The opinion of the court was delivered by: Kimba M. Wood, U.S.D.J.:
On August 5, 2011, this Court entered a judgment against the Government of the Lao People's Democratic Republic ("Respondent") enforcing a $56 million arbitral award in favor of Thai-Lao Lignite (Thailand) Co., Ltd. and Hongsa Lignite (Lao PDR) Co., Ltd. (collectively, "Petitioners"). [Dkt. No. 50]. Since that time, the parties have been engaged in protracted post-judgment discovery regarding assets potentially available to satisfy the award. *fn1 On March 4, 2013, Petitioners moved ex parte for restraining notices and turnover of fees against four airlines-Federal Express Corporation, Colt International, Inc., Kalitta Air, LLC, and United Air Lines, Inc. (collectively, the "Airlines")-which allegedly possess funds available to satisfy the judgment. [Dkt. No. 220]. The Court approved the entry of restraining notices against the Airlines, and ordered the parties to show cause why the Airlines should not turn over the funds Petitioners have requested. Respondent moved to vacate the restraining notices on March 15, 2013, [Dkt. No. 230], and the Airlines opposed Petitioners' request on March 18, 2013. [Dkt. No. 244]. For the following reasons, Respondent's motion to vacate the restraining notices is GRANTED and Petitioners' request for the Airlines to turn over funds is DENIED.
On January 27, 2011, Respondent disclosed to Petitioners that it received "over flight payments" from certain U.S.-based airlines. (Sun Decl. ¶¶ 8-9, Ex. E, at 4 [Dkt. No. 222]). On August 17, 2011, Petitioners sought and obtained an order to show cause that requested restraining notices against these airlines, [Dkt. No. 54], but has since voluntarily terminated those requests. (Pets.' Mem. in Supp. 1 [Dkt. No. 221]. In early 2012, Petitioners served subpoenas on the four airlines targeted in the present motion-United, Kalitta, Colt, and FedEx-which confirmed that the Airlines were obligated to pay Laos every time they flew into and out of Laos (the "Overflight Fees"), and that these obligations are invoiced by Respondent every month.*fn2 (Sun Decl. ¶¶ 20-22; Exs. P, Q, R).
The Overflight Fees are authorized by a Lao statute imposing an "overflight charge" on any "operator of an aircraft that has conducted a flight over the territory of the Lao PDR." Law on Civil Aviation, No. 43/PO, art. 3(3), 48 (2005) (Kry Decl. Ex. B [Dkt. No. 232]). These fees are imposed so that Respondent can provide air traffic control and other regulatory services designed "to ensure the effectiveness of overflight" in Lao airspace. Id. arts. 34, 38. The fees are collected by a Lao agency, id. art. 49, and are expended pursuant to Respondent's budget as a "central budget" item. Amended Law on the State Budget, No. 01/PO, arts. 37(6), 41 (2006) (Kry Decl. Ex. C). Similar fees are assessed by governments around the world, including by the United States. See, e.g., 49 U.S.C. § 45301(a)(1).
On March 4, 2013, Petitioners filed an ex parte motion for restraining notices and turnover of fees from the Airlines. [Dkt. No. 220]. The Court authorized restraining notices to be served against the Airlines preventing them from paying any debts they owe to Respondent, and entered an order requiring the Airlines to show cause why they should not "immediately deliver to Petitioners any and all funds and or payment obligations belonging or owing to Laos." (Order to Show Cause 2-4 [Dkt. No. 220]). Petitioners seek the turnover of the Overflight Fees pursuant to NY CPLR Sections 5225(b) and 5227, which authorize proceedings to recover debts owed to judgment debtors by third parties. Respondent moved to vacate the restraining notices and opposed the requested turnover proceedings on March 15, 2013. [Dkt. No. 230]. Three of the Airlines-United, Kalitta, and FedEx-filed an opposition brief on March 18, 2013. [Dkt. No. 244]. The Court held oral argument on this topic on April 3, 2013.
Respondent argues the restraining notices should be vacated and the motion for turnover of funds denied. First, Respondent contends that the enforcement proceedings should be stayed pending resolution of Respondent's Rule 60(b) motion to vacate the Court's ruling upholding the arbitral award. Second, even absent such a stay, Respondent argues that Petitioners' requests are inappropriate because the Overflight Fees are immune under the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1602 et seq. Although the Court declines to stay proceedings pending resolution of the Rule 60(b) motion, the Court finds that Petitioners' requests are subject to the FSIA and the Overflight Fees may not be attached because they are immune under Section 1610(a) of the FSIA.*fn3 Consequently, the Court vacates the restraining notices and denies Petitioners' request for a turnover of funds.
A.A Stay of Enforcement Proceedings Is Inappropriate
The judgment at issue in this case was rendered pursuant to the New York Convention, an international treaty authorizing U.S. courts to recognize and enforce foreign arbitral awards. See United Nations Convention on the Recognition of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, T.I.A.S. No. 6697 ("New York Convention"); see also 9 U.S.C. §§ 201 et seq. (providing statutory basis for implementing the New York Convention in the United States). The New York Convention does not, however, support the recognition of arbitral awards that have been "set aside or suspended by a competent authority of the country in which, or under the law of which, the award was made." New York Convention art. V(1)(e); see also Baker Marine (Nig.) Ltd. v. Chevron (Nig.) Ltd., 191 F.3d 194, 197 (2d Cir. 1999).
On December 27, 2012, the Malaysian High Court vacated the arbitral award on which the Court's original judgment is based. (Kry Decl. Ex. A). Respondent moved to vacate the Court's original judgment in light of the Malaysian ruling on February 11, 2013. [Dkt. No. 203]. Respondent now argues that the New York Convention bars further enforcement proceedings are because the arbitral award on which this Court's original judgment was based has been set aside by the rendering jurisdiction. (Resp't's Mem. in Resp. 3 [Dkt. No. 231]).
However, the Malaysian court's decision does not automatically render the original judgment invalid under the New York Convention; such a determination must wait until the Court has examined the merits of Respondent's Rule 60(b) motion, which is not yet fully briefed. (See [Dkt. No. 251] (extending time for Petitioners' response pending completion of limited discovery)). Absent a successful motion to stay enforcement proceedings under Rule 62 or a successful challenge under Rule 60, the Court's judgment remains valid and enforceable.
Consequently, the Court's original judgment enforcing the Malaysian arbitral award remains in effect, and proceedings to ...