Stati v. Kazakhstan, No. 14-cv-1638 (D.D.C. Nov. 13, 2018) [click for opinion]

On March 23, 2018, the District Court for the District of Columbia entered judgment in favor of Petitioners Anatolie Stati, Gabriel Stati, Ascom Group, S.A., and Terra Raf Trans Trading Ltd. (the “Stati Parties”) confirming a foreign arbitral award of approximately $500 million against Respondent, the Republic of Kazakhstan. On April 9, 2018, Kazakhstan appealed that ruling to the D.C. Circuit Court of Appeals.

While that appeal was pending, the Stati Parties moved to attach Kazakhstan’s property in the United States in execution of the judgment, pursuant to 28 U.S.C. § 1610(c), and sought to register the judgment in any judicial district of the United States, pursuant to 28 U.S.C. § 1963. Kazakhstan opposed the motion and filed its own motion to stay execution of the judgment, as well as any post-judgment discovery, without posting a supersedeas bond.

In considering the motions, the court noted that under Federal Rule of Civil Procedure 62(d), if an appellant posts a supersedeas bond, it would be entitled to a stay of proceedings as a matter of right. However, district courts may also exercise their discretion to grant unsecured or partially secured stays. Such stays are warranted only in “unusual circumstances,” where granting such a partially secured or unsecured stay would not endanger the judgment creditor’s interest in ultimate recovery.

Kazakhstan argued that, because the Stati Parties had already levied attachments in parallel proceedings in Belgium, Luxembourg, Sweden and the Netherlands, the judgment was fully secured and the protection of a supersedeas bond was unnecessary. However, the court noted that Kazakhstan was actively seeking to vacate the attachments in these foreign jurisdictions, so those attachments, over which the court had no control, were inadequate as alternative security.

The court further noted the stringent standard for a stay pending appeal, the factors of which are: (1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies. The court found that Kazakhstan had offered only conclusory and speculative arguments about its likelihood of success of the merits and risk of irreparable harm, and therefore denied Kazakhstan’s motion for an unsecured stay of the enforcement proceedings.

The court then considered the Stati Parties’ motion to execute the judgment. Under the Foreign Sovereign Immunities Act, attachment of a foreign state’s property in the United States will only be permitted after the court determines that a reasonable period of time has elapsed following entry of judgment. Here, the Stati Parties had originally argued that one month was a reasonable period, and Kazakhstan had responded that two months was more appropriate. Because seven months had elapsed, the issue was moot as Kazakhstan had conceded that a shorter period would be reasonable.

The court thus granted the motion to execute the judgment in D.C., but denied the Stati Parties’ motion to register the judgment in any judicial district in the United States. The necessary “good cause” for such a motion would only exist if Kazakhstan did not have significant assets in the district sufficient to satisfy the judgment. Yet the Stati Parties conceded that they did not “have full insight” into what assets Kazakhstan owns in which jurisdictions. The motion was therefore denied without prejudice.

Finally, the court denied Kazakhstan’s motion for a protective order shielding it from discovery requests while the motion to stay was pending. The court directed the parties to meet and confer to narrow the areas of dispute and referred any matters not resolved to the magistrate.

A version of this post originally appeared in the January 2019 edition of Baker McKenzie’s International Litigation & Arbitration Newsletter, which is edited by David Zaslowsky and Grant Hanessian.