Teco Guatemala Holdings, LLC v. Republic of Guatemala

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
TECO GUATEMALA HOLDINGS, LLC,
Petitioner,
v. Civil Action No. 17-102 (RDM)
REPUBLIC OF GUATEMALA,
Respondent.
MEMORANDUM OPINION
Petitioner TECO Guatemala Holdings, LLC (“TECO”) commenced this action by filing a
“Petition to Confirm an Arbitration Award” rendered by the International Centre for Settlement
of Investment Disputes (“ICSID”) against the Republic of Guatemala (“Guatemala”). Dkt. 1. In
response, Guatemala filed a motion to dismiss for failure to state a claim, Dkt. 23, which the
Court denied, Dkt. 34. The case is now before the Court on TECO’s motion for judgment on the
pleadings, or in the alternative, motion for summary judgment, Dkt. 36, and Guatemala’s cross-
motion for summary judgment, for limited discovery, and for a stay, Dkt. 39. For the reasons
explained below, the Court will GRANT TECO’s motion for summary judgment and will
DENY Guatemala’s cross-motion.
I. BACKGROUND
Because the relevant facts are set forth in detail in the Court’s prior opinion, TECO
Guatemala Holdings, LLC v. Republic of Guatemala, No. 17-102 (RDM), 2018 WL 4705794, at
*1–4 (D.D.C. Sept. 30, 2018) (“TECO I”), the Court will only briefly summarize them here.
A. ICSID Convention Structure and Award Enforcement
The International Convention on the Settlement of Investment Disputes between States
and Nationals of Other States (“ICSID Convention”), Mar. 18, 1965, 17 U.S.T. 1270, is a
“multilateral treaty aimed at encouraging and facilitating private foreign investment in
developing countries,” Mobil Cerro Negro, Ltd. v. Bolivarian Republic of Venezuela, 863 F.3d
96, 100 (2d Cir. 2017) (citing Anthony R. Parra, The History of ICSID 11–12, 24–26 (2012)), to
which the United States is a signatory, see Convention on the Settlement of Investment Disputes
Act of 1966, Pub. L. No. 89-532, 80 Stat. 334 (codified at 22 U.S.C. §§ 1650 and 1650a) (the
treaty’s implementing statute). The ICSID Convention provides an international framework for
adjudicating and enforcing investor-state disputes. Under the Convention, any “Contracting
State or any national of a Contracting State” may request that ICSID convene an arbitration
tribunal. See ICSID Convention art. 36(1). The tribunal then considers the dispute and issues a
written award, that “deal[s] with every question submitted to the [t]ribunal, and state[s] the
reasons upon which it is based.” Id. art. 48(3).
The Convention also establishes procedures for parties to challenge or otherwise seek
relief from an award entered by an ICSID tribunal. Either party may request “revision of the
reward” based on the “discovery of” a material fact that “was unknown to the [t]ribunal and to
the applicant” at the time “the award was rendered,” see id. art. 51(1), or an “annulment of the
award” based on specified grounds, including “that the [t]ribunal . . . manifestly exceeded is
powers,” “that there was corruption on the part of a member of the [t]ribunal,” that the
proceeding “serious[ly] depart[ed] from a fundamental rule of procedure,” or “that the award
. . . failed to state the reasons on which it [was] based,” id. art. 52(1). When a party seeks
annulment, ICSID convenes an ad hoc committee of three members, which is authorized “to
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annul the award or any part thereof” on one or more of the specified grounds. Id. art. 52(3). The
committee may, if appropriate, “stay enforcement of the award pending its decision and, at a
party’s request, enforcement of the award is “stayed provisionally until the [c]ommittee” renders
its decision on that request. Id. art. 52(5). But, “[e]xcept to the extent that enforcement” has
been stayed, the tribunal’s award remains “binding on the parties and shall not be subject to any
appeal or to any other remedy” other than those set forth in the ICSID Convention. Id. art. 53(1).
Following an annulment, either partial or full, either party may request resubmission of the
dispute to a new tribunal, id. art. 52(6)—although if an award had been annulled only in part, the
new tribunal is prohibited from reconsidering any non-annulled portion of the award. Rule
55(3), ICSID Rules of Procedure for Arbitration Proceedings. The new tribunal may, if
appropriate, “stay . . . the enforcement of the unannulled portion of the award until the date its
own award is rendered,” id. at Rule 55(3), but, as Guatemala acknowledges, in the absence of
such a stay, “[p]artially annulled awards can be enforced,” Dkt. 23-1 at 22.
ICSID is not empowered to enforce awards. Instead, prevailing parties must seek
“recognition or enforcement” of their awards with a court of a member state. ICSID Convention
art. 54. The courts of member states, however, play only a limited role. The Convention
requires member-state courts to “recognize an award . . . as binding and [to] enforce the
pecuniary obligations imposed by that award within its territories as if it were a final judgment of
a court in that [s]tate,” or, for a member-state with “a federal constitution,” to “treat the award as
if it were a final judgment of the courts of a constituent state.” Id. art. 54(1). Under the U.S.
implementing statute, an ICSID award “shall create a right arising under a treaty of the United
States,” and, as required by the treaty, “[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
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judgment of a court of general jurisdiction of one of the several States.” 22 U.S.C. § 1650a(a).
The statute further specifies that the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., which
permits courts to vacate FAA awards “procured by corruption, fraud, or undue means,” id. at
§ 10, does “not apply to enforcement of [ICSID] awards.” 22 U.S.C. § 1650a(a). As a result,
under both the ICSID Convention and the U.S. implementing legislation, a U.S. court is “not
permitted to examine an ICSID award’s merits, its compliance with international law, or the
ICSID tribunal’s jurisdiction to render the award;” all the court may do is “examine the
judgment’s authenticity and enforce the obligations imposed by the award.” Mobil Cerro Negro,
Ltd., 863 F.3d at 102.
B. Guatemala and TECO’s Dispute
The ICSID arbitration at issue in this case involved a dispute between TECO, which is an
energy company incorporated in the United States, and the Republic of Guatemala. Dkt. 1 at 2
(Pet. ¶¶ 2–3). The dispute began with Guatemala’s decision in 1997 to privatize Empresa
Eléctrica de Guatemala, S.A. (“EEGSA”), the largest electricity distribution company in the
country. Id. at 4 (Pet. ¶ 9). A consortium of energy companies, including a subsidiary
of TECO Energy, created an investment company that acquired a controlling interest in EEGSA
in July 1998. Id. (Pet. ¶ 10). The TECO Energy subsidiary held a substantial interest in the
consortium, and from 1998 until the sale of the consortium in 2010, the consortium maintained a
“controlling interest in EEGSA.” Id. (Pet. ¶ 10). In 2005, the TECO Energy subsidiary’s shares
in the consortium were transferred to TECO. Id. (Pet. ¶ 11).
The arbitration between TECO and Guatemala concerned the electricity rates paid to
EEGSA and other distribution companies. Among other components, the applicable rates
incorporated a Value Added for Distribution—or “VAD”—which was intended to compensate
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the distributors for operating expenses and infrastructure and “to provide a fair return on
investment.” Id. (Pet. ¶ 12). The VAD was recalculated every five years by a Guatemalan
regulatory agency, the National Electric Energy Commission (“CNEE”), which published the
electricity rates for EEGSA and other electricity distributors in accordance with Guatemalan
law. Id. According to TECO, the process by which CNEE set the VAD for the 2008–2013
period was unlawful in various respects and, as a result, violated Guatemala’s obligation under
the Dominican Republic-Central America Free Trade Agreement (“DR-CAFTA”), 43 I.L.M. 514
(2004), “to afford protected investments fair and equitable treatment.” Dkt. 1 at 5 (Pet. ¶ 14).
The United States is a party to the DR-CAFTA.
CNEE’s actions resulted in “cash flow losses” for TECO and, according to TECO,
ultimately led to the sale of the company “at a depreciated value” in 2010. Id. at 5 (Pet. ¶¶ 13–
14). Pursuant to the DR-CAFTA, TECO filed a claim in arbitration against Guatemala in
October 2010. Id. at 5–6 (Pet. ¶¶ 15–16). That arbitration was governed by the ICSID
Convention. Id. at 5 (Pet. ¶ 15).
C. Procedural History before the ICSID
In the arbitration, TECO sought damages in the amount of $243,585,335. Id. at 6 (Pet.
¶ 17). That total was the sum of two distinct claims for relief: First, TECO sought $21,100,552
to compensate it for the “portion of the cash flow . . . lost from August 1, 2008, when the
[disputed rates] took effect, until October 21, 2010, when [TECO] sold its ownership interest in
EEGSA.” Id. (Pet. ¶ 17). TECO refers to this claim as its “historical loss” or “cash flow value”
claim. Second, TECO sought $222,484,783 to compensate it for “the damages [it] suffered
. . . as a result of the impaired value at which [TECO] sold its ownership interest.” Id. at 7
(Pet. ¶ 17). TECO refers to this claim as its “loss of value” claim. Id. at 6–7 (Pet. ¶ 17). On
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December 19, 2013, the ICSID arbitration tribunal found that Guatemala had violated the DR-
CAFTA. See id. (Pet. ¶ 18); see also Dkt. 1-2 at 3 (Tribunal Award).
TECO’s success on its damage claims, however, was mixed. The tribunal found that
TECO had presented sufficient evidence to establish a “historical loss” of $21,100,552. Dkt. 1-2
at 146 (Tribunal Award ¶ 742). But the tribunal was not persuaded that TECO had offered
evidence sufficient to prevail on its “loss of value” claim for $222,484,783. Id. at 146–47
(Tribunal Award ¶ 749). As to that claim, the tribunal found that there was not “sufficient
evidence of the existence and quantum of the losses that were allegedly suffered as a
consequence of the sale” of the consortium at a depreciated price. Id. On April 18, 2014, TECO
filed an application with ICSID to annul the tribunal’s award in part, and, that same day,
Guatemala filed a petition seeking to annul the award in full. Dkt. 1 at 7 (Pet. ¶ 20). TECO
sought to annul the award only to the extent that it denied the company’s “loss of value” claim,
denied its request for interest on its “historical losses” claim for the period from August 1, 2009
until October 21, 2010, and denied its “claimed interest rate applicable to pre-award interest.”
Id. (Pet. ¶ 20). Guatemala, on the other hand, sought to annul the Tribunal’s award in its
entirety. Id. (Pet. ¶ 20).
In response, ICSID convened an ad hoc committee to consider the annulment requests.
Dkt. 1 at 7 (Pet. ¶ 21); see also Dkt. 1-3 (Annulment Decision). The committee rejected each of
Guatemala’s challenges to the tribunal’s finding that it had violated the DR-CAFTA. See Dkt. 1-
3 at 88–95 (Annulment Decision ¶¶ 274–300); id. at 98–103 (Annulment Decision ¶¶ 308–323);
id. at 104–106 (Annulment Decision ¶¶ 327–331). In contrast, the committee was persuaded by
TECO’s contention that the tribunal’s “decision on the [company’s] loss of value claim [did] not
meet the standards” required by the ICSID convention, id. at 42 (Annulment Decision ¶ 127),
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because “the [t]ribunal’s reasoning . . . [was] not clear at all,” id. (Annulment Decision ¶ 128).
It, accordingly, decided that the tribunal’s decision on TECO’s “loss of value claim . . . need[ed]
to be annulled.” Id. (Annulment Decision ¶ 127). The committee also concluded that the
tribunal erred in declining to award TECO “interest on historical damages for the period before
EEGSA’s sale.” Id. at 63 (Annulment Decision ¶ 198). Finally, the committee noted that the
automatic stay of enforcement terminated as of the date of its decision. Id. at 120–21
(Annulment Decision ¶ 382).
D. Proceedings in this Court
On January 16, 2017, TECO initiated this action, seeking to “confirm and recognize” the
“Final Award” and the entry of judgment against Guatemala “in the amounts stated in the Award
and the Annulment decision.” Dkt. 1 at 9 (Pet. ¶ 27). TECO contends that it “is entitled to
damages in the amount of . . . $21,100,552 [for its historical loss], plus interest on that amount at
the US Prime rate plus two percent as from October 21, 2010 until the date of full payment,
compounded annually.” Id. (Pet. ¶ 28). TECO also seeks entry of judgment awarding it (1)
“half of its costs of ICSID’s administrative expenses and fees related to its application for partial
annulment of the” tribunal Award, and (2) the costs that it incurred in contesting Guatemala’s
application for annulment, for a total amount of $416,048.12. Id. (Pet. ¶ 29).
On November 8, 2017, Guatemala moved to dismiss TECO’s petition, arguing that the
ICSID annulled the tribunal Award and that, as a result, there was no award for this Court to
confirm. Dkt. 23. On September 30, 2018, the Court concluded that the committee’s Annulment
Decision (1) granted TECO $21,100,552 in “historical loss” damages, along with interest at the
U.S. prime interest rate plus two percent, from October 21, 2010 to the date of payment, and
“relevant administrative costs and legal costs,” and (2) “permit[ed] TECO to return to a new
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arbitral tribunal to pursue its additional claims for $222,484,783 in ‘loss of value’ damages and
to pursue its claim for additional interest on its ‘historical loss’ claim for the period from August
1, 2009 to October 21, 2010.” TECO I, 2018 WL 4705794, at *6. The Court, therefore, denied
Guatemala’s motion to dismiss. Id.
On October 29, 2018, TECO filed a motion for judgment on the pleadings pursuant to
Fed. R. Civ. P. 12(c), or, in the alternative, for summary judgment under Fed. R. Civ. P. 56. Dkt.
36. Guatemala opposed TECO’s motions and cross-moved for summary judgment or, in the
alternative, asked that the Court authorize it to either take “limited discovery” or stay this
proceeding until the renewed arbitration proceeding is completed. Dkt. 39.
II. ANALYSIS
Much of the disagreement between the parties centers on the proper role of the Court in
enforcing an ICSID award. In TECO’s view, the role of the Court is limited to examining the
authenticity of the award and to enforcing the obligations it imposes—the Court may not
consider the merits of the award. See Dkt. 36-1 at 16. Guatemala, in contrast, argues that the
ICSID Convention and the U.S. implementing legislation require a district court to treat an
ICSID award as a “final judgment” under domestic law, and thus a respondent, like Guatemala,
is entitled to raise any defense available under Federal Rule of Civil Procedure 60 or any similar
rule. Dkt. 40 at 16. On this theory, Guatemala argues that TECO’s petition fails for three
reasons. It first argues that, under the “complete arbitration rule,” even the unannulled portion of
the Tribunal Award should not be treated as a “final judgment”—rather, it resolves only a
portion of the parties’ dispute and, by analogy to 28 U.S.C. § 1291, is not yet “final.” Dkt. 40 at
20. Second, it argues that “the doctrines of claim and issue preclusion prevent this Court from
enforcing the judgment,” id. at 10—that is, because “a claim by a sister shareholder” asserted
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under a different treaty was dismissed by a separate ICSID tribunal, TECO should be from
precluded from enforcing what Guatemala contends is an inconsistent arbitral award. Id. at 25.
Third, Guatemala claims that the unannulled portion of the Tribunal Award is unenforceable
because the underlying arbitration was tainted by TECO’s fraudulent conduct. Id. at 33. The
Court will analyze Guatemala’s defenses in reverse order.
A. Scope of Review
Before addressing the substance of Guatemala’s defenses, the Court must first decide the
appropriate scope of review. The ICSID Convention, as with other forms of arbitration,
facilitates dispute resolution through a process entered into by mutually consenting parties. See
ICSID Convention, Preamble. Under that voluntary framework, the parties have agreed that the
arbitral “award shall be binding on the parties and shall not be subject to any appeal or to any
other remedy except those provided for in th[e] Convention.” ICSID Convention art. 53(1).
Those remedies are clearly defined: If a dispute arises about the “meaning or scope of an award,
either party may request interpretation of the award” by submitting a request to the Secretary-
General of ICSID, who must then refer the request to original tribunal or, if not possible, to a
new tribunal. Id. art. 50. If a party discovers a decisive fact after the award is issued, and if the
failure to discover that fact early was “not due to negligence,” the “party may request revision of
the award” by the original tribunal or, if not possible, by a new tribunal. Id. art. 51. And, if the
tribunal was not properly constituted, manifestly exceeded its powers, was infected with
corruption, or failed to state the reasons for its award, or if there was a serious departure from a
fundamental rule or procedure, either party may seek annulment of the award by an ad hoc
committee. Id. art. 52.
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All of these remedies, however, are internal to the ICSID process. The role of the courts
of the member-states, in contrast, is limited to the “recognition or enforcement” of an award. Id.
art. 54. This is no accident. The Convention’s aim is to streamline the enforcement of
authenticated ICSID arbitral awards, and thus, under the Convention’s terms, member-states’
courts are generally not “permitted to examine an ICSID award’s merits.” Mobil Cerro Negro,
863 F.3d at 102. Rather, an enforcing court must generally “do no more than examine the
judgment’s authenticity and enforce the obligations imposed by the award.” Id. Consistent with
the Convention’s terms, Congress enacted implementing legislation that requires federal district
courts to accord an ICSID award “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.” 22 U.S.C. § 1650a(a).
In doing so, moreover, Congress expressly precluded courts from engaging in the more robust—
although still “extremely limited,” Teamsters Local Union No. 61 v. United Parcel Service, Inc.,
272 F.3d 600, 604 (D.C. Cir. 2001) (quoting Kanuth v. Prescott, Ball & Turben, Inc., 949 F.2d
1175, 1178 (D.C. Cir. 1991))—form of judicial review applicable under the Federal Arbitration
Act (“FAA”), 9 U.S.C. § 10 et seq. Thus, where the FAA authorizes district courts to vacate
arbitral awards “procured by corruption, fraud, or undue means” or awards rendered in excess of
the arbitrator’s powers, id. § 10, the ICSID implementing legislation does not, 22 U.S.C.
§ 1650a(a); see also Mobil Cerro Negro, 863 F.3d at 121 (citing 9 U.S.C. § 10). By placing
ICSID awards beyond the scope of the FAA, Congress rendered these grounds of attack
“unavailable to ICSID award-debtors in federal court enforcement proceedings.” Mobil Cerro
Negro, 863 F.3d at 120–21 (citing 112 Cong. Rec. 13148, 13149 (daily ed. June 15, 1966)).
Although the Court’s role in enforcing an ICSID arbitral award is therefore
exceptionally limited, the Court is more than a “rubber stamp.” The Court must ensure that it
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has subject-matter and personal jurisdiction, Mobil Cerro Negro, 863 F.3d at 112; see also
Micula v. Gov’t of Rom., 104 F. Supp. 3d 42, 50–51 (D.D.C. 2015) (concluding that Congress
deliberately chose not to allow a summary process to domesticate an ICSID arbitration award),
must ensure that the award is authentic, see Mobil Cerro Negro, 863 F.3d at 121; and must
ensure that its enforcement order is consistent with the award. Moreover, as Congress provided,
the Court must apply the same standard that applies when federal courts are asked to give “full
faith and credit” to a “final judgment of a court of general jurisdiction of one of the several
States.” 22 U.S.C. § 1650a(a). As a result, in enforcing an ICSID award, district courts must
“look to established procedures for enforcing state court judgments in federal court.” Mobil
Cerro Negro, 863 F.3d at 122. That process—recognized in Article IV of the U.S. Constitution,
U.S. Const., Art. IV, Sec. 1—is governed by 28 U.S.C. § 1738, which requires federal courts to
accord “authenticated” judgments from “every court within the United States” the “same full
faith and credit . . . as they have by law or usage in the courts of such State . . . from which they
are taken.” This means that a federal court must “give preclusive effect to state-court judgments
whenever the courts of the State from which the judgments emerged would do so,” Allen v.
McCurry, 449 U.S. 90, 96 (1980), and, by extension, means that federal courts must accord
ICSID awards the same binding effect required under the Convention.
Thus, the appropriate course of action for a district court petitioned to enforce an
authenticated ICSID award is to treat it in the same manner as a state court judgment. It is in that
manner that the Court’s analysis will proceed. As discussed below, this requires something more
than summary enforcement. But, at the same time, as the analysis below demonstrates, allowing
Guatemala to raise the same defenses that a party could raise to a federal court’s enforcement of
a state court judgment does little to further its defense.
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B. Fraud Defense
According to Guatemala, “[b]oth Rule 60(b) and the Full Faith and Credit Clause
provides that fraud is a defense to final judgments” and, by extension, to ICSID awards. Dkt. 40
at 33. The Court is unpersuaded that Rule 60(b) has any application in the present context and
unpersuaded that Guatemala has made a prima facie showing of the type of fraud that would be
necessary to decline to give full faith and credit to a foreign judgment.
Guatemala predicates its Rule 60(b) argument on a misunderstanding of the ICSID
Convention and the U.S. implementing legislation. According to Guatemala, ICSID requires the
courts of member-states to treat an ICSID award “as if it were a final judgment of a court of that
State,” in other words, as a federal court judgment, and because final decisions of federal courts
are subject to Rule 60(b), Guatemala contends that ICSID awards must be subject to the same—
or at least a similar—safety valve. See Dkt. 40 at 9. Guatemala ignores, however, the very next
sentence of the ICSID Convention, which provides that “[a] [c]onstracting [s]tate with a federal
constitution,” like the United States, “may enforce” ICSID awards “in or through its federal
courts” in the same manner it “treat[s] . . . final judgment[s] of the courts of [its] constituent
state[s].” ICSID Convention art. 54(1). That is precisely what Congress did when it enacted the
ICSID implementing statute. The statute—which controls this Court’s consideration of TECO’s
petition—requires federal district courts to enforce ICSID awards in the same manner that final
judgments of state courts are accorded full faith and credit by federal courts. 22 U.S.C.
§ 1650a(a). On the rare occasion when federal courts enforce state court judgments, moreover,
see Mobil Cerro Negro, 863 F.3d at 122 (“[a]ctions to enforce state court judgments in federal
court are rare”), they do not apply Rule 60 but, rather, apply 28 U.S.C. § 1738. The Court’s
analysis, therefore, is guided by § 1738, not Rule 60(b).
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In arguing that Rule 60(b) applies, Guatemala cites On Track Transp., Inc. v. Lakeside
Warehouse & Trucking Inc., 245 F.R.D. 213, 216 (E.D. Pa. 2007), for the proposition that “Rule
60 defenses are allowed in an action to domesticate a judgment from a state court.” Dkt. 40 at
33. That, however, is not what On Track Transp. Inc. held. Rather, that case dealt with a
decision by the federal district court for the Eastern District of Pennsylvania whether to enforce a
default judgment entered by the federal district court for the Central District of California but
registered in the Eastern District of Pennsylvania. See On Track Transp., Inc., 245 F.R.D. at
214. If Guatemala has any support for the novel proposition that Rule 60(b) provides an avenue
for federal courts to set aside state court judgments, Dkt. 40 at 33, it has failed to cite to that
authority.
Guatemala is on firmer ground—although only slightly firmer—in arguing that federal
courts should decline to enforce a state court judgment pursuant to 28 U.S.C. § 1738 if the
judgment was the product of fraud. Although the law addressing this question is sparse, both the
relevant statutes and the case law point in the same direction: a federal court should decline to
give full faith and credit to a state court judgment only if the state court would itself decline to
enforce the judgment on grounds of fraud. Indeed, the ICSID implementing legislation expressly
incorporates the standard applicable to state court judgments under 28 U.S.C. § 1738, see 22
U.S.C. § 1650a(a), which provides that state court judgments must be given the same full faith
and credit as they “have by law or usage in the courts of such State,” 28 U.S.C. § 1738. By
extension, therefore, if the state court—or, here, the ICSID—would treat the judgment—or, here,
the award—as binding, so must the federal district court. See In re Genesys Data Techs., Inc.,
204 F.3d 124 (4th Cir. 2000) (holding that under § 1738 a federal court must apply “the rules
chosen by the State from which the judgment is taken”).
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Harris Tr. & Sav. Bank v. Ellis, 810 F.2d 700 (7th Cir. 1987), is instructive of this
approach. In that case, the plaintiff sought to avoid the preclusive effect of a state court
judgment in federal court by arguing that “the defendants committed fraud on the court,” but the
court was not persuaded. Id. at 705. As the Seventh Circuit stressed, under § 1738 federal courts
must honor state court judgments to the same extent as any court of the relevant state. See id. at
703. But, under the law of the state at issue in that case, only the “rendering court” was
permitted to “set aside a judgment based on fraud.” Id. That state rule mirrored the federal rule
which requires an “aggrieved party” to “return to the rendering court”—and “not simply crank
up a new suit.” Id. at 706. Applying those principles here, the relevant question is whether the
ICSID Convention would permit the Court to decline to enforce the award at issue here. It
would not.
The ICSID is clear: an ICSID “award shall be binding on the parties and shall not be
subject to any appeal or to any other remedy except those provided for in [the ICSID
Convention].” ICSID Convention art. 53(1). Nothing in the ICSID Convention permits a
member-state’s courts to vacate an award. Rather, a party’s remedy lies with internal ICSID
mechanisms. The ICSID Convention provides, for example, a mechanism for raising arguments
based on newly discovered evidence. Thus, if Guatemala has, in fact, obtained new evidence
that was not previously available to it, and if that new evidence is “of such a nature as decisively
to affect the award,” its remedy lies in Article 51 of the Convention, which, if satisfied, would
permit resubmission of the dispute to the tribunal. ICSID Convention art. 51. It may not,
however, present new evidence to this Court in lieu of following the ICSID procedures.
Guatemala nonetheless insists that this Court should refuse to enforce the award because
TECO allegedly engaged in fraud. This argument is merely an effort to relitigate the
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arbitration’s underlying merits masquerading as an appeal to equity. The Court declines the
invitation to do so.
Guatemala’s attempt to revisit issues decided by the ICSID tribunal and ad hoc
committee is at odds with the purpose of the treaty and the clear terms of the implementing
legislation, both of which are designed to create a streamlined process for enforcing arbitral
awards. Moreover, as explained above, the implementing legislation forecloses reliance on the
FAA, which permits federal district courts to consider whether the award at issue was “procured
by corruption, fraud, or undue means.” 9 U.S.C. § 10. It is far from clear that Guatemala could
satisfy even the FAA standard here; it is clear, however, that its efforts to revisit matters already
litigated by the ICSID must be rejected. As explained in a statement offered by Senator
Fulbright when he introduced the ICSID implementing legislation:
The Federal Arbitration Act permits the courts to vacate an arbitration award on
grounds of corruption, fraud, partiality, misconduct, or other prejudicial conduct
of an arbitrator, or where the arbitrators exceed their power. Under Article 52
of the Convention such challenges to an award may be raised only through the
annulment proceedings provide for in the Convention. To permit those issues
to be examined by the courts at the enforcement stage would be contrary to the
provisions of the Convention.
112 Cong. Rec. 13,148, 13, 149 (June 15, 1966).
To be sure, numerous courts have stated, with little explanation, that under § 1738
federal courts may refuse to enforce state judgments “procured” by “extrinsic fraud.” See, e.g.,
Reliance Ins. Co. v. Calderon, 685 F. Supp. 72, 75 (S.D.N.Y. 1988). Sensing a possible opening,
Guatemala asserts that TECO committed “extrinsic fraud.” Its allegations, however, do not
support that contention. Although the concept of “extrinsic fraud” admits of some ambiguity, the
relevant concept is that the fraud must be of the kind that calls into question the integrity of the
adjudicative process itself. See Quick v. EduCap., Inc., 318 F. Supp. 3d 121, 135 (D.D.C. 2018)
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(explaining that “extrinsic” fraud occurs only where the party was prevented from presenting his
claim in the underlying proceeding). The allegations of fraud advanced by Guatemala are not of
this kind. Guatemala merely argues that TECO engaged in fraud because it urged the tribunal to
rely on a recommendation regarding a new tariff rate that was offered to Guatemalan rate-setting
authorities by a commission TECO asserted was independent—even though TECO indirectly
appointed a member of the commission, which it had previously retained as a consultant, and
then engaged in ex parte communications with that member in order to influence it and the other
two members of the commission in their work. Dkt. 40 at 33–35.
At best, Guatemala’s allegations raise reasons to doubt the merits of the decision
rendered by the ICSID tribunal and ad hoc committee. They fall far short of “extrinsic fraud,”
however. There is no evidence, for instance, that any member of the arbitration panel or ad hoc
committee was corrupt or that the integrity of the ICSID process was itself subject to question.
Rather, as TECO explains, see Dkt. 41 at 33–36, Guatemala’s allegations of “fraud” do not differ
in kind from the type of arguments that were made—or could have been made—before the
tribunal. To permit a party opposing enforcement of an ICSID award to challenge the
enforcement of the award on the ground that certain evidence or arguments should have been
disregarded would open the door to the type of re-litigation of the merits that the ICSID
Convention and the U.S. implementing legislation sought to close. See generally Hazel-Atlas
Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 245 (1944) (noting that courts have been
cautious to exercise their equitable power to set aside judgments absent circumstances “where
enforcement of the judgment is ‘manifestly unconscionable’”). The Court is neither inclined nor
permitted to do so.
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Finally, the Court is unpersuaded that discovery is warranted in the present
circumstances. Guatemala merely asserts that it should be permitted discovery to learn “the full
extent of the wrongdoing by [TECO] and others with respect to the [c]omission appointed to
make a recommendation with the tariffs.” Dkt. 40 at 38. Guatemala’s counsel attests that
discovery is needed to determine, for instance, “the extent to which . . . [TECO] . . . engaged in
fraud or other wrongdoing by conducting an ex parte campaign with the person with whom
[TECO] argues was to be responsible for setting the tariff.” Dkt. 40-3 at 4 (Baldwin Decl. ¶17).
To the extent that evidence would merely support Guatemala’s contention that a person
associated with TECO served on the tariff recommendation commission and as a witness in the
proceeding, that evidence would not change the Court’s conclusion. And, to the extent that
Guatemala seeks discovery regarding other alleged wrongdoing by TECO, that request is too
speculative to open the door to discovery in a proceeding that, by design, is as limited in scope as
an ICSID enforcement action.
C. Issue and Claim Preclusion
The Court also rejects Guatemala’s contention that the doctrines of issue and claim
preclusion deprived the ICSID tribunal and ad hoc committee of jurisdiction to enter the award
at issue. Guatemala is correct that, under 28 U.S.C. § 1738, a federal court should not give full
faith and credit to a state court judgment if that state court lacked subject-matter or personal
jurisdiction. See Am. Steel Bldg. Co. v. Davidson & Richardson Const. Co., 847 F.2d 1519,
1521 (11th Cir. 1988) (internal quotation omitted); Weininger v. Castro, 462 F. Supp. 2d 457,
471 (S.D.N.Y. 2006). The rule, moreover, presumably applies under 22 U.S.C. § 1650a, which
requires district courts to apply the full faith and credit standard to the enforcement of ICSID
awards. There are, however, two problems with Guatemala’s argument.
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First, Guatemala argues that the tribunal and ad hoc committee in this matter were
without jurisdiction because a tribunal in another matter—the Iberdrola dispute—concluded that
it lacked jurisdiction over a similar dispute, and that determination should have had preclusive
effect in this matter. See Dkt. 40 at 25–33. But, as the tribunal in this matter concluded, the
Iberdrola dispute involved a different treaty—the Guatemala-Spain bilateral investment treaty—
and the relevant standard under that treaty differed in material respects from the standard under
the DR-CAFTA, which governed in this case. Dkt. 1-2 at 57 (Tribunal Award ¶ 253). The ad
hoc committee, moreover, agreed that “the parties, the underlying treaties, the legal arguments,
and the evidence in the two cases were different.” Dkt. 1-3 at 76 (Annulment Decision ¶ 237).
Second, Guatemala’s view of issue and claim preclusion stands those doctrines—which
are designed to foster finality—on their heads. Although the parties did address the Iberdrola
award before the tribunal, Guatemala did not argue that the Iberdrola award had preclusive
effect. In the words of the tribunal: Guatemala “has in several occasions relied on the award
made on 17 August 2012 by the Iberdrola arbitral tribunal. [Guatemala] did not however submit
that the Iberdrola decision would have res judicata effects in the present case, or that it would be
binding or have the value of a precedent.” Dkt. 1-2 at 102 (Tribunal Award ¶ 485). The ad hoc
committee, moreover, considered Guatemala’s jurisdictional argument and considered the
Iberdrola award. It concluded that “there is no doctrine of stare decisis under international law”
and that, in any event, the parties, treaties, arguments, and evidence differed in the two matters.
Dkt. 1-3 at 76 (Annulment Decision ¶ 237). Having had the opportunity to argue to the tribunal
that it was bound by the decision in the Iberdrola dispute—yet failing to do so—and having been
unsuccessful in convincing the ad hoc committee that the tribunal erred in failing “to follow the
Iberdrola tribunal’s decision,” id., Guatemala may not “reopen th[ose] question[s] in a collateral
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attack upon an adverse judgment.” Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinee,
456 U.S. 694, 702, n.9 (1982); see also Jerez v. Republic of Cuba, 775 F.3d 419, 422 (D.C. Cir.
2014) (discussing the Insurance Corp. of Ireland rule).
Lastly, Guatemala (again) argues that it should be entitled to discovery—ostensibly to
ascertain the extent to which TECO acted in concert with Iberdrola in connection with
Iberdrola’s claims. See Dkt. 40 at 38. No such discovery is warranted. An action to enforce
ICSID award is no place to request, for the first time, discovery on the tribunal’s jurisdiction
where the party had an opportunity to do so below. See Mobil Cerro Negro, 863 F.3d at 117
(noting that district courts enforcing ICSID awards are precluded from inquiring into the merits
of the underlying controversy). Rather, Guatemala could—and should—have raised the
jurisdictional challenge, and any related discovery requests, to the ICSID ad hoc committee. It
did not. This enforcement proceeding is not an opportunity to relitigate the issue.
D. Finality
The only remaining defense that Guatemala raises is that TECO’s enforcement petition is
premature because the underlying arbitration is not yet final. Dkt. 40 at 18. The basis for this
claim, says Guatemala, is that “there is an ongoing” arbitration between the “same parties,”
involving the “exact same claims,” and even the same “case number.” Id. In response, TECO
observes that the underlying arbitration involved two distinct claims: (1) the “historical loss”
claim, and (2) the “loss of value” claim. TECO argues that the “historical loss” claim became
“final, binding, and ripe for enforcement” when the ad hoc committee rendered a decision on the
parties’ respective annulment requests. Dkt. 41 at 16. TECO, moreover, urges that Guatemala’s
“finality” defense is merely a reformulation of a different argument it advanced—and that this
Court rejected—at the motion to dismiss stage. At that stage, Guatemala argued that the ad hoc
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committee had annulled the entirety of TECO’s claim, and, therefore, TECO had no basis for
seeking enforcement of the award. The Court was unpersuaded and held:
Read together, the [t]ribunal and [c]ommittee dispositifs (1) award TECO
$21,100, 552 in “historic loss” damages, along with interest at the U.S. prime
interest rate plus two percent, from October 21, 2010 to the date of payment, and
(2) permit TECO to return to a new arbitral tribunal to pursue its additional
claims from for $222,484,783 in “loss of value” damages and to pursue its claim
for additional interest on its “historical loss” claim for the period from August
1, 2009 to October 21, 2010.
TECO I, 2018 WL 4705794, at *6. In short, the Court has already held that the proceeding
involves two distinct claims—one that is final and enforceable, and one that is subject to further
arbitral proceedings.
Guatemala nevertheless argues that, under the “complete arbitration rule,” TECO is not
entitled to seek enforcement of its “historical loss” award until proceedings regarding its “loss of
value” claim are also complete. Under the “complete arbitration rule,” a federal court should
refrain from reviewing or enforcing an arbitrator’s decision until “the arbitrator has decided all
facets of the dispute.” Peabody Holding Co. v. United Mine Workers of Am., Int’l Union, 815
F.3d 154, 160 (4th Cir. 2016) (citation omitted). The rule “ensures that courts will not become
incessantly dragooned into deciding narrow questions that form only a small part of a wider
dispute otherwise entrusted to arbitration,” id., and it instructs that, “ordinarily, an arbitration
award must be final and binding before a district court may vacate or enforce it,” Am. Postal
Workers Union v. U.S. Postal Serv., 422 F. Supp. 2d 240, 246 (D.D.C. 2006). According to
Guatemala, the award that TECO seeks to enforce “is not complete” because “issues,” such as
the “loss of value” claim, “are still being arbitrated.” Dkt. 40 at 20. This claim fails on both the
facts and law.
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As to the facts, Guatemala’s claim ignores the fact that the ad hoc committee treated the
dispute as involving two distinct claims—the claim for “historical loss,” post October 21, 2010
interest, and the specified administrative costs and lawyers’ fees, and the claim for “loss of
value” and interest from August 2009 until October 21, 2010. See TECO I, 2018 WL 4705794 at
*6; Dkt. 1-3 at 120 (Annulment Decision ¶ 382(8), (9)). Where, as here, an award has “only
been annulled in part, the new [t]ribunal” may “not reconsider any portion of the award not so
annulled,” and, the tribunal may—but need not—“stay the enforcement of the unannulled portion
of the award.” Rule 55, ICSID Rules of Procedure for Arbitration Proceedings. In other words,
under the ICSID rules, the unannulled portion of an award is immediately enforceable in the
absence of a stay, and that portion of the award is not subject to revision or further consideration
by the new tribunal.
On the law, a “[t]ribunal’s subjective beliefs about the finality of its award” is a “key
factor in determining whether [an] award was, in fact, final.” Berkowitz v. Republic of Costa
Rica, 288 F. Supp. 3d 166, 174 (D.D.C. 2018). Here, the ad hoc committee expressly treated the
unannulled portion of the award as immediately enforceable. Indeed, as explained above, the ad
hoc committee treated the two claims as discrete, and it entered a final disposition with respect to
the “historical loss” claim. And there is no ambiguity as to the finality the ad hoc committee
gave the award. To be sure, the ad hoc committee did not resolve TECO’s “loss of value” claim
and instead concluded that TECO could pursue that claim in a “new arbitral” proceeding. Even
so, the unannulled portion of the award is immediately enforceable. First, and foremost, that
conclusion is what the ICSID Convention, ICSID rules, and the relevant arbitral decisions
contemplate. The ICSID rules, moreover, provide that the unanulled portion of an award will be
immediately enforceable absent a stay. And, neither the new tribunal nor any other entity
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operating under the authority of ICSID stayed enforcement of the unanulled portion of the
award.
Despite already conceding that partially annulled awards are enforceable, and despite the
fact that the treaty expressly contemplates that the award at issue here became immediately
enforceable absent a stay to the contrary, Guatemala urges that it is still too early to enforce the
award. On Guatemala’s view, enforcement is unwarranted because there is some risk that the
new tribunal will issue orders or render a decision that is at odds with the unanulled portion of
the award or that counsels against the immediate enforcement of the award. That contention,
however, is difficult to reconcile with the ICSID rules, which preclude the new tribunal from
reconsidering any portion of the unanulled award, and, more importantly, if such a risk existed,
Guatemala is free to seek a stay from the new tribunal, which would be best situated to consider
such an argument. Absent a stay, however, the Court can only conclude that the ad hoc
committee’s disposition of TECO’s “historic loss” claim “finally and conclusively dispose[d] of
a separate and independent claim,” even though it did not resolve “all the claims that were
submitted to arbitration.” Metallgesellschaft A.G. v. M/V Capitan Constante, 790 F.2d 280, 283
(2d Cir. 1986).
Guatemala’s reliance on the kompetenz-kompetenz principle is equally unavailing. That
principle recognizes that arbitrators generally have the power to decide their own jurisdiction.
See China Minmentals Materials Imp. and Exp. Co., v Chi Mei Corp., 334 F.3d 274, 287 (3d Cir.
2003). Based on this notion, Guatemala suggests that the new tribunal might tread into territory
covered by the award that TECO seeks to enforce here. But that contention assumes, without
basis, that the new tribunal will ignore the ICSID rule precluding it from doing just that, see
ICSID Arbitration Rules, Rule 55(3), and it is based on unadorned speculation. And, even if the
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new tribunal were to do so, TECO would—no doubt—seek to annul any such action on the
ground that the tribunal’s decision constituted “a serious departure from a fundamental rule of
procedure.” ICSID Convention art. 51(1)(d).
E. Request for a Stay
Finally, the Court also rejects Guatemala’s request to “stay the current proceeding until
the Tribunal in the ongoing arbitration has issued its award and that award becomes final under
the ICSID Rules.” Dkt. 40 at 40. As just explained, the award currently before the Court has
become final and there is no reason to delay its enforcement. Guatemala again seeks to
analogize to Federal Rules of Civil Procedure—here Rule 62—which have no bearing on the
matter. Rather, under the ICSID, an award is made binding “except to the extent that
enforcement shall have been stayed pursuant to the relevant provisions of [the ICSID].” ICSID,
art. 53. If Guatemala believed that a stay was warranted pending a decision by the new tribunal,
it should have applied to that tribunal for a stay, as the ICSID rules contemplate. Absent such a
stay, Guatemala must “abide by and comply with the terms of the award.” Id. The Court has
considered and found unpersuasive Guatemala’s arguments for delaying this obligation further.
* * *
In sum, none of Guatemala’s defenses withstand scrutiny, the award is final, and, thus,
Guatemala is “obliged to abide by and comply with the award.” ICSID Convention art. 54. The
Court will, accordingly, enforce the award
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CONCLUSION
For the reasons explained above, the Court will GRANT Petitioner’s motion for
summary judgment, Dkt. 36, and will DENY Respondent’s cross-motion for summary judgment,
Dkt. 40, for leave to take discovery, and for stay of proceedings.
A separate order will issue.
/s/ Randolph D. Moss
RANDOLPH D. MOSS
United States District Judge
Date: October 1, 2019
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