9ren Holding S.A.R.L. v. Kingdom of Spain

• Court: District Court, District of Columbia
• Decided: September 30, 2020
• Docket: Civil Action No. 2019-1871
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

) 9REN HOLDING S.A.R.L., ) ) Plaintiff, ) ) v. ) Civil Action No. 19-cv-01871 (TSC) ) KINGDOM OF SPAIN, ) ) Defendant. ) )

MEMORANDUM OPINION

Plaintiff 9REN Holding S.A.R.L. seeks to enforce a € 41 million arbitral award issued by

the International Centre for Settlement of Investment Disputes (ICSID) against Defendant, the

Kingdom of Spain. Spain moves to dismiss or stay the proceedings until the ICSID Tribunal

decides on its petition to annul. (ECF No. 11.) 9REN moves for judgment on the pleadings.

(ECF No. 14.) This court agrees with other courts in this district that “it is wiser to . . . stay these

proceedings pending the opinion of the ICSID regarding Spain’s petition to annul.” See Masdar

Solar & Wind Cooperatief U.A. v. Kingdom of Spain, 397 F. Supp. 3d 34, 36 (D.D.C. 2019).

For the reasons stated below, the court finds that a temporary stay is warranted, and

therefore the court will GRANT Spain’s motion to stay. The court will further deny, without

prejudice, Spain’s motion to dismiss and 9REN’s motion for judgment on the pleadings.

I. BACKGROUND

9REN, incorporated in Luxembourg, owns, constructs, and operates solar photovoltaic

plants. (ECF No. 1, Compl. ¶ 7.) In 2008, it constructed, commissioned, and registered seven

solar photovoltaic energy plants, worth approximately € 211 million, to capitalize on Spain’s

guaranteed tariffs for renewable energy producers. (Compl. ¶¶ 9–11.) Spain later changed its regulations, rolling back the expected benefits from investing in and constructing the solar

energy plants. (Id. ¶ 11.) These regulatory changes allegedly caused 9REN significant harm,

and the company sought to arbitrate the dispute with Spain under the Energy Charter Treaty

(ECT). (Id. ¶ 12.)

The ECT is a multilateral treaty signed by fifty-four nations and organizations, including

Spain and Luxembourg, and is intended to promote international cooperation in the energy

sector. (ECF No. 1-3, ECT.) Article 26 of the ECT provides that “[d]isputes between a

Contracting Party and an Investor of another Contracting Party relating to an Investment of the

latter in the Area of the former” may be submitted to arbitration. (Id. at 43–46.)

In 2015, 9REN initiated arbitral proceedings against Spain before a three-member

ICSID 1 tribunal, claiming that the changes Spain made to its regulations violated Article 10(1) of

the ECT, which obligates contracting states to provide investors with “fair and equitable

treatment.” (Compl. ¶ 29.) The ICSID tribunal found Spain liable for breaching Article 10(1)

and ordered it to pay over € 41 million in damages. (Id. ¶¶ 29–30.)

While ICSID awards cannot be appealed, a party may submit an application before an

ICSID committee to annul the award on limited grounds. After this case was filed, Spain applied

to annul the award, triggering an automatic, provisional stay of enforcement of the award. (ECF

No. 18-1 at 1.) The ICSID annulment committee has provisionally stayed enforcement of the

award. (Id. at 2.)

1 The ICSID Convention is a multilateral treaty created to facilitate foreign investments and to which the United States, Spain and Luxembourg are parties. The treaty provides a mechanism for the resolution of investment disputes in front of an independent arbitral tribunal. (ECF No. 1- 2, ICSID Convention.) 2 II. DISCUSSION

A. Jurisdiction

Spain moves to dismiss on several grounds, including that this court lacks subject-matter

jurisdiction under the Foreign Sovereign Immunities Act because there is no arbitration

agreement. (ECF No. 11-1, Def. Br. at 19–26.) Neither side challenges the court’s power to

enter a stay. Nonetheless, courts “have an independent obligation to determine whether subject-

matter jurisdiction exists, even in the absence of a challenge from any party.” Arbaugh v. Y&H

Corp., 546 U.S. 500, 514 (2006). Despite this obligation, a court may decide “certain non-

merits, nonjurisdictional issues . . . because ‘[j]urisdiction is vital only if the court proposes to

issue a judgment on the merits.’” Pub. Citizen v. U.S. Dist. Court for D.C., 486 F.3d 1342, 1348

(D.C. Cir. 2007) (quoting Sinochem Int’l Co. v. Malay. Int’l Shipping Corp., 549 U.S. 422, 431

(2007) (internal quotation marks and citation omitted)). When faced with such a non-merits,

nonjurisdictional threshold issue, and “when considerations of convenience, fairness, and judicial

economy so warrant,” a district court can “bypass[] questions of subject-matter and personal

jurisdiction.” Sinochem Int’l Co., 549 U.S. at 432.

Courts in this district have held that stays are a threshold, non-merits issue which a court

may consider before resolving jurisdictional issues. See Gretton Ltd. v. Republic of Uzbekistan,

No. 18-cv-1755, 2019 WL 464793, at *2–3 (D.D.C. Feb. 6, 2019) (staying petition to enforce an

arbitral award before determining subject-matter jurisdiction); Hulley Enters. Ltd. v. Russian

Federation, 211 F. Supp. 3d 269, 277–80 (D.D.C. 2016) (same) (“A stay of proceedings in this

case is exactly the type of nonmerits action the Sinochem decision contemplates.”); Seneca

Nation of Indians v. U.S. Dep’t of Health & Human Servs., 144 F. Supp. 3d 115, 118–19 (D.D.C.

2015) (staying an action before agency decision and before determining subject-matter

3 jurisdiction). Accordingly, the court will resolve the threshold stay issue before the thornier

jurisdictional issues, which involve sovereign immunity and international treaties.

B. Stay

“[T]he power to stay proceedings is incidental to the power inherent in every court to

control the disposition of the causes on its docket with economy of time and effort for itself, for

counsel, and for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). District courts

“have broad discretion” in deciding whether to stay proceedings “pending the resolution of

independent legal proceedings.” Marsh v. Johnson, 263 F. Supp. 2d 49, 52 (D.D.C.2003) (citing

Landis, 299 U.S. at 254). In considering a stay, courts must “‘weigh competing interests and

maintain an even balance’ between the court’s interests in judicial economy and any possible

hardship to the parties.” Belize Soc. Dev. Ltd. v. Government of Belize, 668 F.3d 724, 732–33

(D.C. Cir. 2012) (quoting Landis, 299 U.S. at 254–55). The party seeking the stay bears the

burden, and “must make out a clear case of hardship or inequity in being required to go forward,

if there is even a fair possibility that the stay for which he prays will work damage to some one

else.” Philipp v. Federal Republic of Germany, 253 F. Supp. 3d 84, 88 (D.D.C. 2017) (quoting

Landis, 299 U.S. at 255) (internal quotation marks omitted). And, as here, when a party seeks an

indefinite stay, the stay “must be supported by ‘a balanced finding that such need overrides the

injury to the party being stayed.’” Belize Soc. Dev., 668 F.3d at 732. A court may not “order[] a

stay ‘of indefinite duration in the absence of a pressing need.’” Id. (quoting Landis, 299 U.S. at

255).

Here, the court’s interest in judicial economy favors a stay. “Litigating essentially the

same issues in two separate forums is not in the interest of judicial economy or in the parties’

best interests.” Naegele v. Albers, 355 F. Supp. 2d 129, 141 (D.D.C. 2005) (quoting Nat’l

4 Shopmen Pension Fund v. Folger Adam Sec., 274 B.R. 1, 3 (D.D.C. 2002)). Because Spain

continues to raise the same jurisdictional arguments in this court that were before the arbitral

tribunal, the outcome of the annulment proceedings “may affect this Court’s determinations, at a

minimum, by virtue of the[ir] persuasive value.” Hulley Enters. Ltd., 211 F. Supp. 3d at 284; cf.

Clientron Corp. v. Devon IT, Inc., No. 13-cv-05634, 2014 WL 940406, at *5 (E.D. Pa. Mar. 10,

2014) (explaining a stay was not warranted where the result of the foreign proceedings would

have no effect on the confirmation proceedings). A hasty resolution resulting in inconsistent

rulings is not in the interest of judicial economy.

Spain’s motion to dismiss raises intricate questions regarding the validity of arbitration

agreements with EU member states under EU law. (Def. Br. at 19–26.) This court is “loath to

wade into this territory unnecessarily,” and agrees that the more prudent course is to refrain from

delving into determinations on EU law at this stage. Masdar, 397 F. Supp. 3d at 40 (noting in a

case against Spain raising similar issues that “considerations of comity are particularly resonant

here, given that resolving this case mandates addressing a conflict between decades-old treaties

and newly minted EU case law”).

9REN contends that under the ICSID, this court does not have discretion to stay the

proceedings. (ECF No. 13, Pl. Br. at 41.) However, the court’s authority to issue the stay arises

under its inherent power, as this court has not yet even determined whether it has jurisdiction to

hear the case. Moreover, courts in this district have issued stays in cases arising under the

ICSID, even when the ICSID lifted its stay on enforcing an award before issuing a decision in

annulment proceedings. See Minute Order, Infrastructure Servs. Lux. S.A.R.L. and Energia

Termosolar B.V. v. Kingdom of Spain, No. 1:18-cv-01753 (D.D.C. July 15, 2020) (order

continuing stay on proceedings despite ICSID lifting its provisional stay); Unión Fenosa Gas,

5 S.A. v. Arab Republic of Egypt, No. 18-cv-2395, 2020 WL 2996085, at *3–4 (D.D.C. June 4,

2020) (staying proceedings pending annulment proceedings before the ICSID, despite the

annulment committee terminating its stay). In addition, the annulment committee has now

provisionally stayed enforcement of the award. (ECF No. 18-1.)

Finally, balancing the hardships to each party also favors a stay. Litigating the validity of

arbitral awards in two forums would burden Spain. Moreover, the risk of premature enforcement

could result in Spain trying to recover assets seized during this action if it were to prevail in the

annulment proceedings. See In re Arbitration of Certain Controversies Between Getma Int’l &

Republic of Guinea, 142 F. Supp. 3d 110, 118 (D.D.C. 2015). 9REN did not cite any hardship it

might face, (see generally Pl. Br.), and the court notes that if 9REN ultimately prevails it will

likely be compensated for any delay because the award includes interest. (Compl. ¶ 30.) Thus,

the hardship to Spain, which could be significant, outweighs any potential hardship to 9REN.

In sum, Spain has met its burden to show a “pressing need” for a stay pending the

outcome of the annulment proceedings. However, in an effort to ensure that the proceedings

before this court are not unduly delayed, by separate order, the court will provide for prompt and

regular review of the ongoing proceedings before the ICSID and, if 9REN prevails in those

proceedings, will promptly address the merits in this case.

III. CONCLUSION

For the reasons stated, the court will GRANT Defendant’s motion to stay and

proceedings are stayed until resolution of the current annulment proceedings before the ICSID.

The court will further deny, without prejudice, Spain’s motion to dismiss and 9REN’s motion for

judgment on the pleadings. A corresponding Order will issue separately.

6 Date: September 30, 2020

Tanya S. Chutkan TANYA S. CHUTKAN United States District Judge