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Frontera Resources Azerbaijan Corp. v. State Oil Co. of the Azerbaijan Republic

September 28, 2009

FRONTERA RESOURCES AZERBAIJAN CORPORATION, PETITIONER-APPELLANT,
v.
STATE OIL COMPANY OF THE AZERBAIJAN REPUBLIC, RESPONDENT-APPELLEE.



SYLLABUS BY THE COURT

Petitioner Frontera Resources Azerbaijan Corporation appeals from the dismissal of its petition to confirm a foreign arbitral award against Respondent State Oil Company of the Azerbaijan Republic ("SOCAR") for lack of personal jurisdiction. We hold that the district court correctly required jurisdiction over either SOCAR or SOCAR's property. We find, however, that the district court erred by holding that foreign states and their agents are entitled to rights under the Due Process Clause. Accordingly, we overrule our holding to the contrary in Texas Trading & Milling Corp. v. Federal Republic of Nigeria, 647 F.2d 300 (2d Cir. 1981), and remand for the district court to reconsider its jurisdictional analysis.

VACATED and REMANDED.

The opinion of the court was delivered by: John M. Walker, Jr., Circuit Judge

Argued: October 27, 2008

Before WALKER, PARKER, and RAGGI, Circuit Judges.

Petitioner-Appellant Frontera Resources Azerbaijan Corporation ("Frontera") appeals from the dismissal by the United States District Court for the Southern District of New York (Richard J. Holwell, Judge) of its petition to enforce a Swedish arbitration award against Respondent-Appellee State Oil Corporation of the Azerbaijan Republic ("SOCAR"). The district court granted SOCAR's motion to dismiss for want of personal jurisdiction. See Frontera Res. Azer. Corp. v. State Oil Co. of the Azer. Republic, 479 F. Supp. 2d 376, 388 (S.D.N.Y. 2007). We conclude that SOCAR is not entitled to the Due Process Clause's jurisdictional protections if it is an agent of the Azerbaijani state. Accordingly, we vacate and remand for the district court to reconsider its analysis.

BACKGROUND

Frontera and SOCAR are two companies in the oil industry. Frontera is based in the Cayman Islands, and SOCAR is based in and owned by the Republic of Azerbaijan ("Azerbaijan"). In November 1998, the parties entered into a written agreement (the "Agreement") under which Frontera developed and managed oil deposits in Azerbaijan and delivered oil to SOCAR. In 2000, a dispute arose over SOCAR's refusal to pay for some of this oil, and in response, Frontera allegedly sought to sell oil that was supposed to be sold to SOCAR to parties outside of Azerbaijan instead. In November 2000, after instructing local customs authorities to block Frontera's oil exports, SOCAR seized the oil.

In March 2002, the bank that had financed Frontera's involvement in Azerbaijan foreclosed on its loan, forcing Frontera to assign its rights in the project to the bank. In July 2002, the bank settled its claims with SOCAR. Frontera, however, continued to seek payment for both previously delivered and seized oil. Based on its settlement with the bank, SOCAR denied liability to Frontera.

After Frontera and SOCAR were unable to settle their dispute amicably, Frontera served SOCAR in July 2003 with a request for arbitration as per the Agreement. In January 2006, after a hearing on the merits with full participation by both parties, a Swedish arbitral tribunal awarded Frontera approximately $1.24 million plus interest.

On February 14, 2006, Frontera filed a petition in the Southern District of New York to confirm the award pursuant to Article II(2) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention"), opened for signature June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38, implemented at 9 U.S.C. § 207. The district court dismissed the petition for lack of personal jurisdiction, on the basis that SOCAR had insufficient contacts with the United States to meet the Due Process Clause's requirements for the assertion of personal jurisdiction. The district court questioned the soundness of according due process protections to SOCAR, a company owned by Azerbaijan, but nonetheless applied the traditional due process test based on our precedent in Texas Trading & Milling Corp. v. Federal Republic of Nigeria, 647 F.2d 300 (2d Cir. 1981). The district court also declined to find quasi in rem jurisdiction over SOCAR, because Frontera had not identified specific SOCAR assets within the court's jurisdiction. The district court denied jurisdictional discovery and dismissed Frontera's petition. This appeal followed.

DISCUSSION

Frontera contends (1) that a court does not need personal jurisdiction over a party in order to confirm a foreign arbitral award against that party, and (2) that Texas Trading should be overruled, because the Due Process Clause's protections should not apply to foreign states or their instrumentalities. Frontera also challenges the district court's denial of jurisdictional discovery.

I. Personal Jurisdiction over SOCAR

When considering a district court's dismissal for lack of personal jurisdiction, we review its factual findings for clear error and its legal conclusions de novo. See Sunward Elecs., ...


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