Overview
First Tuesday Update is our monthly take on current issues in commercial disputes, international arbitration, and judgment enforcement.
We have written before in these pages about the Micula brothers, Swedish food industry investors, who have been trying since 2013 to enforce a $250 million ICSID award against Romania. Recently, the DC District Court held Romania in contempt and ordered monetary sanctions for its failures to respond to discovery. Romania resisted discovery because it believes it has satisfied the judgment by making payments in its domestic currency RON in Romanian enforcement proceedings. But those payments fall short of the outstanding judgment in US dollars. The DC District Court has rejected Romania’s position three times including again in this most recent order.
The Miculas originally had their ICSID award recognized in the SDNY through an ex parte process in April 2015 but that judgment was vacated following the Second Circuit's decision in Mobil Cerro Negro, Ltd. v. Venezuela, 863 F.3d 96 (2d Cir. 2017). Thereafter, the Miculas re-filed their recognition papers in the DC District Court in November 2017. On September 20, 2019, the DC District Court entered final judgment in the amount of $356 million (including post-award interest from December 2013 through September 2019). In May 2020, the DC Circuit affirmed the judgment.
With no bond posted pending appeal or any other applicable stay of the judgment, the Miculas sought post-judgment discovery of Romania’s assets. Romania refused to respond, which led to an order by the DC District Court compelling responses. "But Romania’s obstinance continued." Micula v. Romania, No. 17-CV-02332 (APM), 2020 WL 6822695, at *2 (D.D.C. Nov. 20, 2020).
The Miculas filed a motion for civil contempt against Romania based on its failure to respond to the discovery and sought to recover their costs as sanctions. Shortly after the motion was filed, Romania filed a motion for relief from the judgment under Rule 60(b) of the Federal Rules of Civil Procedure. Romania's chief ground for relief was an argument it has raised three times before—that Romania satisfied the judgment based on payments it made in Romanian currency as part of the Romanian enforcement proceedings. Judge Mehta, now well-versed in this dispute, ruled on both motions just 11 days ago, finding Romania in contempt and denying the Rule 60 motion.
The court first analyzed whether the Foreign Sovereign Immunities Act (FSIA) precludes monetary contempt sanctions against a sovereign. Citing FG Hemisphere Associates, LLC v. Democratic Republic of Congo, 637 F.3d 373, 380 (D.C. Cir. 2011), the court held that "the FSIA does not abrogate a court's inherent power to impose contempt sanctions on a foreign sovereign." Micula v. Romania, 2020 WL 6822695, at *5. Given Romania's intransience, the court ordered that if Romania fails to answer post-judgment interrogatories within 14 days, it will be fined $25,000 per week, which shall double every four weeks reaching a maximum of $100,000 per week until Romania complies.
Based on Romania's past conduct, we anticipate an appeal. Since the district court's decision is based on the DC Circuit's decision in FG Hemisphere, a reversal is unlikely. As for the US Supreme Court, there is a circuit split on this issue with the DC and the Seventh Circuits, Autotech Techs. v. Integral Research & Dev., 499 F.3d 737, 744 (7th Cir. 2007), finding that the FSIA does not limit a court's inherent power to hold litigants before it in contempt, but the Fifth Circuit reached a contrary view in Af-Cap, Inc. v. Republic of Congo, 462 F.3d 417, 428 (5th Cir. 2006).
As for Romania's Rule 60 motion, the district court once again rejected the argument that Romania has satisfied the judgment. But the value of Romania's payments—made in the Romanian currency of RON—fell short of the amount due payable in US dollars ($356 million). Although the parties dispute the exact value of the payments made so far, according to the court, there remains millions of the judgment unsatisfied with Romania claiming it paid $286 million and the Miculas asserting that the payments amount to $274 million.
As the court explained: "[o]nce the district court entered judgment [in a US currency], . . . everything changed" and the judgment creditor owes the amount in US dollars and not RON. See Micula, 2020 WL 6822695, at *3. The district court relied on the holding by the Second Circuit in Competex, S.A. v. Labow, "once an enforcing judgment is entered, a new obligation in dollars is created, and . . . the opportunity to prevent its entry by paying in [a foreign currency] does not imply the right to satisfy it by paying [in that foreign currency]." 783 F.2d 333, 340 (2d Cir. 1986). Id. "To the extent that Romania is using its Rule 60(b)(5) motion to challenge the court's conversion of the ICSID Award to US dollars, that ship has long sailed. . . ." Romania did not contest petitioners' request to convert the award to US dollars as of the date of the award, which is the norm in proceedings under § 1650a, and so the court converted the judgment into dollars. Id., at *4–5.
The Miculas have moved closer to a recovery since Romania has paid some on the judgment but until the payments equal the judgment in US dollars, Romania will be subject to further enforcement proceedings and all that it entails, including contempt and monetary sanctions. To be continued, we are sure.
