Blue Ridge Investments, L.L.C. v. Republic of Argentina
735 F.3d 72 (2013)
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Rule of Law:
A foreign state waives its immunity from suit in U.S. courts under the Foreign Sovereign Immunities Act (FSIA) when it becomes a party to an international treaty, such as the ICSID Convention, that provides for the recognition and enforcement of arbitral awards in member states. This waiver applies under both the FSIA's implied waiver and arbitral award exceptions.
Facts:
- In the 1990s, the Republic of Argentina privatized its state-owned gas transportation industry.
- CMS Gas Transmission Company (CMS), a U.S. entity, invested in one of the newly privatized companies, TGN, under regulations allowing for gas tariffs to be adjusted based on the U.S. Producer Price Index (PPI).
- Following an economic crisis in the late 1990s, Argentina suspended the PPI adjustment mechanism, promised to compensate gas companies for the losses, but ultimately failed to do so and terminated the adjustment right entirely.
- Pursuant to a U.S.-Argentina investment treaty, CMS initiated arbitration against Argentina before the International Centre for the Settlement of Investment Disputes (ICSID).
- In 2005, the ICSID tribunal issued a final award of $133.2 million plus interest in favor of CMS, finding Argentina had breached its treaty obligations.
- CMS subsequently sold and assigned its interest in the arbitral award to Blue Ridge Investments, L.L.C. (Blue Ridge).
Procedural Posture:
- An ICSID tribunal issued an award in favor of CMS against Argentina, which was confirmed after Argentina's attempt to annul it failed.
- After acquiring the award, Blue Ridge filed a petition to confirm the award in the U.S. District Court for the Southern District of New York (a federal trial court).
- Argentina filed a motion to dismiss the petition, arguing, among other things, that it was immune from suit under the Foreign Sovereign Immunities Act (FSIA).
- The District Court denied Argentina's motion to dismiss, holding that Argentina had waived its sovereign immunity.
- Argentina, as the appellant, filed an interlocutory appeal of the District Court's denial of sovereign immunity to the U.S. Court of Appeals for the Second Circuit, with Blue Ridge as the appellee.
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Issue:
Does a foreign state waive its immunity from suit under the Foreign Sovereign Immunities Act (FSIA) by becoming a party to the Convention on the Settlement of Investment Disputes (ICSID Convention), which provides for the enforcement of arbitral awards in the domestic courts of member states?
Opinions:
Majority - Judge Cabranes
Yes. A foreign state waives its immunity from suit under the FSIA by ratifying an international arbitration convention that provides for enforcement of awards in member states. The court first determined it had jurisdiction to hear the interlocutory appeal of the sovereign immunity denial under the collateral order doctrine, as immunity is a right to avoid the burdens of litigation itself. However, the court declined to exercise pendent appellate jurisdiction over whether Blue Ridge, as an assignee, could state a claim, because that issue was not 'inextricably intertwined' with the immunity question. On the merits, the court held that Argentina waived its immunity on two independent grounds: 1) the implied waiver exception (28 U.S.C. § 1605(a)(1)), because by joining the ICSID Convention, which requires member states to enforce awards as final judgments, Argentina 'must have contemplated' enforcement actions in other member states like the U.S.; and 2) the arbitral award exception (28 U.S.C. § 1605(a)(6)), because the action was brought to confirm an award governed by a treaty in force for the U.S. that calls for the recognition of such awards.
Analysis:
This decision reinforces the pro-enforcement policy of U.S. courts toward international arbitral awards and solidifies the principle that joining a major arbitration convention like ICSID is a definitive waiver of sovereign immunity for enforcement purposes. It makes the U.S. a predictable and reliable forum for creditors seeking to enforce awards against foreign states. Furthermore, the court's strict application of the 'inextricably intertwined' test for pendent appellate jurisdiction limits the ability of foreign sovereigns to use interlocutory immunity appeals to litigate other, non-appealable aspects of the case on the merits.
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