prevent the companies from proceeding with their U.S. lawsuits.

The companies replied that the “waiver” and “arbitration” exceptions contained in the FSIA barred Spain from invoking the FSIA to impede the companies’ confirmation efforts in the U.S. The companies also sought injunctive relief in the U.S. Courts to have those courts enjoin Spain from pursuing its own “anti-suit” injunctive relief in Europe.

Lower Court’s Rulings. The NextEra Energy Court determined that it had jurisdiction under the FSIA’s arbitration exception, and accordingly denied Spain’s motion to dismiss. The Court further exercised such jurisdiction to grant the Plaintiff companies’ request for injunctive relief preventing Spain from seeking “anti-suit” relief in Europe.

By contrast, the Blasket Renewable Investments Court determined that Spain was in fact immune from suit under the FSIA, thus simultaneously mooting the Plaintiffs’ request in that suit for injunctive relief.

The non-prevailing parties in each case then appealed these respective decisions to the D.C. Circuit.

Court’s Analysis: Jurisdiction. On the issue of jurisdiction, the D.C. Circuit ruled, in a matter of first impression, that the district courts did in fact have jurisdiction over the arbitral claims in question under the FSIA’s arbitration exception—jurisdiction which empowered those courts to confirm against Spain the arbitral awards in question.

In doing so, the D.C. Circuit noted that the arbitral panels in both cases operated under an arbitrability delegation regime that empowered the arbitral panels to decide threshold issues of arbitrability. It further noted that in these cases, the arbitral tribunals in question had rejected Spain’s contention about arbitrability. Indeed, since the issue in question was resolved by turning to the wording of the agreements in question, the D.C. Circuit stated that the issue was not actually jurisdictional in the strict sense of the word, but rather a matter of measuring the scope of the investment treaty in question.

Court’s Analysis: Injunctive Relief. However, the D.C. Circuit also ruled that the decision by the NextEra Energy Court to grant the injunctive relief requested by the Plaintiffs against Spain constituted an abuse of discretion. The Court held that Spain should be allowed to pursue its “anti-suit” relief in Dutch and Luxembourgish courts, principally because the Court considered it “unprecedented” to enjoin a foreign sovereign from pursuing such legal relief. This factor, combined with the lack of any direct interest by the United States in the underlying disputes, convinced the D.C. Circuit that no injunctive relief was warranted.

Conclusion. Parties confronted with arbitral award confirmation or vacatur should consult the decision and reasoning of the D.C. Circuit in the above appeal to attain vital guidance as to the scope and validity of the role of a United States Court to become involved in such a process. Such Courts may likely be “open for business” when it comes to determining their authority in award enforcement.