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SI Group Consort Ltd. v. Ukraine

United States District Court, S.D. New York

January 30, 2017

SI GROUP CONSORT LTD., Plaintiff,
v.
UKRAINE, IVANO-FRANKIVSK STATE ADMINISTRATION, and DEPARTMENT FOR CONSTRUCTION, HOUSING, URBAN DEVELOPMENT AND ARCHITECTURE OF THE IVANO-FRANKIVSK REGIONAL STATE ADMINISTRATION, Defendants.

          MEMORANDUM OPINION AND ORDER

          LAURA TAYLOR SWAIN United States District Judge

         Plaintiff SI Group Consort Ltd. (“SI Group”) brought this action against Defendants Ukraine; the Ivano-Frankivsk Regional State Administration (the “State”); and the Department for Construction, Housing, Urban Development, and Architecture of the Ivano-Frankivsk Regional State Administration (“DCIF” and, with Ukraine and the State, “Defendants”), seeking to enforce a roughly $35.7 million judgment rendered by the courts of Ukraine in favor of Plaintiff. (Docket entry no. 1, Complaint (“Compl.”), at ¶ 1.) Both subject-matter jurisdiction and personal jurisdiction are contested. Defendants have moved under Federal Rules of Civil Procedure 12(b)(1), 12(b)(2), and 12(b)(6) to dismiss the Complaint. The Court has reviewed the parties' submissions carefully and, for the following reasons, grants Defendants' motion.

         Background

         The facts recited below, which are limited to those relevant to the Court's decision, are drawn from the Complaint and are taken as true for purposes of this motion practice.

         SI Group is an Israeli company that specializes in waste management. (Compl. ¶¶ 6, 11.) In 2013, SI Group entered into a series of waste disposal contracts with DCIF. (Compl. ¶¶ 22-23.) The principal contract between the parties provided that disputes would be resolved “in court under the laws of Ukraine.” (Compl. ¶ 28.) The contract, which was submitted by Plaintiff in connection with the instant motion and is appropriately considered on this motion to dismiss because it is integral to the allegations in the Complaint, also specifies that “[a]ll disputes meant to be settled in court shall be settled at the location of the Client, ” namely, the Ivano-Frankivsk State in Ukraine. (Docket entry no. 33, Ex. 46, Art. 11.11 (ECF page 81).)

         A dispute arose over payments SI Group claimed were owed, and in 2014, SI Group brought suit in Ukrainian court against DCIF. (Compl. ¶¶ 39, 41.) DCIF largely admitted the allegations, and the Ukrainian court entered a monetary judgment in SI Group's favor. (Compl. ¶ 43.) The judgment was affirmed on appeal and is a final judgment for purposes of enforcement. (Compl. ¶¶ 44, 49.) The judgment was not paid; SI Group brought this action seeking to collect its judgment out of Defendants' assets in the United States. (Compl. ¶¶ 50, 112.)

         Discussion

         Pursuant to the Foreign Sovereign Immunities Act, 28 U.S.C. § 1604 (the “FSIA”), foreign states are presumptively immune from the jurisdiction of the courts of the United States, unless a statutory exception to immunity applies. “[I]f the claim does not fall within one of the exceptions, federal courts lack subject matter jurisdiction” of the claim, as well as personal jurisdiction over the foreign state defendant. Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 489 & n.14 (1983); see also Transatlantic Shiffahrtskontor GMBH v. Shanghai Foreign Trade Corp., 204 F.3d 384 (2d Cir. 2000) (applying FSIA sovereign immunity analysis in the context of a proceeding to enforce a foreign judgment).

         The parties do not dispute that Defendants are foreign sovereigns that are entitled to the presumption of sovereign immunity under the FSIA. SI Group argues that three statutory exceptions to sovereign immunity apply in this case: waiver, 28 U.S.C. § 1605(a)(1); commercial activity, id. at § 1605(a)(2); and expropriation, id. at § 1605(a)(3). As explained below, the Court concludes that none of these exceptions applies. The Court, accordingly, lacks both subject-matter jurisdiction of Plaintiff's claims and personal jurisdiction over the Defendants.

         Waiver

         The FSIA provides that a foreign state is not immune from suit if “the foreign state has waived its immunity either explicitly or by implication.” 28 U.S.C.S. § 1605(a)(1) (LexisNexis 2014). Plaintiffs do not argue that Defendants have made an explicit waiver of immunity here, but instead assert that Defendants have waived their sovereign immunity implicitly in two ways: first, by consenting broadly to resolve disputes “in court”; and second, by consenting to arbitration before the International Centre for Settlement of Investment Disputes (“ICSID”).

         The Second Circuit has concluded, in light of both the text and legislative history of Section 1605(a)(1), that “Congress primarily expected courts to hold a foreign state to an implied waiver of sovereign immunity by the state's actions in relation to the conduct of litigation.” Smith v. Socialist People's Libyan Arab Jamahiriya, 101 F.3d 239, 244 (2d Cir. 1996). Such a “waiver would not be found absent a conscious decision to take part in the litigation and a failure to raise sovereign immunity despite the opportunity to do so.” Drexel Burnham Lambert Grp. Inc. v. Cmte. of Receivers for Galadari, 12 F.3d 317, 327 (2d Cir. 1993). Defendants have taken no action in connection with this litigation, either here or in Ukrainian courts, that can be deemed failure to raise the defense of sovereign immunity to suit in United States courts. See Shapiro v. Republic of Bolivia, 930 F.2d 1013, 1017 (2d Cir. 1991) (holding that “the implied waiver provision of Section 1605(a)(1) must be construed narrowly, ” and that any waiver must therefore be “unmistakable” and “unambiguous”).

         Defendants' consent to resolve suits “in court under the laws of Ukraine” does not evidence an implied intent by Defendants to waive their sovereign immunity from suit in United States courts. While Plaintiffs correctly note that the contractual language refers generically to resolution of disputes “in court” without a modification limiting what ‘courts' could resolve those disputes, and a waiver of sovereign immunity need not contain an explicit reference to the United States to be effective under Section 1605(a)(1), there still must be evidence of “an intent to waive sovereign immunity in United States courts.” Capital Ventures Int'l v. Argentina, 552 F.3d 289, 295 (2d Cir. 2009) (emphasis added). There is no such evidence here. The cited contractual language, which neither references the United States nor broadly waives immunity to suit in “any” or “all” courts (as was the case in Capital Ventures), contains no language from which the Court could infer an unambiguous intent to waive sovereign immunity in the United States. Rather, the contract contains an explicit limitation that appears to exclude the United States court system, in that it specifically requires that “[a]ll disputes meant to be settled in court shall be settled at the location of the Client” - i.e., in the Ukraine. (Docket entry no. 33, Ex. 46, Art. 11.11 (ECF page 81) (emphasis supplied).)

         Nor does the fact that Defendants participated in the litigation of the underlying dispute in Ukrainian courts evidence an intent to waive sovereign immunity in United States courts. Plaintiffs rely on First City, Texas Houston, N.A. v. Rafidian Bank, 281 F.3d 48 (2d Cir. 2002), for the proposition that a waiver of sovereign immunity during principal litigation carries over into litigation to enforce a monetary judgment. Id. at 54. In Rafidian Bank, however, the Second Circuit was concerned with the effect of a prior waiver for purposes of litigation in United States courts, not litigation in the courts of a foreign country. Id. (“We think that where subject matter jurisdiction under the FSIA exists to decide a case, jurisdiction continues long enough to allow proceedings in aid of any money judgment that is rendered in the case.”). Defendants' consent to the jurisdiction of Ukrainian courts for litigation does not amount to an implied waiver of sovereign immunity in United States ...


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