Tenaris S.A. v. Bolivarian Republic of Venezuela ( 2021 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
TENARIS, S.A., et al.,
Petitioners,
v. Civil Action No. 1:18-cv-01373 (CJN)
BOLIVARIAN REPUBLIC OF
VENEZUELA,
Respondent.
MEMORANDUM OPINION
Petitioners, a Luxembourg steel company and its Portuguese subsidiary, seek to confirm
and enforce an arbitration award issued against the Bolivarian Republic of Venezuela. See
generally Pet., ECF No. 1. After Petitioners effected service, Venezuela failed to enter an
appearance, and Petitioners moved for default judgment. See Pets.’ Mot. for Default Judgment
(“Pets.’ Mot.”), ECF No. 16. Shortly after Petitioners filed their motion, Venezuela entered an
appearance and filed an opposition to the motion. See Resp.’ Opp’n to Mot. for Default
Judgment (“Resp.’ Opp’n”), ECF No. 25. The Court will therefore deny Petitioners’ motion for
default judgment but will grant in part and deny in part the petition to recognize and enforce the
award.
I. Background
Petitioner Tenaris S.A., a Luxembourg company, is a global supplier of steel tubes for
commercial application in the energy sector. See Tenaris S.A. v. Bolivian Republic of Venezuela,
ICSID Case No. ARB/12/23, Award, ECF No. 1-3, ¶¶ 52–54. Petitioner Talta-Trading E
Marketing Sociedade Unipessoal LDA is Tenaris’s wholly-owned subsidiary incorporated in
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Portugal. See id. ¶ 239. Tenaris and Talta held interests in Tubos de Acero de Venezuela S.A.
(“TAVSA”), a Venezuelan company producing steel pipes, and Complejo Sidenirgico de
Guayana, C.A. (“Comsigua”), a Venezuelan company producing hot briquetted iron, a basic
input for the production of steel. See id. ¶ 52. In 2009 and 2011, Venezuela expropriated
Petitioners’ interest in TAVSA and Comsigua without compensation. See id. ¶¶ 271, 273.
In 2012, Petitioners filed a Request for Arbitration with the International Centre for
Settlement of Investment Disputes (“ICSID”) alleging that Venezuela’s expropriation violated
the nation’s bilateral investment treaties with Luxembourg and Portugal. See id. ¶¶ 6, 47. The
arbitral tribunal, after determining that it had jurisdiction over the dispute, ruled for Tenaris and
Talta, awarding Petitioners $137,017,887 USD as compensation for Venezuela’s unlawful
expropriation. See id. ¶ 892. The tribunal also awarded pre-award and post-award interest to
accrue “from April 30, 2008, up to the date of actual payment at a rate equal to the LIBOR for
one-year USD deposits plus 4% p.a., with the interest rate redefined every year from April 30,
2008, onwards and interest compounded on a year-in-arrears basis.” Id. The award is silent as to
post-judgment interest.
Following the tribunal’s decision, Venezuela filed an application with ICSID to annul the
award. See Nigel Blackaby Decl. ¶ 8, ECF No. 1-2. An ICSID ad hoc annulment committee
rejected the application, ending the ICSID proceedings and making the arbitral award final. See
id.
In 2018, Petitioners sued seeking recognition of the award under 22 U.S.C. § 1650a and
Article 54 of the ICSID Convention. See generally Pet., ECF No. 1. On July 26, 2019,
Petitioners served Venezuela through diplomatic channels under 28 U.S.C § 1608(a)(4). See
Return of Service, ECF No. 12. Under Section 1608(d) of the Foreign Sovereign Immunities Act
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(“FSIA”), 28 U.S.C. § 1608(d), Venezuela had until September 24, 2019, to serve its answer or
other responsive pleadings. When Venezuela failed to meet this deadline, Petitioners asked the
Clerk of the Court to issue an entry of default, which she did. Petitioners then moved for default
judgment. See Pets.’ Mot., ECF No. 16.
Fearing that Venezuela’s nonappearance was due to a lack of notice (including to the
appropriate government), the Court sent a letter to Special Attorney General of Venezuela José
Ignacio Hernández informing him of the current litigation and Petitioners’ motion for default
judgment. See Letter from Judge Carl J. Nichols, ECF No. 20. Mr. Hernández promptly
responded to the letter informing the Court that Venezuela would be retaining counsel in the
matter. See Letter from José Ignacio Hernández, ECF No. 21. Soon after, counsel for Venezuela
entered an appearance and filed an opposition to Petitioner’s motion for default judgment. See
Resp.’s Opp’n, ECF No. 25. The Court finds that Venezuela’s appearance makes default
judgment inappropriate.
In its opposition, Venezuela agreed with Petitioners that this Court has subject matter
jurisdiction over this matter under 28 U.S.C. § 1330(a) and the Foreign Sovereign Immunities
Act’s arbitration exception, 28 U.S.C. § 1605(a)(6). See Resp. Opp’n, ECF No. 25, at 1.
Venezuela also agreed that the Court should affirm the arbitral award. Id. There are, however,
three areas of disagreement between the Parties that the Court will address in turn.
II. Analysis
First, the Parties disagree about the calculation of post-judgment interest. Post-judgment
interest is, of course, different from post-award interest, which the tribunal did address. Post-
judgment interest refers to the interest that accrues following this Court’s judgment enforcing the
award, while post-award interest refers to the interest that accrues between the arbitration panel’s
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decision and a decision enforcing the award. See Tenaris S.A. v. Republic of Venezuela, No. CV
18-1371, 2020 WL 3265476, at *2 (D.D.C. June 17, 2020).
As a matter of common law, “[w]hen the plaintiff recovers a valid and final personal
judgment, his original claim is extinguished and rights upon the judgment are substituted for it.
The plaintiff’s original claim is said to be ‘merged’ in the judgment.” OI Eur. Grp. B.V. v.
Bolivarian Republic of Venezuela, No. CV 16-1533, 2019 WL 2185040, at *6 (D.D.C. May 21,
2019) (quoting Restatement (Second) of Judgments § 18 cmt.a (1982)). Consistent with this
notion, courts have held that when a “federal court confirms an arbitral award, the award merges
into the judgment and the federal rate for post-judgment interest presumptively applies.” Bayer
Crop Sci. AG v. Dow Agrosciences L.L.C., 680 F. App’x 985, 1000 (Fed. Cir. 2017) (collecting
cases).
Congress, has provided a post-judgment interest rate that applies to civil money
judgments recovered in district court. Pursuant to 28 U.S.C. § 1961(a), “interest shall be
calculated from the date of the entry of judgment, at a rate equal to the weekly average 1-year
constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve
System, for the calendar week preceding the date of judgment.” Venezuela asserts that the rate
set forth in § 1961(a) should govern the post-judgment interest in this case. Petitioners, on the
other hand, argue that post-judgment interest should accrue at the post-award interest rate set
forth in the ICSID decision.
Despite Petitioners arguments to the contrary, Section 1961(a) does “not permit” this
Court to “exercise . . . judicial discretion” in setting post-judgment interest rates. OI European
Grp. B.V., 2019 WL 2185040, at *6 (cleaned up). The rate prescribed by statute is “mandatory.”
Id. A different post-judgment interest rate can only be applied in two instances: (1) when the
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parties agree to a different rate by “clear, unambiguous, and unequivocal language,”
Westinghouse Credit Corp. v. D’Urso, 371 F.3d 96, 102 (2d Cir. 2004); or (2) when the arbitral
award itself “explicitly state[s] the interest rate to be applied ‘post-judgment,’” OI European
Grp. B.V., 2019 WL 2185040, at *6.
Petitioners have not demonstrated that either of these exceptions applies here. The
arbitral award is silent on a post-judgment interest rate. And Petitioners have identified no
agreement between the parties to apply a post-judgment interest rate different from the one set
forth in § 1961(a). The Court therefore holds that Section 1961(a)’s interest rate will apply to the
accumulation of interest from the date of this decision.
The second dispute stems from Petitioners’ request for attorneys’ fees. Parties to
litigation proceedings in the United States are generally responsible for their own litigation costs.
See Summit Valley Indus. v. United Blvd. of Carpenters & Joiners, 456 U.S. 717, 725 (1982).
But federal courts retain the inherent power to assess attorneys’ fees “when a party has acted in
bad faith, vexatiously, wantonly, or for oppressive reasons.” Chambers v. NASCO, Inc., 501
U.S. 32, 45–46 (1991). In the context of petitions to enforce arbitration awards, courts in this
district have awarded petitioners reasonable attorneys’ fees and costs when arbitral award
debtors “unjustifiably refuse to abide by the arbitral award.” Concesionaria Dominicana de
Autopistas y Carreteras, S.A. v. Dominican State, 926 F. Supp. 2d 1, 3 (D.D.C. 2013). In
Concesionaria, for example, the Court awarded a petitioner’s attorneys’ fees and costs when the
respondent failed to satisfy the arbitral award for more than a year and did not file an appearance
in the case filed by petitioner to have the award recognized and enforced. Id.Petitioners argue that, like the respondent in Concesionaria, Venezuela unjustifiably
refused to abide by the arbitration award because it has failed to satisfy the award for more than
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three years. See Pets.’ Reply, ECF No. 26, at 2. Although Venezuela certainly did not promptly
satisfy the arbitral award (and has not yet done so), the Court disagrees that attorney’s fees are
warranted. Unlike the respondent in Concesionaria, Venezuela, after the Court notified the
country’s U.S.-recognized representatives of the lawsuit, promptly entered an appearance and
acknowledged that the arbitral award was proper. See Resp. Opp’n, ECF No. 25, at 1. In these
circumstances, the Court declines to award Petitioners their attorneys’ fees and costs.
Finally, Venezuela requests that, following the entry of judgment on the arbitration
award, the Court enter a stay of enforcement of that judgment given the Venezuelan sanction
regulations issued by the U.S. Department’s Office of Foreign Assets Control (“OFAC”). See
Resp.’s Opp’n, ECF No. 25, at 7–9. The Venezuelan sanctions program was promulgated under
the International Emergency Economic Powers Act (“IEEPA”), which authorizes the President,
upon the declaration of a national emergency, to “nullify, void, prevent or prohibit, any
acquisition . . . use, transfer . . . or dealing in, or exercising any right, power, or privilege with
respect to, or transactions involving, any property in which any foreign country or a national
thereof has any interest.” 50 U.S.C. § 1702(a)(1)(B). In 2015, President Obama declared a
national emergency related to the ongoing crisis in Venezuela. Exec. Order No. 13692, 80 Fed.
Reg. 12747 (Mar. 8, 2015) (“E.O. 13692”). Four years later, President Trump took additional
steps to address the emergency by issuing Executive Order 13884 (“E.O. 13884”), which
prohibited the “transfer[]” of all Venezuelan-owned property controlled by U.S. persons or found
in the United States. Exec. Order No. 13884, 84 Fed. Reg. 38,843 (Aug. 5, 2019), § 1(a). The
Order also directed the Treasury Secretary to issue regulations and take other actions necessary
to implement the order. See E.O. 13884, § 8; see also 50 U.S.C. § 1704. Adhering to this
directive, OFAC promulgated regulations barring “enforcement of any . . . judgment” against
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Venezuela “unless authorized pursuant to a specific license issued by OFAC.” 31 C.F.R.
§ 591.407.
Venezuela insists that the OFAC regulation necessitates a stay. Resp.’s Opp’n, ECF No.
25, at 9. Not so. The OFAC regulations make a stay of the enforcement of the award “until
[Petitioners] obtain[] a license from OFAC or the relevant sanctions are lifted” redundant:
Petitioners are currently prohibited from attaching or executing on any Venezuelan assets in the
United States without first obtaining a license to do so from OFAC. A stay prohibiting the
enforcement of an award until an OFAC license is obtained or the current regulations are
amended does nothing to alter the status quo. Courts consistently deny requests for redundant or
unnecessary stays. See, e.g., Ojo v. Luong, No. 14-4347, 2015 WL 1808514, at *6 (D.N.J. Apr.
21, 2015) (refusing to grant plaintiff’s request for an injunction declaring that the FBI must
comply with the Fourth Amendment because such relief would be “redundant and unnecessary”);
J & J Sports Productions., Inc. v. El 33, LLC, No. EP-11-CV-519-KC, 2013 164521, at *7 (W.D.
Tex. Jan. 14, 2013) (denying plaintiff’s request for an injunction preventing defendants from
engaging in illegal activity because “[t]here is no need to order an entirely redundant remedy of
this kind”).
Additionally, as other courts in this district have observed, the Court may lack authority
to stay the enforcement of the arbitration award. See Tenaris S.A., 2020 WL 3265476, at *4.
That is because doing so may violate the ICSID’s implementing statute, 22 U.S.C. § 1650(a),
which provides that “[t]he 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 Court therefore denies Venezuela’s
request to stay the judgment.
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III. Conclusion
For these reasons, the Court denies Petitioners’ Motion for Default Judgment, ECF No. 16,
and grants in part and denies in part Petitioners’ Petition to Recognize and Enforce the Arbitral
Award, ECF No. 1. An order will issue along with this memorandum opinion.
DATE: February 24, 2021
CARL J. NICHOLS
United States District Judge
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