Turan Petroleum Inc. v. Ministry of Oil and Gas of Kazakhstan

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
No. 21-7023 September Term, 2021
FILED ON: MARCH 25, 2022
TURAN PETROLEUM INC., A DELAWARE CORPORATION, ET AL.,
APPELLANTS
TURAN PETROLEUM, INC., (A NEVADA CORPORATION),
APPELLEE
v.
MINISTRY OF OIL AND GAS OF KAZAKHSTAN, AGENCY OF REPUBLIC OF KAZAKHSTAN AND DOES,
1 TO 100,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:10-cv-02102)
Before: ROGERS and PILLARD, Circuit Judges, and RANDOLPH, Senior Circuit Judge
JUDGMENT
This appeal was considered on the record from the United States District Court for the
District of Columbia and on the briefs of the parties. See Fed. R. App. P. 34(a)(2); D.C. Cir. R.
34(j). The court has afforded the issues full consideration and has determined that they do not
warrant a published opinion. See D.C. Cir. R. 36(d). For the following reasons, it is
ORDERED AND ADJUDGED that the judgment of the district court be AFFIRMED.
The question on appeal concerns whether Kazakhstan retains its sovereign immunity against
claims by foreign investors in a dispute over natural resource exploration rights, called concessions,
that Kazakhstan granted to domestic Kazakh firms. At the time relevant here, Kazakhstan auctioned
off concessions through its Ministry of Oil and Gas. In 2001, the Ministry auctioned the Aral and
Arys Concessions to two Kazakh entities, Ai Dan LLC and Aral Petroleum LLC, respectively.
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Those concessions were transferred among various private entities, and U.S. investors acquired
interests in them. The Ministry, however, unilaterally terminated the Aral Concession in 2005 and
the Arys Concession in 2010. Plaintiffs, entities with interests in the concessions, contend that those
terminations resulted from various bribery and extortion schemes. They brought this lawsuit against
the Ministry in 2010, principally claiming breach of contract and violations of their rights under the
Bilateral Investment Treaty between the United States and Kazakhstan. They contend that their
claims fall within the Foreign Sovereign Immunities Act’s commercial activity and expropriation
exceptions.
The district court correctly dismissed the case based on Kazakhstan’s sovereign immunity.
As an arm of the government of Kazakhstan, the Ministry is presumptively immune from suit. 28
U.S.C. § 1604; see OBB Personenverkehr AG v. Sachs, 577 U.S. 27, 30-31 (2015). The Ministry’s
immunity “is overcome only if the plaintiff shows that one of the exceptions to immunity provided
in [the FSIA] applies.” TMR Energy Ltd. v. State Prop. Fund of Ukr., 411 F.3d 296, 299 (D.C. Cir.
2005); accord Sachs, 577 U.S. at 31.
Plaintiffs argue that the commercial activity and expropriation exceptions apply. Neither
does.
As to the FSIA’s commercial activity exception, Plaintiffs rely on the exception’s allowance
for any claim against a foreign sovereign that is “based upon . . . an act outside the territory of the
United States in connection with a commercial activity of the foreign state elsewhere and that act
causes a direct effect in the United States.” 28 U.S.C. § 1605(a)(2). Whether an act is commercial
turns on the act’s nature, not its purpose. Id. at § 1603(d). And a foreign sovereign engages in
commercial activity when it exercises “those powers that can also be exercised by private citizens, as
distinct from those powers peculiar to sovereigns.” Saudi Arabia v. Nelson, 507 U.S. 349, 360
(1993) (internal quotation marks and citations omitted).
Plaintiffs claim that Kazakhstan breached contracts authorizing exploration of Kazakhstan’s
natural resources. Our precedent treats the granting of permission to excavate and export natural
resources owned by a sovereign government as a quintessentially sovereign prerogative, not a
commercial activity. See World Wide Mins., Ltd. v. Republic of Kazakhstan, 296 F.3d 1154, 1165
(D.C. Cir. 2002) (quoting Millen Indus., Inc. v. Coordination Council for N. Am. Affs., 855 F.2d 879,
885 (D.C. Cir. 1988)). In deciding that the act of state doctrine barred certain claims in World Wide
Minerals, we held that Kazakhstan’s refusal to license the export of natural resources was a
sovereign act. 296 F.3d at 1165. We favorably cited Rush-Presbyterian-St. Luke’s Medical Center
v. Hellenic Republic, 877 F.2d 574 (7th Cir. 1989), for the proposition that “a contract whereby a
foreign state grants a private party a license to exploit the state’s natural resources is not a
commercial activity [under the FSIA], since natural resources, to the extent they are ‘affected with
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the public interest,’ are goods in which only the sovereign may deal.” World Wide Mins., 296 F.3d
at 1165 (quoting Rush-Presbyterian-St. Luke’s Med. Ctr., 877 F.2d at 578). We consequently held
that “issuance of a license permitting the removal of uranium from Kazakhstan is a sovereign act.”
Id. Plaintiffs have alleged no facts to meaningfully distinguish the concessions at issue here. And
because the “gravamen” of their complaint is the purportedly corrupt termination of their
concessions, Sachs, 577 U.S. at 35, we need not decide whether any activity surrounding promotion
of the concessions was commercial. Plaintiffs accordingly have not met their burden to allege that
the Ministry engaged in relevant commercial activity, and the exception does not apply.
The expropriation exception is likewise inapplicable. Under the FSIA, a sovereign lacks
immunity from a suit in which “(1) rights in property are at issue; (2) those rights were taken in
violation of international law; and (3) a jurisdictional nexus exists between the expropriation and the
United States.” Schubarth v. Fed. Republic of Germany, 891 F.3d 392, 398-99 (D.C. Cir. 2018)
(quoting Nemariam v. Fed. Democratic Republic of Ethiopia, 491 F.3d 470, 475 (D.C. Cir. 2007))
(citing 28 U.S.C. § 1605(a)(3)). The exception’s jurisdictional nexus requirement is established if
the property is either (i) “present in the United States in connection with a commercial activity
carried on in the United States by the foreign state”; or (ii) “owned or operated by an agency or
instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial
activity in the United States.” 28 U.S.C. § 1605(a)(3); accord Nemariam, 491 F.3d at 475. The
Ministry is properly considered an arm of Kazakhstan itself because its core functions, managing the
state’s oil and gas sector, are governmental. See De Csepel v. Republic of Hungary, No. 20-7047,
2022 WL 678076, at *5 (D.C. Cir. Mar. 8, 2022). Accordingly, we analyze the Ministry’s acts under
the first part of the expropriation exception.
Plaintiffs fail to allege facts satisfying the requisite jurisdictional nexus, see 28 U.S.C.
§ 1605(a)(3)(i), so the exception does not apply. The U.S. property at issue—the value of Plaintiffs’
investments—was not taken “in connection with” any commercial activities that Kazakhstan
conducted in the United States. Plaintiffs, which include some businesses within the United States,
do not allege that the Ministry was involved in securing their investments in Kazakh companies.
The complaint itself states that “Kazakh authorities did not participate in any investments.” App. 8,
¶ 19. And the concession agreements the Ministry approved were for Kazakh businesses, not
American ones. App. 11-12, ¶¶ 31-35; App. 15-17, ¶¶ 48-61. Plaintiffs only later invested in the
Kazakh companies that had obtained the concessions from the Ministry. Accordingly, Plaintiffs fail
to allege their property was taken “in connection with” any commercial activities of Kazakhstan in
the United States.
Finally, Plaintiffs argued before the district court that Kazakhstan had waived its immunity,
but they forfeited reliance on the waiver exception by failing to raise it in their opening brief here.
See Al-Tamimi v. Adelson, 916 F.3d 1, 6 (D.C. Cir. 2019). Even had they pressed the point we
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would affirm for the reasons the district court gave in its opinion. See Turan Petroleum, Inc. v.
Ministry of Oil & Gas of Kazakhstan, 406 F. Supp. 3d 1, 10-13 (D.D.C. 2019) (describing the three
situations in which we have found implicit waiver of sovereign immunity and holding that none
applies here) (citing Creighton Ltd. v. Gov’t of State of Qatar, 181 F.3d 118, 122 (D.C. Cir. 1999)).
In the absence of allegations establishing the applicability of any FSIA exception, Plaintiffs’
claims are barred by sovereign immunity. Their other arguments on appeal accordingly also fail.
Plaintiffs’ proposed amendments to their complaint would be futile to overcome Kazakhstan’s
immunity. Their proposal to allege additional bad acts neither shows any commercial character of
the Ministry’s acts nor otherwise establishes a jurisdictional nexus to the United States. See
Appellants’ Br. at 24-38. Plaintiffs specifically appear to argue that adding a RICO claim could
allow jurisdiction under the commercial activity exception. Appellants’ Br. at 24-25, 38-39. But
they plead no additional facts to show that the commercial activity exception applies, and the cases
on which they rely show only that RICO claims may proceed where the conduct on which they rest
renders a FSIA exception applicable. See Turan Petroleum, 406 F. Supp. 3d at 17. Plaintiffs’
motion under Fed. R. Civ. P. 59(e) is similarly futile; in any event, it also does not identify a change
in controlling law, new evidence supporting application of a FSIA exception, or clear legal error.
We therefore affirm the judgment of the district court.
Pursuant to D.C. Circuit Rule 36, this disposition will not be published. The Clerk is directed
to withhold issuance of the mandate herein until seven days after resolution of any timely petition for
rehearing or rehearing en banc. See Fed. R. App. P. 41(b); D.C. Cir. R. 41(a)(1).
So ordered.
Per Curiam
FOR THE COURT:
Mark J. Langer, Clerk
BY: /s/
Daniel J. Reidy
Deputy Clerk
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