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Gretton Ltd. v. Republic of Uzbekistan, No. 18-cv-01755 (D.D.C. Feb. 6, 2019) [click for opinion]

Petitioner, Gretton Ltd. (“Gretton”), is a litigation funder. Following the alleged expropriation of two gold-mining operations run by Oxus Gold PLC (“Oxus”) in the Republic of Uzbekistan, Gretton funded an arbitration on behalf of Oxus in return for an assignment of the proceeds of any award.

In 2015, an arbitral panel sitting in Paris found Uzbekistan liable for approximately $10 million plus interest—a fraction of the $1.2 billion sought by Oxus in the arbitration. In 2016, Oxus obtained recognition of the award from a court in Paris. Oxus then filed a request with the Paris Court of Appeal for a partial vacatur of the award—seeking to set aside the portions of the arbitral award that denied its claims but to leave intact the portion on which it had prevailed. Uzbekistan opposed the request; it also argued that if the court were to set aside any portion of the award, it should vacate the entire award.

In 2018, Gretton filed a petition against Uzbekistan in the U.S. district court to enforce the portion of the award already recognized in France. Uzbekistan sought outright dismissal on several grounds, including lack of subject-matter jurisdiction, defective service and forum non conveniens, and, in the alternative, a stay of the case pending the outcome of the set-aside proceedings in Paris.

The district court noted that, under the Federal Arbitration Act (the “FAA”), 9 U.S.C. §§ 201-208, which codifies the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention“), a court may stay enforcement proceedings if an application to set aside or suspend an award has been made to a competent authority. The court acknowledged that, although a court must establish its jurisdiction before analyzing any merits issue, the stay of a petition to enforce an arbitral award is a non-merits, non-jurisdictional threshold issue that it could properly consider even before the question of its own jurisdiction.

Having determined that it could stay the case without first resolving outstanding questions about its jurisdiction, the court turned to the question of whether it should impose a stay. Noting that neither the New York Convention nor the FAA dictate how a court should weigh a request for a stay, the court followed circuit precedent and considered six relevant factors.

First, the court considered the general objectives of arbitration, including the expeditious resolution of disputes and the avoidance of protracted and expensive litigation. The court noted that it was not the requested stay, but rather the efforts of Uzbekistan and Oxus to appeal the award in French courts, that were responsible for lengthening the litigation, and that a stay would avoid unnecessary and expensive piecemeal litigation. Second, the court considered the status of the foreign proceedings, which weighed strongly in favor of Uzbekistan given that a decision by the Paris Court of Appeals was expected within several months. On the third factor, whether the award would receive greater scrutiny in foreign proceedings, the court found it did not tilt in either party’s favor, given that the issues in the Paris proceeding related to claims that Oxus previously lost (and thus did not overlap with the issues in the U.S. case). Fourth, the court considered the characteristics of the foreign proceeding, which it found favored a stay. In particular, the court reasoned that (1) issuing a decision on the enforcement of the award at a time when the foreign proceedings were nearly concluded would raise significant international comity concerns, (2) the foreign proceedings were initiated by the assignor of the party (Gretton) now seeking enforcement of the award, and (3) Uzbekistan was not requesting the stay under circumstances indicating an intent to hinder or delay resolution. Fifth, the court considered possible hardships to the parties and noted that Gretton, the party responsible for lengthening proceedings abroad and for potential duplicative litigation over award enforcement, had not explained what harms it would suffer from a several-month delay. Finally, the court considered any other circumstances that might shift the balance, including the court’s uncertainty about how likely the Paris proceedings were to overturn the portion of the award currently subject to enforcement. The court found those other circumstances slightly favored Gretton’s position, but were insufficient to tip the overall balance away from granting a stay.

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

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