The court affirmed that district courts must assess the existence of an arbitration agreement under the FSIA, while issues of scope were typically for the tribunal
In Hulley Enterprises Ltd. v. Russian Federation, the D.C. Circuit recently held that district courts must independently determine whether an arbitration agreement exists when applying the arbitration exception under the Foreign Sovereign Immunities Act (FSIA). 2025 WL 2216545 (D.C. Cir. Aug. 5, 2025). The district court had deferred to the arbitral tribunal's conclusion that an arbitration agreement existed between shareholders of OAO Yukos Oil Company ("Yukos") and the Russian Federation ("Russia") under the Energy Charter Treaty ("ECT"). But the D.C. Circuit disagreed, reaffirming the distinction between the existence or validity of an arbitration agreement, a jurisdictional fact that the court must independently consider, versus the scope of an arbitration agreement, which is a matter of arbitrability often conclusively resolved by an arbitral tribunal.
The Court also addressed whether a foreign court's conclusions concerning facts relevant to FSIA jurisdiction should receive issue preclusive effect. While proceedings to confirm the award in the U.S. were ongoing, the Dutch Supreme Court issued a ruling affirming that Russia had consented to arbitrate under the ECT. Citing Supreme Court authority on the deference due to foreign judgments in Hilton v. Guyot, 159 U.S. 113 (1895), the D.C. Circuit explained that the Dutch judgment may be issue-preclusive on the facts necessary to determine whether jurisdiction over Russia exists under the FSIA. Given that Russia had raised objections that the Dutch proceedings were not "full and fair," the Court declined to address that question in the first instance, remanding it to the district court for further consideration.
The FSIA
The FSIA is "the sole basis for obtaining jurisdiction over a foreign state in [U.S.] courts." Argentine Republic v. Amerada Hess Shipping Corp., 488 U. S. 428, 434 (1989). Under the FSIA, foreign states—including foreign agencies and other state instrumentalities—are presumptively immune from the jurisdiction of U.S. courts unless one of the FSIA's exceptions to immunity applies. 28 U.S.C. §§ 1603, 1604. One frequently invoked exception is for actions commenced to confirm or enforce arbitral awards, which provides that:
A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case ... in which the action is brought, either to enforce an [arbitration] agreement made by the foreign state with or for the benefit of a private party ... or to confirm an award made pursuant to such an agreement to arbitrate, if ... the agreement or award is or may be governed by a treaty or other international agreement in force for the United States calling for the recognition and enforcement of arbitral awards.
In order for the arbitration exception to apply, a district court must confirm three jurisdictional facts: "the existence of an arbitration agreement, an arbitration award[,] and a treaty governing the award." LLC SPC Stileks v. Republic of Moldova, 985 F.3d 871, 877 (D.C. Cir. 2021).
The Dispute and the District Court's Decision
In 2014, an arbitral tribunal issued three awards finding that Russia had violated the ECT and awarding the claimants $50 billion in damages.
The Hague Court of Appeal and the Dutch Supreme Court rejected Russia's challenge to the awards, affirming the tribunal's jurisdiction and its conclusions that provisional application of the ECT was consistent with Russian law and that the claimants were investors under the ECT.
While the Dutch proceedings were pending, the claimants brought suit in the United States District Court for the District of Columbia to confirm and enforce the final awards. Russia moved to dismiss that enforcement suit, arguing that the district court did not have jurisdiction under the FSIA's arbitration exception. Russia advanced the same arguments it made before the arbitration tribunal and Dutch courts—i.e., that the ECT did not constitute an "agreement" under the FSIA's arbitration exception because the ECT did not provisionally apply to Russia and the claimants did not qualify as investors.
Following the Dutch Supreme Court's decision, the district court denied Russia's motion to dismiss, concluding that it had subject matter jurisdiction. On the question of whether the ECT constituted an arbitration agreement under the FSIA, the district court reasoned that "[t]he terms of the ECT, to which the Russian Federation was a signatory, . . . establish[] the existence of an agreement to arbitrate for the purposes of jurisdiction under the FSIA." Hulley Enters. Ltd. v. Russian Federation, 2023 WL 8005099, at *13 (D.D.C. Nov. 17, 2023) (Hulley I). But, in any event, the district court concluded that it was bound by the "[t]ribunal's determination that an arbitration agreement existed" under the ECT. Huley Enters. Ltd. v. Russian Federation, 2023 WL 8005099, at *12 (D.D.C. Nov. 17, 2023). The district court likewise deferred to the arbitration tribunal's conclusion that Russia was required to apply the entire ECT provisionally. Id. at *21 ("[T]his Court may not revisit the Tribunal's determination as to the textual meaning of [ECT] Article 45(1) and the requirements of provisional application of the ECT.").
The D.C. Circuit's Opinion
On appeal, Russia contended that the district court erred in deferring to the arbitration tribunal's jurisdictional conclusions, and that the FSIA's arbitration exception didn't apply because there was no valid agreement to arbitrate under the ECT.
The D.C. Circuit explained that courts confronted with a challenge to an arbitration agreement must distinguish arguments concerning the agreement's existence or validity from arguments concerning its scope. Hulley Enters. Ltd. v. Russian Federation, 2025 WL 2216545, at *4 (D.C. Cir. Aug. 5, 2025) (Hulley II). The latter are arguments about arbitrability, and "when parties delegate questions of arbitrability to an arbitral tribunal, this court is bound by the tribunal's determinations". But "[w]hen a party challenges the existence or validity of an arbitration agreement, that question goes to the applicability of an exception to sovereign immunity and therefore is jurisdictional" and "[j]urisdictional questions must be independently analyzed by the court." Id. at *3.
Russia's first argument—that provisional application of the ECT was inconsistent with Russian law—"pertains to [the court's] jurisdiction under the FSIA's arbitration exception to sovereign immunity." Id. at *5. That is because "an arbitration agreement between Russian and the claimants would exist only if Russia had made a standing offer to arbitrate through provisional application of the Treaty." Id. That argument "therefore goes to the existence of an arbitration agreement and is jurisdictional." Id. The D.C. Circuit concluded that the district court should not have deferred to the tribunal on that question, and remanded it to the district court to determine afresh.
Russia's second argument, by contrast, concerned the agreement's scope—i.e., "[w]hether the [claimants] are investors within the meaning of the arbitration clause." Id. As such, that argument "pertains to arbitrability and so is not jurisdictional." Id.
The claimants also argued that issue preclusion barred Russia from relitigating the existence of an arbitration agreement because the Dutch courts had already ruled that Russia agreed to arbitrate the dispute. The D.C. Circuit agreed, but directed the district court to decide the issue in the first instance. As the Court explained, although the district court was required to review jurisdictional facts independently, "the decisions of the Dutch courts may control the factual questions that the district court must answer." Id. at *6. But "[g]iven the numerous threshold issues necessary to resolve before giving preclusive effect to foreign judgments," the Court remanded that question to the district court, providing "some guidance." Id.
First, the D.C. Circuit explained that the district court would need to consider whether issue preclusion applies to jurisdictional questions under the FSIA. "Issue preclusion applies to threshold jurisdictional issues," and sovereign immunity is a jurisdictional issue—indeed, other courts have given preclusive effect to jurisdictional determinations by domestic courts when analyzing subject matter jurisdiction under the FSIA. Id. at *6 n.7 (collecting cases).
Second, assuming the district court determines that issue preclusion applies to jurisdictional questions under the FSIA, the D.C. Circuit explained that it would then need to assess whether preclusion extends to foreign judgments. The Court noted the long-standing practice of U.S. courts was to "accord[] respect to, and often enforce[], judgments of foreign courts." Id. at *7. It identified the controlling Supreme Court authority—Hilton v. Guyot, 159 U.S. 113 (1895)—which set forth the principles for determining whether a court should recognize a foreign judgment as a matter of international comity.
Given that the issue-preclusive effect of a foreign judgment concerning foreign sovereign immunity "may implicate foreign relations and international law," Hulley II, 2025 WL at *7, the Court instructed the district court to invite the United States to express its position on the issue on remand.
Comment
The Court's decision reaffirms a well-established distinction between challenges to the existence or validity of an arbitration agreement as the basis for FSIA jurisdiction, on the one hand, and challenges to an arbitration agreement's scope, on the other. Because challenges to the existence or validity of an arbitration agreement implicate the court's subject matter jurisdiction, they must be independently assessed by the court. But challenges to the "scope" of an arbitration agreement (e.g., whether, assuming an agreement to arbitrate exists, a claimant is a covered "investor" under the ECT or has protected "investments" under the ECT) concern arbitrability and, as such, will often be determined by the arbitral tribunal without a second look by the district court.
The Court's guidance on whether foreign judgments have preclusive effect draws upon long-standing Supreme Court precedents regarding international comity. As the D.C. Circuit pointed out, this will require the district court to apply the principles set out by the Supreme Court in Hilton v. Guyot, 159 U.S. 113 (1895), for deciding whether to recognize a foreign judgment as a matter of international comity. As the Second Circuit has put it, federal courts applying Hilton "generally extend comity whenever the foreign court had proper jurisdiction and enforcement [of the foreign judgment] does not prejudice the rights of United States citizens or violate domestic public policy." Victrix S.S. Co., S.A. v. Salen Dry Cargo A.B., 825 F.2d 709, 713 (2d Cir. 1987).
Courts outside the US have given preclusive effect to the Dutch court's judgments in this dispute on matters of immunity. In May 2025, the English Court of Appeal held that the Dutch judgment gave rise to an issue estoppel on the question of whether Russia had agreed to arbitrate, for the purposes of the U.K.'s State Immunity Act 1978 (see our blog post here). It will be interesting to see whether the district court follows suit.
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