Summary

INTRODUCTION

In response to this Court's invitation in Kingdom of Spain v. Blasket Renewable Invs. LLC (No. 24-1130) ("Blasket"), the U.S. government submitted an amicus brief that does not address Russia's petition directly but agrees in substance with Russia's argument that the existence of a valid arbitration agreement between the actual parties to the dispute is an issue that must be resolved as a matter of jurisdictional immunity under the arbitration exception of the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. 1605(a)(6), and that therefore the D.C. Circuit's contrary decision in NextEra Energy Glob. Holdings B.V. v. Kingdom of Spain, 112 F.4th 1088 (D.C. Cir. 2024)--which controlled the decision below in this case--is wrong. U.S. Br. 2-3. Although the government did not recommend granting the petition in Blasket, it anticipated that other cases "arising out of the D.C. Circuit itself" could provide an opportunity to review that erroneous decision, "including under other investment treaties." Russia's petition presents such an opportunity under the government's own criteria.

The government did not view Blasket as an appropriate vehicle for certiorari mainly because of the concern that Spain might not prevail on remand even if NextEra were reversed. Spain has argued that European Union (EU) law invalidated Spain's "unconditional consent" (or offer) to arbitrate with investors from other EU Member States under the multilateral Energy Charter Treaty, Dec. 17, 1994, 2080 U.N.T.S. 95. In the government's view, EU law is part of Spain's "internal law" and therefore cannot be invoked "to avoid a treaty obligation" as a matter of international law.

The government's concern--valid or not--does not apply to Russia's petition. Russia is not relying on its internal law, but rather on ordinary contract and treaty interpretation principles, to argue that it never consented (or offered) to arbitrate with respondents under the plain language of the Agreement Between the Government of the Russian Federation and the Cabinet of Ministers of Ukraine on the Encouragement and Mutual Protection of Investments, dated November 27, 1998 ("Bilateral Investment Treaty"), which by its very nature is intended to protect only foreign investments. Unlike respondents in Blasket, who undisputedly made foreign investments in Spain, respondents here are Ukrainian investors who made domestic investments in Ukraine. Therefore, Russia's offer to arbitrate could not extend to respondents, and respondents lacked the legal power to accept it.

Regardless, at this juncture, the critical question is not who is likely to prevail on the underlying question of whether an arbitration agreement exists between the parties to the dispute, but when that determination must be made. As the government explained, the text and purpose of Section 1605(a)(6) requires the court's independent determination that a valid arbitration agreement was formed "`with or for the benefit of' the FSIA plaintiff," rather than "some unrelated third party." Requiring a court to make that determination at the outset is important because "Congress could not have wanted courts to exercise less oversight in cases where the immunity of a foreign sovereign is at stake." (emphasis added). The D.C. Circuit's error in NextEra and below is thus consequential--regardless of whether a foreign state could ultimately prevail on its contract formation argument. Punting this issue to the merits stage rather than resolving it at the jurisdictional stage eviscerates the FSIA's grant of sovereign immunity by forcing foreign states to litigate what is statutorily a jurisdictional immunity defense together with all its merits defenses. It would also deny a foreign state the right to take an immediate, interlocutory appeal of that threshold jurisdictional immunity determination with the concomitant divestiture of a district court's jurisdiction to proceed with the merits, including execution of a potential judgment against state assets, pending that appeal.

That result would subject foreign states to the very burdens and indignities of litigation the FSIA is designed to avoid, and would undermine the United States' reciprocal interest in ensuring that its own sovereign immunity is respected in foreign courts.

The government acknowledges that the D.C. Circuit's erroneous view diverges enough from other circuits that further percolation across circuits is unlikely. That is because actions to enforce foreign arbitral awards against foreign states must ordinarily be brought in the D.C. Circuit, and furthermore NextEra now favors plaintiffs. U.S. Br. 16; see also 28 U.S.C. 1391(f)(4). While the government suggests that further percolation within the D.C. Circuit may be possible, for instance in cases involving "other investment treaties," that too is now highly unlikely in light of the D.C. Circuit's decision here. Indeed, Russia argued to the D.C. Circuit that respondents' cases are distinguishable from NextEra for various reasons, not the least of which is that they arise under a different investment treaty that does not implicate the overlay of EU law. The court below rejected those arguments and doubled down on NextEra, leaving no doubt that the D.C. Circuit's error is entrenched.

Absent intervention by this Court now, the D.C. Circuit's erroneous decision in NextEra and this case will continue to deprive foreign states of the sovereign immunity afforded to them by Congress under the FSIA. In light of the government's brief, the Court should grant Russia's petition.