Tethyan Copper Co. Pty Ltd. v. Islamic Republic of Pakistan, No. 1:19-cv-02424 (D.D.C. Mar. 10, 2022)
In 2006, Tethyan Copper Co. Pty Ltd. (“Tethyan”), an Australian company, entered into a joint venture with a Pakistani province, Balochistan, which provided that Tethyan could “explore potential copper and gold mining” in the province. In 2011, Tethyan applied to Balochistan for a lease to mine the Reko Diq deposit, one of the world’s largest copper-gold deposits, located in the northwest of the province.
Despite the joint venture agreement, Balochistan denied the application. As a result, Tethyan submitted the dispute to the International Centre for Settlement of Investment Disputes (“ICSID”) under the Australia-Pakistan 1998 bilateral investment treaty. In 2019, following years of arbitration, an ICSID tribunal issued a $6 billion award to Tethyan against Pakistan, holding that Tethyan had a legitimate expectation that Balochistan would approve the mining application and that Tethyan had relied on that expectation. Tethyan then petitioned the U.S. district court to recognize and enforce the award.
Pakistan immediately sought two remedies before ICSID, either an annulment or a revision of the award. Those proceedings triggered a series of provisional stays of enforcement by ICSID, and the district court stayed its own recognition and enforcement proceedings in response. However, when the ICSID stays expired, Pakistan asked the district court to continue to stay enforcement of the award until the ICSID proceedings concluded or to dismiss Tethyan’s recognition and enforcement petition entirely. The district court ruled against Pakistan on both issues.
First, the court ruled against a stay of the proceedings based on a balancing of the competing interests. Judicial economy, the court reasoned, could not benefit from a stay, as the parties had already briefed all of the issues, and ICSID was unlikely to modify the award. Denying a stay also would not irreparably harm Pakistan. Pakistan could make its arguments about the impact of a judgment on its economic stability and its ability to fight COVID-19 at the attachment and execution phase. Conversely, granting a stay would prejudice Tethyan. Tethyan had already waited over a decade for compensation, and Pakistan had provided no guarantee that it would not use the stay to deplete its U.S. assets. Pakistan, therefore, was not entitled to a stay of the proceedings.
Second, the court refused to dismiss Tethyan’s petition to recognize and enforce the award, rejecting Pakistan’s arguments that: (1) the court lacked jurisdiction to enforce the arbitral award, and (2) the ICSID award was not entitled to full faith and credit.
With respect to jurisdiction, Pakistan argued that the doctrine of sovereign immunity, as codified in the Foreign Sovereign Immunities Act (the “FISA”), protected it from the jurisdiction of the United States courts. But the court disagreed, ruling that Pakistan was not immune from suit because the arbitration exception to the FSIA applied. In so holding, the court rejected Pakistan’s argument that it had not agreed to arbitrate the dispute, finding that Tethyan had made a prima facie showing of arbitrability by presenting the arbitral award, the bilateral investment treaty between Australia and Pakistan, and Tethyan’s notice of arbitration. And, because the ICSID Convention grants a tribunal the authority to be “the judge of its own competence,” the court refused to disturb the ICSID tribunal’s finding that the matter was arbitrable.
With respect to Pakistan’s full faith and credit argument, the court noted that the ICSID implementing statute requires courts to give arbitral awards “the same full faith and credit as if the award were a final judgment of [a state court].” Pakistan first argued that the ICSID tribunal lacked jurisdiction over it, precluding full faith and credit. The court found that Pakistan had already made, and lost, this argument before the ICSID tribunal, and accordingly rejected it. Pakistan also argued that the size of the award made it an award of “punitive damages” not entitled to full faith and credit. The court disagreed, holding that the ICSID tribunal had instead fashioned an award of compensatory damages to redress the concrete loss Tethyan had suffered.
In sum, the court found that the ICSID award was entitled to full faith and credit as required by 22 U.S.C. § 1650a(a) and that Pakistan was obliged to abide by and comply with it as stated in Article 53(1) of the ICSID Convention.
This article was originally published in the North America Newsletter.