United States: U.S. Federal Court Allows Seizure Of Libyan Assets To Satisfy ICC Award In Investor-State Dispute

As a general rule, U.S. federal law prevents people with judgments against foreign countries to satisfy those judgments against the countries' assets in the United States. Absent special legislation, the Foreign Sovereign Immunities Act (the "FSIA") creates a difficult hurdle for judgment creditors. A recent case in New York federal court may provide an additional avenue for relief.

On Sept. 18, 2023, Judge Koeltl of the U.S. District Court for the Southern District of New York (the "SDNY") held that a foreign investor could seek attachment or execution in the U.S. of assets belonging to the State of Libya (the "State of Libya" or "Libya").¹ The court ruled that under the FSIA the petitioner could attach or execute Libyan assets to collect on a $28 million judgment against the North African country, as long as a "reasonable amount of time" had lapsed from the date of the judgment ordering payment, and despite ongoing parallel proceedings in the French courts.

In 2018, petitioner Olin Holdings Limited ("Olin Holdings"), a Cypriot investor in the dairy and juice industry, obtained an award from an arbitral tribunal constituted under the International Chamber of Commerce ("ICC") Rules of Arbitration, after the Libyan government seized the land on which Olin Holdings had developed its operations. The four-year ICC proceedings resulted in an award of $19.3 million plus costs against Libya for a breach of the country's bilateral investment treaty with Cyprus.

The court confirmed the award in March 2022, ordering the State of Libya to pay the Cypriot petitioner a sum of $27,760,340 plus interest.² The U.S. Court of Appeals for the Second Circuit affirmed this judgment in July 2023.

Fifteen months after the initial judgment confirming the award, the petitioner filed a motion in the SDNY to permit the attachment or execution of Libya's property pursuant to 28. U.S.C. §1610(c), an exception to the protection of foreign states' assets afforded by the FSIA. This provision of the FSIA requires "that a reasonable period of time has elapsed following the entry of judgment" before allowing the court to order attachment or execution of a foreign state's property in the U.S.

The court was tasked with determining whether a reasonable period of time had passed since the judgment confirming the award to permit Olin Holdings to attach or execute assets belonging to the State of Libya, in satisfaction of the 2018 arbitral award.

Reasonable period of time under the FSIA

While the FSIA does not define a "reasonable period of time," the SDNY observed that courts usually take into consideration several factors when evaluating this standard, including the procedures necessary for foreign states to render such a payment, steps being taken by the state to satisfy the judgment, and/or evidence that the foreign state is planning to remove said assets from the jurisdiction to circumvent payment.

The court held that a reasonable period of time had indeed passed since the issuance of the judgment confirming the award. The court reasoned that fifteen months is a longer period than what other courts have considered to be reasonable for purposes of this section of the FSIA, and that the judgment had already been affirmed on appeal in July 2023. The court pointed out that there were no additional factors that would have made it unreasonable for the state to comply with the judgment.

Concurrent Proceedings in France

The State of Libya argued that concurrent proceedings challenging the award in France were ongoing, and that the court should stay enforcement of the judgment until the foreign proceedings are concluded.

The court ruled that foreign proceedings had no bearing on whether a reasonable period of time had passed under §1610(c) of the FSIA, even if those proceedings could result in the judgment eventually being vacated. This was established in a 2015 decision of the U.S. District Court for the District of Columbia against the Republic of Sudan. Owens v. Republic of Sudan, 141 F. Supp. 3d 1, 3 (2015).

The court reasoned that the outcome of the French proceedings was entirely speculative, and that an eventual ruling vacating the award would have to be subject to a future motion for relief from the judgment under Rule 60(b) of the U.S. Federal Rules of Civil Procedure.

In essence, a vacated award in a different jurisdiction does not automatically render the original U.S. judgment invalid. However, the court specified the limits of an order under §1610(c), again citing Owens v. Republic of Sudan, concluding that an order under this section does "not authorize the attachment or execution upon any particular property: plaintiffs must still convince a court with jurisdiction over specific assets that those assets are subject to attachment or execution under § 1610."³

In France, the Tribunal judiciaire de Paris (Paris Court of Justice) ruled months earlier against the State of Libya, authorizing Olin Holdings to attach assets, specific claims and/or shareholder rights held in France by Libya's National Oil Corporation towards satisfaction of the arbitral award.⁴ As of now there are no subsequent judgments of French courts vacating or annulling the award.

Conclusion

Whether or not foreign proceedings result in vacating an arbitral award in a foreign jurisdiction, Olin Holdings Ltd. v. State of Libya, makes it clear that the SDNY, and likely other federal courts in the United States, will still permit the seizure or execution of a foreign state's assets as long as a reasonable period of time has passed since the judgment confirming the relevant arbitral award.

This decision gives teeth to the FSIA's §1610(c) exception to its own protections of foreign states and their assets. Both investors and state entities involved in commercial or investment-treaty disputes subject to arbitration should consider the SDNY's decision when assessing where and when to litigate the confirmation of an eventual arbitral award.

States may want to think twice about where they keep their assets when they are subject to a potential adverse arbitral award. Likewise, investors seeking to enforce awards in their favor may focus on pursuing confirmation of the award and eventual seizure of assets through New York and other U.S. courts, assuming the foreign state subject to the award has assets in that jurisdiction.

Footnotes

1. Olin Holdings Ltd. v. State of Libya, 2023 U.S. Dist. LEXIS 165334 *1

2. The investor filed for confirmation of the ICC award before the Supreme Court of the State of New York in December 2020, and the respondent Libya removed the petition to the U.S. District Court for the Southern District of New York ("SDNY" or "SDNY Court") in May of 2021.

3. 141 F. Supp. 3d at 11.

4. Ordonnance du Tribunal judiciaire de Paris 22/1576. The claimant in the French proceedings successfully established that the National Oil Corporation lacked functional independence from the State of Libya, and that both entities' assets were intermingled, as was also determined earlier that year by the juge de l'exécution de Paris (Paris Enforcement Judge).

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