Esso Exploration and Production Nigeria Limited et al v. Nigerian National Petroleum Corporation

MEMORANDUM OF LAW in Support re: 9 MOTION to Stay Petition for Confirmation of Foreign Arbitral Award. . Document

S.D.N.Y.November 10, 2014

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ESSO EXPLORATION AND PRODUCTION NIGERIA LIMITED and SHELL NIGERIA EXPLORATION AND PRODUCTION COMPANY LIMITED, Petitioners, - against - NIGERIAN NATIONAL PETROLEUM CORPORATION, Respondent. Case No. i:14-cv-08445-WHP MEMORANDUM OF LAW IN SUPPORT OF MOTION TO STAY PETITION TO CONFIRM FOREIGN ARBITRAL AWARD Case 1:14-cv-08445-WHP Document 10 Filed 11/10/14 Page 1 of 8 TABLE OF AUTHORITIES Cases Page(s) Corporación Mexicana de Mantenimiento Integral, S. de R.L. de C. V. y. Pemex- Exploración y Producción, 962 F. Supp. 2d 642 (S.D.N.Y. 2013) ........................................................................................... 5 Europcar Italia, S.p.A. y. Maiellano Tours, Inc., 156 F.3d 310 (2d Cir. 1998) .......................................................................................................... 4 Spier V. Calzaturijicio Tecnica S.p.A., 663 F. Supp. 871 (S.D.N.Y. 1987) ................................................................................................ 4 Thai-Lao Lignite (Thailand) Co. y. Goy 't ofLao People 's Democratic Republic, 997 F. Supp. 2d 214 (S.D.N.Y. 2014) ........................................................................................... 5 Statutes 9U.S.C.1 i 9U.S.C.i2 4 9U.S.C.2Oi i,4 9U.S.C.2O2 i,4 9U.S.C.2O3 i,4 9U.S.C.2O4 i,4 9U.S.C.2O5 i,4 9U.S.C.2O6 i,4 9 U.S.C. § 207 ............................................................................................................................... i, 2, 4 9U.S.C.2O8 i,4 Case 1:14-cv-08445-WHP Document 10 Filed 11/10/14 Page 2 of 8 PRELIMINARY STATEMENT Petitioners Esso Exploration and Production Nigeria Limited ("EEPNL") and Shell Nigeria Exploration and Production Company Limited ("SNEPCO," and, with EEPNL, "Petitioners"), through their attorneys, respectfully submit this Memorandum of Law in support of their Motion To Stay Petition To Confirm Foreign Arbitral Award. On October 22, 2014, Petitioners filed this action to confirm an arbitration award under the Federal Arbitration Act ("FAA"), 9 U.S.C. § i , et seq., and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958 (the "New York Convention"). The arbitration award (the "Award") was rendered in favor of Petitioners and against Respondent Nigerian National Petroleum Corporation ("NNPC"), following an arbitration conducted in Abuja, Nigeria under the arbitration rules of the Nigerian Arbitration and Conciliation Act. The Award was rendered in Nigeria, and cross-proceedings respectively to enforce and to annul the Award have been ongoing in the courts of Nigeria since November 201 1 . (Declaration ofElizabeth Snodgrass, dated October 21, 2014, ECF No. 4 ("Snodgrass Decl.") ¶91 3-7.) Both the United States and Nigeria are signatories to the New York Convention. Therefore, Article III of the New York Convention, implemented by Chapter 2 of the FAA, 9 U.S.C. § 201-208, governs enforcement ofthe Award. Article V(1)(e) of the New York Convention and Section 207 of the FAA vest the Court with discretion to enforce an award even if that award has been set aside in the seat of arbitration. In this matter, Petitioners seek, and shall demonstrate their entitlement to, enforcement on whatever schedule the Court should direct. Petitioners have filed their Petition because they are faced with the imminent expiration of the three-year statute of limitations to Case 1:14-cv-08445-WHP Document 10 Filed 11/10/14 Page 3 of 8 confirm their rights under the Award, see 9 U.S.C. § 207, and cannot ensure that the Nigerian courts will have rendered a final judgment on the pending actions to enforce or annul the Award prior to the running ofthe limitations period. (Snodgrass Decl. ¶ 7.) As a result, Petitioners must preserve their rights pending the outcome of the Nigerian proceedings. Article VI of the New York Convention grants domestic courts the discretion to stay proceedings to confirm foreign arbitral awards in situations in which awards remain subject to local annulment proceedings. BACKGROUND TO THE MOTION On July 3 1 , 2009 , the Petitioners served Respondent with a Notice of Arbitration. (Snodgrass Decl., Ex. A ¶ 5.) The subject matter of the arbitration concerned a dispute arising out of, and relating to, the Production Sharing Contract for Oil Prospecting License 209, entered into by Petitioner EEPNL and NNPC on May 21, 1993 (the "PSC"). (Snodgrass Decl., Ex. A ¶11 1 , 5, 54.) Several assignments of EEPNL's interest under the PSC have resulted in EEPNL holding 56.25% of the Contractor's interest under the PSC and SNEPCO holding the remaining 43.75% interest. (Snodgrass Decl., Ex. A9[ 83.) The Tribunal was duly constituted on May 6, 2010. The Award, dated October 24, 2011, and transmitted to the parties on November 1 , 201 1 , found NNPC to have breached the PSC. (Snodgrass Decl., ¶ 4; Ex. A ¶ 385.) Having found in favor of Petitioners, the Tribunal ordered, in addition to declaratory and injunctive relief: a. that NNPC pay Petitioners damages totaling US$1.799 billion, plus simple interest at the rate of 30-day LIBOR plus 4 percent from December 17, 2007, the date ofbreach, up until April 30, 201 1 , in the amount of US$243 million; 2 Case 1:14-cv-08445-WHP Document 10 Filed 11/10/14 Page 4 of 8 b. that NNPC pay Petitioners simple interest at the rate of 30-day LIBOR plus 4 percent on the sum of US$1.799 billion from April 30, 2011 up until the date of payment, which as ofthe date ofthe Petition amounts to US$264,593,757; c. that NNPC pay Petitioners the sum to be determined as damages for its breach in the period between April 30, 201 1 , and the date of the Award, plus simple interest at a rate of 30-day LIBOR plus 4 percent from April 30, 201 1 , until the date of payment; and d. that NNPC pay half the costs of the arbitration. (Snodgrass Decl., Ex. A, Operative Part ¶91 2-4.) Petitioners applied to the Nigerian court of first instance to enforce the Award on November 3, 201 1. (Snodgrass Decl. ¶ 6.) Six days later, NNPC cross-applied to the Nigerian court to have the Award set aside. (Snodgrass Decl. ¶ 7.) NNPC's application succeeded at first instance. (Snodgrass Decl. ¶ 7.) Petitioners have appealed that decision to the Nigerian Court of Appeal, and believe that their appeal, which remains pending, is meritorious. (Snodgrass Decl. ¶ 7.) Petitioners have not received payment from NNPC with respect to the payments, damages and interest due under the Award, and are faced with the imminent expiration of the applicable statute of limitations governing their right to seek confirmation and enforcement of the Award in the United States. Accordingly, Petitioners filed with this Court their Petition To Confirm Foreign Arbitral Award. Petitioners also seek an order to stay that confirmation proceeding, pending the completion ofthe Nigerian proceedings. As indicated above, Petitioners believe that their position in the Nigerian proceedings has merit and that a bona fide application of governing legal principles will result in confirmation of 3 Case 1:14-cv-08445-WHP Document 10 Filed 11/10/14 Page 5 of 8 the Award. Such a resolution, assuming that Respondent complies with the Award, could moot this action. If so, Petitioners promptly would dismiss this action voluntarily and thus conserve both the Court's and the parties' resources. ARGUMENT The Court has discretion to stay this proceeding pursuant to Article VI of the New York Convention, implemented by Chapter 2 of the FAA, 9 U.S.C. § 201-208, and 9 U.S.C. § 12. Spier V. Calzaturijicio Tecnica S.p.A., 663 F. Supp. 871, 874 (S.D.N.Y. 1987) (adjourning enforcement proceedings pending Respondent's ongoing challenge to the underlying arbitral award before the Italian courts). Article VI provides: If an application for the setting aside or suspension of the award has been made to a competent authority referred to in article V(1 )(e), the authority before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security. "Clearly thisI remedy is discretionary with the district courts." Spier, 663 F. Supp. at 874. A stay is appropriate here to conserve the time and resources of the Court and the parties during the ongoing enforcement and annulment proceedings in Nigeria. As the Second Circuit has noted, the fact that "a parallel proceeding is ongoing in the originating country and there is a possibility that the award will be set aside" is one of "certain considerations favo4ingl granting a stay." Europcar Italia, S.p.A. y. Maiellano Tours, Inc., 156 F.3d 310, 317 (2d Cir. 1998). The same logic applies here, where the prospective resolution in the foreign jurisdiction would result in confirmation, rather than vacatur, ofthe underlying award. Case 1:14-cv-08445-WHP Document 10 Filed 11/10/14 Page 6 of 8 Moreover, even if the Nigerian courts were to vacate the Award, Petitioners will be entitled to seek confirmation of the Award. For example, where the foreign judgment violates "basic notions ofjustice," Courts in this District have recognized that the "use of the permissive 'may' in Article (V)(1)(e) of the New York Convention gives this Court discretion to enforce a foreign arbitral award where the award has been nullified by a court in the state with primary jurisdiction over the award." Thai-Lao Lignite (Thailand) Co. y. Goy 't of Lao People 's Democratic Republic, 997 F. Supp. 2d 214, 222-23 (S.D.N.Y. 2014) (citation omitted); see also Corporación Mexicana de Mantenimiento Integral, S. de R.L. de C. V. y. Pemex-Exploración y Producción, 962 F. Supp. 2d 642, 656-57 (S.D.N.Y. 2013) (noting that appellate court precedent has "recognized that a district court should hesitate to defer to a judgment of nullification that conflicts with fundamental notions of fairness" and granting motion to confirm award despite nullification by Mexican court). Petitioners believe that there is a high likelihood that a vacatur issuing from the Nigerian courts would represent exactly the situation contemplated by this body of law and would require the Court to address the merits of the Petition. Pending resolution of the Nigerian actions, however, any further proceedings here are premature and unnecessary. Accordingly, the issuance of a stay will preserve Petitioners' ability to vindicate their rights with respect to the Award while removing the prospect that the Court or the parties will have to engage in the interim in potentially unnecessary and burdensome motion practice. CONCLUSION For the foregoing reasons, Petitioners respectfully request that the Court grant their motion to stay these proceedings until such time as Petitioners advise the Court that the Nigerian proceedings have concluded. 5 Case 1:14-cv-08445-WHP Document 10 Filed 11/10/14 Page 7 of 8 Dated: New York, New York FRESHFIELDS BRUCKHAUS DERINGER US LLP November 10, 2014 By: Isi Michael Lacovara Michael Lacovara Elliot Friedman David Y. Livshiz Rebecca Everhardt 601 Lexington Avenue, 31st Floor New York, New York i 0022 Telephone: (212) 277-4000 Facsimile: (212) 277-4001 michael.lacovara@freshfields.com elliot.friedman@freshfields.com david.livshiz@freshfields.com becca.everhardt@freshfields.com A ttorneysfor Petitioners Case 1:14-cv-08445-WHP Document 10 Filed 11/10/14 Page 8 of 8