United States

The 25-year dispute between Chevron Corporation and the Republic of Ecuador reached the US Supreme Court in June 2016.¹ The High Court denied Ecuador’s petition for a writ of certiorari and thus let stand a decision of the US Court of Appeals for the District of Columbia confirming an arbitral award issued by a tribunal in The Hague, the Netherlands finding that Ecuador breached the US-Ecuador bilateral investment treaty (BIT) by failing to adjudicate in its courts Chevron’s breach of contract claims against Ecuador. The tribunal, appointed pursuant to the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL Rules), granted Chevron US$96 million in damages.² In light of the Supreme Court’s refusal to intervene, and its 2014 decision in BG Group PLC v The Republic of Argentina,³ it now seems clear that jurisdictional decisions of investment dispute tribunals appointed pursuant to the UNCITRAL Rules will be subject to the same standards of judicial deference under the New York Convention and the Foreign Sovereign Immunities Act applicable to the decisions of arbitral tribunals in commercial cases under the Federal Arbitration Act. However, the procedures for enforcement in the US of investor-state awards rendered under the Convention on the International Convention for the Settlement of Investment Disputes (ICSID) remain less certain. This article describes the current state of US law in these areas.

Enforcement of investor-state awards under the Foreign Sovereign Immunities Act and New York Convention

Background

Three separate arbitral tribunals have considered claims between Chevron and Ecuador under the US-Ecuador BIT. Related litigation has famously engaged national courts in Ecuador, the US, the Netherlands, Canada, Argentina and Brazil.

In 1973 Ecuador granted Texaco Petroleum Company (hereinafter, with its successor Chevron Corporation, ‘Chevron’), a concession to explore and extract crude oil in exchange for providing oil to the Ecuadorian government at below-market prices for domestic consumption.⁴

The first disputes to arise between the parties were contractual: Chevron filed seven breach of contract claims in Ecuadorian courts between 1991 and 1994, asserting that Ecuador breached the parties’ agreement by overstating its domestic consumption needs and selling Chevron’s oil for export.⁵

In 1993, private Ecuadorian citizens brought a putative class action suit against Chevron in the US District Court for the Southern District of New York (SDNY) alleging that Chevron’s operations caused environmental damage in Ecuador’s Amazon region.⁶

In May 1995, Ecuador, Chevron and Petroecuador, Ecuador’s state-owned oil company, entered into a settlement agreement in which Chevron agreed to remedy any environmental damages resulting from its operations in exchange for a release from the government and Petroecuador.⁷ The agreement permitted Chevron to continue its breach of contract lawsuits against Ecuador.⁸

In 2001, the SDNY dismissed the environmental class action suit on grounds of forum non conveniens.⁹ The Second Circuit affirmed the dismissal, conditioned on Chevron’s agreement to submit to the jurisdiction of a court in Ecuador.¹⁰ In 2003, the action was recommenced in the Court of Lago Agrio in Ecuador, ultimately resulting in 2011 in a US$9 billion judgment against Chevron, which has become the subject of substantial litigation in the US and elsewhere.¹¹

Regarding Chevron’s breach of contract claims, in December 2006 Chevron commenced UNCITRAL arbitration under the BIT alleging that Ecuador’s failure to adjudicate Chevron’s claims in the Ecuadorian courts constituted, inter alia, a denial of justice under customary international law and a violation of article II(7) of the BIT, which obligates Ecuador to ‘provide effective means of asserting claims and enforcing rights with respect to investment’.¹² Ecuador argued, inter alia, that the tribunal lacked jurisdiction because Chevron’s contractual rights expired prior to the BIT’s entry into force and that Chevron’s lawsuits in Ecuador were not ‘investments’ under the BIT.

In December 2008, the three-member tribunal (Karl-Heinz Böckstiegel, Charles N Brower and Albert Jan van den Berg) issued an interim award holding that it had jurisdiction over Chevron’s claims and that Chevron’s lawsuits were ‘investments’ within the meaning of the BIT.¹³ In a partial award on the merits in March 2010, the tribunal determined that Ecuador’s ‘undue delay’ in resolving Chevron’s court cases breached the BIT’s ‘effective means’ clause, allowing the tribunal to ‘step into the shoes’ of the judiciary and decide the underlying contract claims.¹⁴ The tribunal awarded Chevron approximately US$96 million in damages in a final award issued in August 2011.¹⁵

Following Ecuador’s unsuccessful efforts to have the award set aside in Dutch courts, Chevron petitioned the US District Court for the District of Columbia to confirm the award.¹⁶ The district court issued an order on 6 June 2013, confirming the award and entering judgment in favour of Chevron.¹⁷ Ecuador appealed to the DC Circuit Court of Appeals, arguing that it was not subject to the jurisdiction of US courts under the US Foreign Sovereign Immunities Act (FSIA)¹⁸ and that the FSIA required that US courts review de novo whether Ecuador agreed in the BIT to arbitrate Chevron’s claim.¹⁹ Ecuador also argued that the award should not be enforced under the New York Convention.²⁰

The DC Circuit Court decision

FSIA

The FSIA grants foreign states immunity from personal and subject-matter jurisdiction of US courts subject to certain exceptions that, as the US Supreme Court has held, provide ‘the sole basis for obtaining jurisdiction over a foreign state’.²¹ One exception provides for federal court jurisdiction ‘in any case [...] in which the action is brought, either to enforce an [arbitration] agreement made by the foreign state with or for the benefit of a private party [...] or to confirm an award made pursuant to such an agreement to arbitrate, if [...] the agreement or award is or may be governed by a treaty [...] in force for the United States calling for the recognition and enforcement of arbitral awards.’²²

Ecuador argued that in order to decide whether to apply the FSIA’s ‘arbitration exception’, a US court must independently determine whether Ecuador and Chevron entered into an agreement to arbitrate their dispute. Ecuador alleged that there was no basis under the FSIA for the court to defer to the judgment of the arbitral tribunal on the question. In Ecuador’s view, it did not agree to arbitrate with Chevron because Chevron’s lawsuits were not ‘investments’ under the BIT, and thus US courts had no jurisdiction under the FSIA to enforce the arbitral award.²³

The DC Circuit Court held that Chevron had ‘conflate[d] the jurisdictional standard of the FSIA with the standard for review under the New York Convention’.²⁴ The Court held that Chevron met its initial burden to show that the FSIA arbitration exception applied by ‘producing the BIT, Chevron’s notice of arbitration against Ecuador, and the tribunal’s arbitration decision’.²⁵ The Court further held that upon such showing, ‘the burden shifted to Ecuador to demonstrate [...] that the BIT and the notice to arbitrate did not constitute a valid arbitration agreement between the parties.’²⁶ For FSIA purposes, the Court’s jurisdictional task was merely to determine whether Ecuador had in fact rebutted Chevron’s prima facie showing.²⁷

In rejecting Ecuador’s argument that the FSIA requires courts to make their own findings as to jurisdiction – and thus the court must review de novo the arbitrators’ determination that they had jurisdiction over Chevron’s claims under the BIT²⁸ – the DC Circuit Court relied on the US Supreme Court’s 2014 decision in BG Group PLC v Republic of Argentina.²⁹

BG Group also concerned an investment treaty award rendered under UNCITRAL Rules. Although Argentina, as the petitioner in BG Group,³⁰ did not object to the US court’s jurisdiction under the FSIA, it did argue that US courts should not defer to the arbitrators’ determination as to whether BG complied with the treaty’s local litigation requirement. Argentina argued that the UK-Argentina BIT required, as a condition to arbitration, that a claimant bring its claims in a court of the host state for 18 months prior to commencing arbitration, and that BG’s failure to do so meant that Argentina never consented to arbitrate with BG.

In BG Group, the US Supreme Court held that, as formulated in the UK-Argentina BIT, the local litigation requirement was a procedural precondition to arbitration (and thus for the arbitrators to interpret), not a condition on Argentina’s consent to arbitrate (and thus for the court to review de novo).³¹ Justice Breyer, writing for the Supreme Court majority, stated that treaties should be viewed similarly to commercial contracts in determining whether the parties intended for courts or arbitrators to decide a particular issue: ‘As a general matter, a treaty is a contract, though between nations. Its interpretation normally is, like a contract’s interpretation, a matter of determining the parties’ intent. And where, as here, a federal court is asked to interpret that intent pursuant to a motion to vacate or confirm an award made in the United States under the Federal Arbitration Act, it should normally apply the presumptions supplied by American law.’³²

The BG Group majority – as a dissenting Justice Roberts observed – effectively held that the UK-Argentina treaty provided ‘a unilateral offer to arbitrate, which an investor may accept by complying with its terms’.³³ This is, of course, consistent with the views of virtually all writers in the field.³⁴ The BG Group majority did not consider an investor’s compliance with the local litigation requirement, at least in this treaty, to be required to accept Argentina’s offer to arbitrate, typically done ‘through an investor’s filing of a notice of arbitration’.³⁵

The DC Circuit Court’s decision in the Chevron case flowed naturally from the reasoning of BG Group: ‘The BIT includes a standing offer to all potential US investors to arbitrate investment disputes, which Chevron accepted in the manner required by the treaty. The FSIA therefore allows federal courts to exercise jurisdiction over Ecuador in order to consider an action to confirm or enforce the award. The dispute over whether the lawsuits were ‘investments’ for purposes of the treaty is properly considered as part of review under the New York Convention.’³⁶

Notwithstanding its determination that the FSIA did not require de novo merits review of Ecuador’s jurisdictional argument, the DC Circuit Court did address the issue.³⁷ Ecuador argued that since Texaco’s lawsuits were commenced by 1994, the parties’ settlement agreement was signed in 1995, and the BIT did not go into force until 1997, the actions could not be a protected ‘investment’ under the BIT. The Court disagreed and stated – consistent with the decision of the arbitral tribunal –  that Chevron’s investment continued so long as the lawsuits were unresolved, and was therefore protected by the BIT from the time the treaty came into force.³⁸

New York Convention

The DC Circuit Court then considered Ecuador’s arguments that the award should not be recognised under the New York Convention.³⁹ Ecuador argued two grounds for vacating the award: that the decision concerned matters beyond the scope of the arbitration agreement under article V(1)(c); and was contrary to US public policy under article V(2)(b).⁴⁰

Regarding the first ground, the Court held that ‘the BIT is not silent on who decides arbitrability’, noting that article VI of the BIT states that the investor may submit a matter to arbitration in accordance with the UNCITRAL Rules, which provide that ‘[t]he arbitral tribunal shall have the power to rule on objections that it has no jurisdiction, including any objections with respect to the existence or validity of the arbitration clause,’ and ‘shall have the power to determine the existence or the validity of the contract of which an arbitration clause forms a part.’⁴¹ The Court held that by this BIT provision, Ecuador consented to allow the arbitral tribunal to decide issues of ‘arbitrability’ – including whether Chevron had ‘investments’ within the meaning of the treaty – and that there was no need for the District Court independently to determine the scope of the arbitration agreement once it concluded that the parties had delegated this task to the arbitrators.⁴² The Court cited similar holdings in Oracle America, Inc v Myriad Group AG, 724 F.3d 1069, 1077 (9th Cir. 2013) (‘[i]ncorporation of the UNCITRAL arbitration rules [...] constitutes clear and unmistakable evidence that the parties agreed to arbitrate arbitrability’) and Schneider v Kingdom of Thailand, 688 F.3d 68, 72 (2d Cir. 2012) (‘a bilateral investment treaty’s incorporation of the [...] UNCITRAL rules [is] clear and unmistakable evidence that the parties intended questions of arbitrability to be decided by the arbitral panel in the first instance’).

In writing for the majority in the Supreme Court’s decision in BG Group, Justice Breyer wrote as follows, regarding the ‘presumptions supplied by American law’ to determine whether the parties intended for a court or arbitral tribunal to decide on compliance with the local litigation requirement at issue there:

[I]t is up to the parties to determine whether a particular matter is primarily for arbitrators or for courts to decide. See, e.g., Steelworkers v Warrior & Gulf Nav. Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960) (‘[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit’). If the contract is silent on the matter of who primarily is to decide ‘threshold’ questions about arbitration, courts determine the parties’ intent with the help of presumptions.

     On the one hand, courts presume that the parties intend courts, not arbitrators, to decide what we have called disputes about ‘arbitrability.’ These include questions such as ‘whether the parties are bound by a given arbitration clause,’ or ‘whether an arbitration clause in a concededly binding contract applies to a particular type of controversy.’ Howsam v Dean Witter Reynolds, Inc., 537 U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002); accord, Granite Rock Co. v Teamsters, 561 U.S. 287, 299-300, 130 S.Ct. 2847, 177 L.Ed.2d 567 (2010) (disputes over ‘formation of the parties’ arbitration agreement’ and ‘its enforceability or applicability to the dispute’ at issue are ‘matters ... the court must resolve’ (internal quotation marks omitted)). See First Options, supra, at 941, 943-947, 115 S.Ct. 1920 (court should decide whether an arbitration clause applied to a party who ‘had not personally signed’ the document containing it)... .

     On the other hand, courts presume that the parties intend arbitrators, not courts, to decide disputes about the meaning and application of particular procedural preconditions for the use of arbitration. See Howsam, supra, at 86, 123 S.Ct. 588 (courts assume parties ‘normally expect a forum-based decisionmaker to decide forum-specific procedural gateway matters’ (emphasis added)). These procedural matters include claims of ‘waiver, delay, or a like defense to arbitrability.’ Moses H. Cone Memorial Hospital v Mercury Constr. Corp., 460 U.S. 1, 25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). And they include the satisfaction of ‘’prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate.’’ Howsam, supra, at 85, 123 S.Ct. 588 (quoting the Revised Uniform Arbitration Act of 2000 section 6, Comment 2, 7 U.L.A. 13 (Supp.2002); emphasis deleted). See also section 6(c) (‘An arbitrator shall decide whether a condition precedent to arbitrability has been fulfilled’); section 6, Comment 2 (explaining that this rule reflects ‘the holdings of the vast majority of state courts’ and collecting cases).⁴³

The BG Group majority held that where, as in that case, the local litigation provision ‘resembled a claims-processing requirement and [...] not a requirement that affects the arbitration contract’s validity or scope’, US courts should presume that the parties intended that arbitrators, not courts, would have primary authority to decide on the meaning and application of this threshold provision.⁴⁴ The Supreme Court majority thus deferred to the decision of the arbitral tribunal finding that Argentina’s conduct had waived or excused BG’s failure to comply with the local litigation requirement.⁴⁵

The DC Circuit did not reference these ‘presumptions’ in the Chevron case. It also did not distinguish between disputes regarding the validity of an arbitration agreement (not at issue in the case) and the scope of such an agreement (which was of course at issue). The Court’s reference to the UNCITRAL Rules provision that arbitrators ‘shall have the power to determine the existence or the validity of the contract of which an arbitration clause forms a part’⁴⁶ is consistent with many US cases holding that an agreement to arbitrate under arbitration rules, such as the UNCITRAL Rules, that provide for the arbitrators to determine issues concerning their own jurisdiction is ‘clear and unmistakable evidence’ of the parties’ intent to delegate questions of ‘arbitrability’ to the arbitrators, and thereby limit judicial review of such matters.⁴⁷ It is sometimes said that these decisions follow – or even are required by – the holding of the Supreme Court’s decision in First Options v Kaplan,⁴⁸ although some commentators have argued that First Options should not be interpreted to mean that the text of an arbitration agreement can be considered ‘evidence’ of the parties’ intent where one of the parties disputes formation of the arbitration agreement itself.⁴⁹

The Court also rejected Ecuador’s argument that the award was contrary to US public policy under article V(2)(b) of the New York Convention. The Court found that ‘enforcement of the arbitral award is fully consistent with the public policy of the United States, most notably the “emphatic federal policy in favor of arbitral dispute resolution”.’⁵⁰ Ecuador argued that the award was repugnant to both the enforceability of forum-selection clauses between sophisticated parties and judicial sovereignty. The Court disagreed and found Ecuador’s arguments ‘similarly rooted in the “erroneous premise” that the BIT does not apply’.⁵¹ The issue was not the breach of contract claim, but Ecuador’s failure to ‘resolve the contract suits in a timely fashion’.⁵² Furthermore, ‘[t]he Tribunal did not usurp the authority of the Ecuadorian judiciary; Ecuador ceded that authority, first by signing the BIT, and then by failing to resolve Chevron’s legal actions in a timely fashion.’⁵³

Enforcement of investor-state awards under the ICSID Convention

Enforcement in the US of awards of investor-state tribunals under the ICSID Convention follows a different path than enforcement of arbitral awards under the New York Convention and the Federal Arbitration Act. Regarding recognition and enforcement by national courts of ICSID awards, article 54(1) of the ICSID Convention provides that:

[e]ach Contracting State shall recognize an award rendered pursuant to this Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State. A Contracting State with a federal constitution may enforce such an award in or through its federal courts and may provide that such courts shall treat the award as if it were a final judgment of the courts of a constituent state.

Thus, the ICSID Convention does not permit national courts of contracting states to refuse recognition and enforcement of ICSID awards – ICSID awards may only be challenged through the annulment mechanism of the Convention.⁵⁴

The US enabling legislation for the ICSID Convention, 22 USC section 1650a (section 1650a), provides that the FAA does not apply to enforcement of ICSID awards, and that US federal courts have exclusive jurisdiction over actions to enforce ICSID awards. The statute also mandates that ‘pecuniary obligations imposed by such an award shall be enforced and shall be given the same full faith and credit as if the award were a final judgment of a court of general jurisdiction of one of the several States.’ The statute provides no further guidance with respect to the procedures to be followed in recognising ICSID awards and entering judgment.

In the absence of textual guidance, US federal district courts have split in their procedural approaches to recognising and enforcing ICSID awards under section 1650a.

In Mobil Cerro Negro, Ltd v Bolivarian Republic of Venezuela,⁵⁵ several ExxonMobil entities (collectively, Mobil) obtained an ex parte judgment from the SDNY in the amount of a US$1.6 billion arbitral award against Venezuela. Venezuela then moved to vacate the judgment, arguing that section 1650a does not permit ex parte recognition proceedings and that recognition of an ICSID award against a foreign sovereign is governed by the FSIA, which requires service of process and personal jurisdiction.

Mobil countered that section 1650a permits a district court to look to the forum state’s law, and that New York state law permits recognition of a foreign judgment on an ex parte basis, so long as the judgment debtor is notified within 30 days. Agreeing with Mobil, the SDNY court upheld this streamlined procedure for registering an ICSID award. Venezuela’s appeal of that decision to the US Court of Appeals for the Second Circuit is currently pending.

Three months after the Mobil Cerro Negro decision, the US District Court for the District of Columbia denied a similar ex parte petition for recognition of an ICSID award in Micula v Govt. of Romania.⁵⁶ In Micula, the DC District Court concluded that section 1650a concerns enforcement, but not recognition, of awards, emphasising that the statute uses the word ‘enforce’ in requiring that ICSID awards be treated in the same manner as ‘state court judgments’. As federal courts have no procedure for the recognition or ‘confirmation’ (to use the FAA term) of state court judgments, the Court held that enforcement of an ICSID award, like a state court judgment, can only be done in a plenary action with proper service of process. The District Court’s refusal to recognise the award in an ex parte proceeding departed from earlier case law in the District of Columbia.⁵⁷

Five days after the DC District Court’s decision, other award creditors from the Micula arbitration sought and obtained ex parte recognition of the same ICSID award against Romania in the SDNY.⁵⁸ Denying Romania’s request to reconsider that decision on the basis of the DC District Court’s opinion, the SDNY court expressly stated that it ‘disagrees with the District of Columbia Court’s decision, which is not binding here’.⁵⁹

The Second Circuit’s decision in Mobil Cerro Negro will be the first from an appellate court on these issues, and will have an important impact on the future enforcement of ICSID awards in the United States. After hearing oral argument on the appeal, the Second Circuit asked the US government for its views on the following three issues concerning the interplay between the ICSID Convention, the FSIA and section 1650a:

• Does the enabling statute for the ICSID Convention, 22 USC section 1650a, embody a grant of subject matter jurisdiction over an action to enforce an [ICSID] award against a foreign sovereign that is outside the scope of the FSIA, or does the FSIA provide the sole source of subject matter jurisdiction over such an action? In other words, does the FSIA provide the sole jurisdictional ‘road map’ that an ICSID award creditor must follow to convert a valid ICSID award against a foreign sovereign into a federal judgment, or is some other process available?
• Does either the ICSID Convention’s enabling statute or the FSIA permit a federal court to ‘borrow’ procedural rules of the forum state, including provisions for ex parte proceedings, for the judicial recognition of ICSID arbitral awards?
• Does the ICSID Convention’s enabling statute permit a federal district court to modify, under 28 USC section 1961, the interest rate adopted by an ICSID arbitral panel to be paid on an ICSID award?

In an amicus brief filed on 30 March 2016, the government addressed each question in turn.⁶⁰

On the Second Circuit’s first question, the government expressed the view that ‘[t]he FSIA is the sole source of subject matter jurisdiction over an action to enforce an ICSID award against a foreign sovereign and its rules must be followed.’⁶¹ The government argued that the SDNY erred in holding that section 1650a constitutes an exception to the FSIA’s exclusive grant of subject-matter jurisdiction, citing the US Supreme Court precedent indicating that the later-enacted ‘FSIA’s grant of jurisdiction supplants earlier-enacted grants of subject-matter jurisdiction that might have applied to an action against a foreign state’.⁶² Thus, the government argued, after enactment of the FSIA, that section 1650a supplies subject-matter jurisdiction only for enforcement of ICSID awards against private parties – not against foreign sovereigns.⁶³

Moreover, the FSIA’s proviso that its grant of sovereign immunity is ‘[s]ubject to existing international agreements to which the United States is a party at the time of enactment of this Act’⁶⁴ does not apply to the ICSID Convention because this ‘treaty exception’ applies only where there is a direct conflict with the FSIA’s immunity provisions – and article 55 of the ICSID Convention ‘expressly notes that it has no effect on domestic law regarding the immunity of foreign states’.⁶⁵

For similar reasons, the government also criticised the SDNY’s holding that the FSIA’s treaty exception meant that Mobil was not required to comply with the FSIA’s service of process or venue requirements. Likewise, the government argued that personal jurisdiction over a foreign state must be established even if state law would not require it in recognition proceedings, because ‘the federal requirements for exercising jurisdiction over a foreign state in US courts preempt any inconsistent state-law principles governing personal jurisdiction over out-of-state defendants,’ such that ‘the service requirements of [28 USC] section 1608 must be complied with in every action against a foreign sovereign and are strictly construed.’⁶⁶

As to the Second Circuit’s second question, the government argued that ‘[n]either the ICSID Convention’s enabling statute nor the FSIA permits a federal court to “borrow” procedures from state law that permit an ex parte proceeding.’⁶⁷ The government rejected the SDNY’s contention that this borrowing was necessary because a plenary action requirement would be in ‘tension’ with the ICSID Convention, pointing out that neither the Convention nor section 1605a mandate any particular set of procedures for enforcement, and in fact, the Convention anticipates that differing local laws will be applied by the contracting states.⁶⁸ The government also took issue with the SDNY’s conclusion that Congress intended for ICSID awards to be enforced through an ‘automatic’ ex parte process, pointing to various statements in the legislative history of the Convention and enabling statute to the effect that a plenary ‘action’ with notice would be required to enforce an award, consistent with federal practice for enforcing state court judgments at that time.⁶⁹ The government also contested the SDNY’s view that an action under the FSIA would serve no cause but delay, noting that the court is entitled to address ‘certain limited procedural issues in connection with [an ICSID award’s] enforcement’ and that it is efficient for the court to do so at the enforcement stage, rather than assuming such issues could be addressed in a proceeding for execution or attachment.⁷⁰

Responding to the Second Circuit’s third question, the government argued that ‘[t]he district court correctly held that the interest rate provided in the ICSID award is a pecuniary obligation that must be enforced’ under the terms of the Convention and the enabling statute.⁷¹ It was, therefore, appropriate for the district court to reject Venezuela’s attempt to modify the interest rate applied by the ICSID tribunal. The government also urged the Second Circuit to reject the ‘merger doctrine’, pursuant to which obligations owed under an arbitral award merge into the judgment at the time it is entered such that, from that time on, the mandatory federal post-judgment interest rate provided in 28 USC section 1961 must apply. In the government’s view, the merger doctrine conflicts with US treaty obligations by requiring judicial modification of a ‘pecuniary obligation’ in the award that US courts are treaty-bound to enforce.⁷²

The authors are grateful to Kristina Fridman, a summer associate with Baker & McKenzie LLP, for her assistance with this article.

Notes

1      Republic of Ecuador v Chevron Corp, No. 15-1088, 2016 U.S. LEXIS 3728 (2016).

2      In July 2016, Ecuador reportedly paid US$112 million to Chevron in full satisfaction of the award. D Thomson, ‘Ecuador settles with Chevron over court delay’, Global Arbitration Review (25 July 2016).

3      134 S. Ct. 1198 (2014).

4      Chevron Corp v Republic of Ecuador, 795 F.3d 200, 202 (DC Cir. 2015).

5      Chevron Corp v Republic of Ecuador, UNCITRAL Arb., Interim Award (1 December 2008), paragraph 9.

6      Aguinda v Texaco, Inc, Dkt. No. 93 Civ. 7527 (S.D.N.Y filed 3 November 1993).

7      Chevron, 795 F.3d at 202.

8      Id.

9      Aguinda v Texaco, Inc, 142 F.Supp.2d 534 (2001).

10   Aguinda v Texaco, Inc, 303 F.3d 470 (2d Cir. 2002).

11   In 2009, Chevron commenced an UNCITRAL arbitration alleging breach of the BIT and seeking a declaration that the Settlement Agreements released it from all environmental liability. Chevron Corp and Texaco Petroleum Corp v Republic of Ecuador, UNCITRAL, PCA Case No. 2009-23. In 2013, the tribunal (V V Veeder, Dr Horacio A Grigera Naon, Prof Vaughan Lowe) in that arbitration enjoined Ecuador from permitting enforcement of the Ecuador judgment on grounds that the enforcement and execution of the judgment in foreign jurisdictions by third parties threatened Chevron’s right to an ‘adequate remedy’ in the arbitration. Fourth Interim Award on Interim Measures (7 February 2013), paragraph 83. The tribunal also issued interim and partial awards confirming the tribunal’s jurisdiction under the BIT and ordering Ecuador to suspend enforcement of the Ecuador judgment. In March 2014, the US District Court for the Southern District of New York found that the Ecuador judgment was procured by fraudulent means. Chevron Corp v Donziger, 974 F. Supp. 2d 362 (S.D.N.Y 2014). That decision is currently on appeal. Meanwhile, Ecuador is seeking to enforce the Ecuador judgment in several jurisdictions. For a useful summary of enforcement proceedings as of 2013, see Manuel A Gómez, ‘The Global Chase: Seeking the Recognition and Enforcement of the Lago Agrio Judgment Outside of Ecuador’, 1 Stan. J. Compl. Lit. 429 (2013).

12   Chevron, 795 F.3d at 209; Chevron Corp and Texaco Petroleum Corp v Republic of Ecuador, UNCITRAL, PCA Case No. AA277, Partial Award on the Merits (30 March 2010), paragraph 33, 118.

13   Chevron Corp. and Texaco Petroleum Corp v Republic of Ecuador, UNCITRAL, PCA Case No. AA277, Interim Award (1 December 2008).

14   Chevron Corp and Texaco Petroleum Corp v Republic of Ecuador, UNCITRAL, PCA Case No. AA277, Partial Award on the Merits (30 March 2010), paragraph 379 & p. 249. The tribunal held that the effective means clause was an independent treaty obligation rather than a restatement of the denial of justice under customary international law, with a ‘potentially less-demanding test’ than the latter, and thus declined to reach Chevron’s customary international law claims. Id. at paragraph 244. Unsatisfied with the tribunal’s reasoning, in 2011, Ecuador commenced an arbitration against the US under the BIT’s state-to-state arbitration provisions, seeking an interpretation of the BIT’s ‘effective means’ provision as setting a high standard equivalent to that for a denial of justice under customary international law. Republic of Ecuador v United States of America, UNCITRAL, PCA Case No. 2012-5. The case was dismissed in a non-public award in 2012 by a tribunal chaired by Luiz Olavo Baptista and including Donald McRae and Raúl Vinuesa. Jarrod Hepburn & Luke Eric Peterson, ‘US-Ecuador Inter-State Investment Treaty Award Released to Parties; Tribunal Members Part Ways on Key Issues’, IA Reporter (30 October 2012).

15   Chevron Corp and Texaco Petroleum Corp v Republic of Ecuador, UNCITRAL, PCA Case No. AA277, Final Award (31 August 2011).

16   Chevron, 795 F.3d at 203.

17   Chevron Corp v Republic of Ecuador, 949 F. Supp. 2d 57 (D.D.C. 6 June 2013).

18   28 U.S.C. section 1604.

19   Chevron, 795 F.3d at 205.

20   Id. at 207.

21   Argentine Republic v Amerada Hess Shipping Corp, 488 U.S. 428, 439, 109 S.Ct. 683 (1989).

22   28 U.S.C. section 1605(a)(6).

23   Chevron, 795 F.3d at 205.

24   Id.

25   Id.

26   Id.

27   Id.

28   Id.

29   134 S. Ct. 1198 (2014).

30   Republic of Argentina v BG Group PLC, 715 F. Supp. 2d 108, 112 (D.D.C. 2010). The District Court concluded that it had subject matter jurisdiction under the New York Convention as enacted in 9 U.S.C. section 203.

31   BG Group, 134 S. Ct. at 1206-1207.

32   Id. at 1204 (citations omitted).

33   Id. at 1216 (Roberts, J, dissenting) (emphasis in original).

34   See, eg, Jan Paulsson, ‘Arbitration Without Privity’, 10 ICSID Rev. Foreign Investment L.J. 232, 234 (1995); Kenneth J Vandevelde, Bilateral Investment Treaties: History, Policy, and Interpretation, section 10.2.1.1 (Oxford U. Press, 2010); Nigel Blackaby, Constantine Partasides, et al., Redfern and Hunter on International Arbitration, section 8.08-8.09 (Oxford U. Press 6th ed. 2015); Lucy Reed, Jan Paulsson, et al., Guide to ICSID Arbitration, 52-56 (Kluwer Law Int’l 2010).

35   BG Group, 134 S. Ct. at 1209, 1211. Justice Breyer noted that the BIT did not label the litigation requirement as a condition of consent, but in dicta expressed doubt as to whether such a label would make any difference in the result reached by the majority. Id. However, Justice Sotomayor, concurring in part, wrote separately to stress that the Court was not extending its interpretation to treaties that explicitly refer to ‘conditions of consent’ when describing a requirement that might be deemed purely procedural in the ordinary commercial context. Id. at 1213-1214. Justice Sotomayor noted that: ‘Consent is especially salient in the context of a bilateral investment treaty, where the treaty is not an already agreed-upon arbitration provision between known parties, but rather a nation state’s standing offer to arbitrate with an amorphous class of private investors.’ Id. at 1213.

36   Chevron, 795 F.3d at 206.

37   Id.

38   Id. at 206-207.

39   Id. at 207.

40   Convention on the Recognition and Enforcement of Foreign Arbitral Awards, United Nations, United Nations Conference of International Commercial Arbitration 50 (1958).

41   Chevron, 795 F.3d at 207-208; UNCITRAL Arbitration Rules, article 21 (1976).

42   Id. at 208.

43   BG Group, 134 S. Ct. at 1206-1207.

44   Id. at 1212.

45   Id. at 1210, 1212-1213.

46   Chevron, 795 F.3d at 207-208; UNCITRAL Arbitration Rules, article 21 (1976).

47   See Schneider v Kingdom of Thailand, 688 F.3d 68, 72-73 (2d Cir. 2012) (UNCITRAL Rules); PaineWebber Inc v Bybyk, 81 F.3d 1193, 1199 (2d Cir. 1996) (NASD Rules); Petrofac, Inc v DynMcDermott Petroleum Operations Co, 687 F.3d 671, 675 (5th Cir. 2012) (AAA Rules); Fallo v High-Tech Inst., 559 F.3d 874, 878 (8th Cir. 2009) (AAA Rules); FSC Securities Corp v Freel, 14 F.3d 1310, 1312–13 (8th Cir. 1994) (NASD Rules); Oracle Am., Inc v Myriad Grp. A.G., 724 F.3d 1069, 1076-75 (9th Cir. 2013) (UNCITRAL Rules); Terminix Int’l Co v Palmer Ranch L.P., 432 F.3d 1327, 1332 (11th Cir. 2005) (AAA Rules); Qualcomm Inc v Nokia Corp, 466 F.3d 1366, 1373 (Fed. Cir. 2006) (AAA Rules).

48   514 U.S. 938 (1995).

49   See, eg, Steven H Reisberg, ‘The Rules Governing Who Decides Jurisdictional Issues:  First Options v. Kaplan Revisited’, 20 Am. R. Int’l Arb.159 (2009).

50   Chevron, 795 F.3d at 209.

51   Id. at 208.

52   Id.

53   Id. at 209.

54   ICSID Convention, article 53(1).

55   87 F. Supp. 3d 573 (S.D.N.Y 2015).

56   104 F. Supp. 3d 42 (D.D.C. 2015).

57   See Miminco, LLC v Democratic Republic of the Congo, 79 F. Supp. 3d 213, 216 (D.D.C. 2015) (finding that an ex parte proceeding ‘suffice[s]’).

58   Micula v Gov’t of Romania, No. 15 Misc. 107, 2015 U.S. Dist. LEXIS 102907, 2015 WL 4643180 (S.D.N.Y 5 August 2015).

59   Micula v Gov’t of Romania, No. 15 Misc. 107, 2015 U.S. Dist. LEXIS 119906, *4-5, 2015 WL 5257013 (S.D.N.Y 3 September 2015).

60   Mobil Cerro Negro, Ltd v Bolivarian Republic of Venezuela, Docket No. 15-707, ECF No. 87 (30 March 2016).

61   Id. at 2.

62   Id. at 9-10 (citing Argentine Republic v Amerada Hess Shipping Corp, 488 US 428, 443 (1989).

63   Id. at 10.

64   28 U.S.C. section 1604.

65   Mobil Cerro Negro, Docket No. 15-707, ECF No. 87 (30 March 2016), at 11.

66   Id. at 14-15.

67   Id. at 15.

68   Id. at 16.

69   Id. at 15-17.

70   Id. at 18.

71   Id. at 2.

72   Id. at 21-22.