Esso Exploration and Production Nigeria Limited et al v. Nigerian National Petroleum Corporation
Filing
250
OPINION & ORDER re: 193 MOTION to Dismiss the Third Amended and Supplemental Petition filed by Nigerian National Petroleum Corporation, 205 MOTION for Sanctions (ECF 195-1 refiled per Court order dated January 4, 2019) f iled by Esso Exploration and Production Nigeria Limited, Shell Nigeria Exploration and Production Company Limited. For the foregoing reasons, NNPC's motion to dismiss is granted and Esso's motion for an adverse inference is de nied. The Third Amended Petition is dismissed. The parties are directed to advise this Court whether there is a continuing need for redactions in this Opinion & Order by September 21, 2019. The Clerk of Court is directed to terminate all pending motions and to mark this case as closed. (Signed by Judge William H. Pauley, III on 9/4/2019) (mro) Transmission to Orders and Judgments Clerk for processing.
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
ESSO EXPLORATION AND PRODUCTION
NIGERIA LIMITED, et ano.,
Petitioners,
-againstNIGERIAN NATIONAL PETROLEUM
CORPORATION,
Respondent.
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14cv8445
OPINION & ORDER
WILLIAM H. PAULEY III, Senior United States District Judge:
Respondent Nigerian National Petroleum Corporation (“NNPC”) moves pursuant
to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6) to dismiss Petitioners Esso Exploration
and Production Nigeria Limited and Shell Nigeria Exploration and Production Company
Limited’s (together, “Esso”) Third Amended Petition to confirm a Nigerian arbitral award (the
“Award”). NNPC argues that the Third Amended Petition should be dismissed for lack of
personal jurisdiction, on forum non conveniens grounds, and because the Award was set aside by
Nigerian courts. Esso moves for certain facts to be deemed admitted as a sanction for purported
discovery violations. It also requests that this Court confirm the $1.799 billion Award and
accrued interest. 1 For the reasons that follow, NNPC’s motion is granted and Esso’s motion is
denied.
1
Because this Court declines to confirm the Award, pre-judgment security is not warranted.
BACKGROUND
This dispute stems from a 1993 Production Sharing Contract (the “Agreement”)
between Esso and NNPC related to the Erha oil field off the coast of Nigeria. (Third Am. Pet.,
ECF No. 182 (“TAP”), ¶ 36.) The Agreement assigned Esso the responsibility for the
exploration, development, and extraction of oil from the Erha field, in exchange for the right to
share profits. (TAP ¶ 37.) Esso was also given the exclusive right to calculate the oil produced
and allocate it into four tranches: (1) Royalty Oil, to cover NNPC’s payments to the Nigerian
government; (2) Cost Oil, to cover Esso’s operating costs; (3) Tax Oil, to cover tax payments to
the Nigerian government; and (4) Profit Oil, which is derived from the remaining oil and split
between Esso and NNPC pursuant to a formula. (TAP ¶ 37.) In addition, Esso had the exclusive
right to prepare tax returns to be filed with the Nigerian government related to those tranches of
oil. (TAP ¶ 38.) The Agreement also contained a “Stabilization Clause,” which required the
parties to modify the terms of the Agreement to compensate Esso for any loss sustained due to
changes in Nigerian law, regulations, or policies. (TAP ¶ 39.) Finally, the parties agreed that
any dispute arising out of the Agreement would be arbitrated in Nigeria subject to Nigerian law.
(TAP ¶ 40.) The arbitration clause was limited to disputes “concerning the interpretation or
performance” of the Agreement. (Decl. of Adewale Atake, ECF No. 183 (“Atake Decl.”), Ex. 2
at cl. 21.)
After executing the Agreement, Esso explored and developed the Erha oil fields
and began production in 2006. (TAP ¶ 42.) Through 2009, Esso had invested over $6 billion in
the project. (TAP ¶ 42.) However, due to changing oil prices in 2007, Nigeria and NNPC began
to rethink the Agreement. By the latest November 2007, President Umaru Musa Yar’Adua of
Nigeria established the Presidential Investment Committee (the “Committee”) to determine
2
whether NNPC should be taking—known as “lifting”—more oil than Esso was allocating to
NNPC under the Agreement. (Decl. of Megha Hoon in Supp. of Pets.’ Third Am. & Suppl. Pet.,
ECF No. 187 (“First Hoon Decl.”), Ex. 10 at 9; Decl. of Mele Kyari, ECF No. 211 (“Kyari
Decl.”), ¶¶ 2, 6 (explaining that the Committee formed a Technical Subcommittee, which began
its work in November 2007); TAP ¶ 45.) In early February 2008, the Committee issued its
report, which concluded that Nigeria had been deprived of $646.3 million from the Erha oil field
and recommended that NNPC lift that amount of oil from Erha. (First Hoon Decl. Ex. 10 at 20;
TAP ¶ 46.) The Committee then met with President Yar’Adua in April 2008 to give its
recommendation. (First Hoon Decl. Ex. 15.) On May 20, 2008, President Yar’Adua ordered
NNPC to lift more oil per the Committee’s recommendation. (TAP ¶ 46; Decl. of Shannon M.
Leitner, ECF No. 207 (“Leitner Decl.”), Ex. 14 (Press Release).) However, NNPC had begun
lifting more oil in December 2007 or January 2008—before President Yar’Adua gave the order.
(ECF No. 238, Ex. D ¶ 13 & Ex. E.) In addition, NNPC refused to submit tax returns prepared
by Esso to the Nigerian tax authority (the “FIRS”) and instead submitted its own returns to FIRS.
(TAP ¶ 48.)
Esso objected to what it refers to as the “overlifting” of oil and commenced
arbitration against NNPC in July 2009. (TAP ¶ 49.) The parties submitted extensive briefing
prior to the arbitration hearings. (TAP ¶ 54.) During those hearings in 2011, NNPC argued that
the dispute was not contractual in nature, but rather a tax dispute subject to the exclusive
jurisdiction of the Nigerian Tax Appeal Tribunal. (TAP ¶ 56.) NNPC also argued that Nigeria’s
1999 Constitution prevented the arbitration of tax disputes. (TAP ¶ 58.) However, the arbitral
panel (“Arbitral Panel”) found that it had jurisdiction to hear the dispute because it was
contractual in nature and awarded Esso $1.799 billion. (TAP ¶¶ 59–61.) Specifically, the
3
Arbitral Panel found that NNPC overlifted Royalty and Tax Oil and reduced the Cost Oil due to
Esso. (TAP ¶ 61.) Those actions by NNPC also reduced the Profit Oil available to Esso. (TAP
¶ 61.) The Award represented the difference between what NNPC lifted and what it was entitled
to lift. (TAP ¶ 61.)
Thereafter, the Nigeria Federal High Court—a trial level court—issued two
decisions: (1) the FIRS Decision, which allowed FIRS to enjoin the arbitration, and (2) the Set
Aside Decision, which vacated the Award. (TAP ¶ 63.) In the FIRS Decision, the High Court
held that the Arbitral Panel lacked jurisdiction because the dispute affected the amount of
revenue received by FIRS, which was akin to a tax. (TAP ¶ 64; Atake Decl. Ex. 3 (FIRS
Decision).) Notably, though, because the arbitration had been completed before the FIRS
Decision was issued, there was no proceeding to enjoin. (TAP ¶ 64.) Esso maintains that the
High Court failed to consider its arguments as to why the matter was not a tax dispute. (TAP
¶ 64.) In the Set Aside Decision, which was issued after Esso sought to confirm the Award, the
High Court set aside the Award because of a similar jurisdictional issue—namely, that the case
was not arbitrable because requiring NNPC to pay contractual damages would reduce the amount
of money received by Nigeria through FIRS. (TAP ¶¶ 65–66; Atake Decl. Ex. 4 (Set Aside
Decision).) Esso claims that the Set Aside Decision was essentially a “copy/paste” of the FIRS
Decision, which appears, at least in part, to be the case. (Compare Atake Decl. Ex. 3 at 24 (“To
say that the claims of the Claimants have nothing to do with tax is akin [to] saying that [s]ix is
not half a dozen.”), with Atake Decl. Ex. 4 (“To say that the claims of the Claimants have
nothing to do with tax is akin to saying that [s]ix is not half a dozen.”).) Esso appealed both
decisions.
4
In the Set Aside Appeal, the Nigerian Court of Appeal found that the High Court
properly set aside the Award because the matter was primarily a tax dispute. (TAP ¶ 68; Atake
Decl. Ex. 5 at 20 (Set Aside Appeal).) However, the Court of Appeal reinstated some of the nonmonetary aspects of the Award, finding that the High Court should have severed the claims
related to the preparation of Petroleum Profit Tax returns and the calculation of lifting allocations
from the rest of the Award because they were contractual in nature. (TAP ¶ 68; Atake Decl. Ex.
5 at 20.) Put another way, the Court of Appeal concluded that NNPC had breached the
Agreement by overlifting oil and failing to submit the tax returns prepared by Esso, and that
these portions of the Award should be restored. (TAP ¶ 68; Atake Decl. Ex. 5 at 20.) NNPC
argues that this only provides prospective relief. Moreover, the Court of Appeal found that Esso
had essentially waived its argument regarding the Stabilization Clause. (Atake Decl. Ex. 5 at
29.) Thereafter, the Court of Appeal decided the FIRS Appeal in a separate opinion with
virtually the same holding and reasoning. (TAP ¶ 70; Atake Decl. Ex. 6 (FIRS Appeal.)
Esso pursued two separate avenues of relief from these rulings. First, it appealed
both rulings. (TAP ¶ 73.) Second, it commenced an action in the High Court, seeking
compensation for NNPC’s violation of the Agreement. (TAP ¶ 74.) However, it commenced
that lawsuit while simultaneously seeking to confirm the Award in Nigeria (apparently to avoid
statute of limitations issues). (TAP ¶ 74.) The High Court dismissed that suit with prejudice,
finding an “abuse of process” because Esso filed a substantive lawsuit while also seeking to
confirm the Award. (TAP ¶ 75.) Esso appealed that decision as well.
Now, Esso seeks to confirm the Award in this Court. At the time Esso filed its
Third Amended Petition, the value of the Award was $2,669,405,616. (TAP ¶ 61.) NNPC
moves to dismiss on numerous grounds. First, NNPC argues that this Court lacks personal
5
jurisdiction over it. Next, NNPC argues that even if this Court can exercise personal jurisdiction,
the action should be dismissed on forum non conveniens grounds. Finally, NNPC argues that
this Court cannot confirm the Award because it was set aside by the Nigeria courts. In addition,
Esso moves for 12 proposed facts to be ordered established as a discovery sanction.
DISCUSSION
I.
Personal Jurisdiction
A. Standard
On a motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2), a
plaintiff has the burden of establishing personal jurisdiction and “must make a prima facie
showing that jurisdiction exists.” Eades v. Kennedy PC Law Offices, 799 F.3d 161, 167–68 (2d
Cir. 2015). “Where, as here, there has been jurisdictional discovery but no evidentiary hearing,
‘the plaintiff’s prima facie showing, necessary to defeat a jurisdiction testing motion, must
include an averment of facts that, if credited by the trier, would suffice to establish jurisdiction
over the defendant.’” In re N. Sea Brent Crude Oil Futures Litig., 2017 WL 2535731, at *4
(S.D.N.Y. June 8, 2017) (quoting Dorchester Fin. Sec., Inc. v. Banco BRJ, S.A., 722 F.3d 81, 85
(2d Cir. 2013)). “A court construes the pleadings and affidavits in the light most favorable to the
plaintiff and resolves all doubts in plaintiff’s favor, notwithstanding any controverting
presentation by the moving party.” McGraw-Hill Glob. Educ. Holdings, LLC v. Mathrani, 295
F. Supp. 3d 404, 409 (S.D.N.Y. 2017) (quotation marks omitted).
For a court to exercise personal jurisdiction (1) there must be procedurally proper
service of process, (2) there must be a statutory basis for personal jurisdiction, and (3) the
exercise of personal jurisdiction must comport with constitutional due process. See Waldman v.
Palestine Liberation Org., 835 F.3d 317, 327 (2d Cir. 2016). The first two requirements are not
6
contested here. Rather, the parties dispute whether NNPC is entitled to due process, and if so,
whether the exercise of personal jurisdiction here would comport with due process.
Esso advances three arguments why due process is either unnecessary or satisfied.
First, Esso argues that there is subject matter jurisdiction under the Foreign Sovereign
Immunities Act (“FSIA”) and valid service, which is sufficient to confer personal jurisdiction
without establishing due process. 2 Second, Esso contends that NNPC is an alter ego of Nigeria
and therefore not entitled to due process. Third, even if due process is required, Esso asserts that
NNPC had sufficient minimum contacts with the forum to satisfy due process. In addition, Esso
argues this Court can exercise in rem jurisdiction.
B. Personal Jurisdiction under the FSIA
By way of background, Esso argues that the FSIA sets forth two requirements
which, if satisfied, allow this Court to exercise personal jurisdiction over NNPC regardless of
whether doing so comports with due process. 3 Specifically, the FSIA provides that “[p]ersonal
jurisdiction over a foreign state shall exist as to every claim for relief over which the district
courts have [subject matter] jurisdiction under subsection (a) where service has been made . . . .”
28 U.S.C. § 1330(b) (emphasis added). There is no dispute that this Court has subject matter
jurisdiction and that service has been made. Accordingly, the question is whether the FSIA can
confer personal jurisdiction irrespective of due process.
2
Because this Court finds that it can exercise personal jurisdiction on other grounds, it need not address the
FSIA or in rem jurisdiction. However, it discusses jurisdiction under the FSIA as background.
3
In the alternative, Esso argues that satisfaction of the FSIA requirements serves as satisfaction of the
minimum contacts test, based on Shapiro v. Republic of Bol., 930 F.2d 1013, 1020 (2d Cir. 1991). This argument
rests on a misreading of Shapiro. There, to establish subject matter jurisdiction, plaintiff needed to meet a
substantial contact test that would satisfy the commercial activity exception to the FSIA. Thus, the court found a
higher level of contact with the forum than minimum contacts. In addition, the Second Circuit explicitly stated that
there must be sufficient minimum contacts to exercise personal jurisdiction. Shapiro, 930 F.2d at 1020 (“There is of
course a constitutional constraint on the assertion of personal jurisdiction. There must be sufficient ‘minimum
contacts’ . . . .”).
7
Under the FSIA, a “foreign state . . . includes a political subdivision of a foreign
state or an agency or instrumentality of a foreign state as defined in subsection (b).” 28 U.S.C.
§ 1603(a) (emphasis added). NNPC concedes that it is an instrumentality of Nigeria. And the
Second Circuit has held that a foreign state is not “entitled to the jurisdictional protections of the
Due Process Clause” of the Constitution. Frontera Res. Azer. Corp. v. State Oil Co. of Azer.
Republic, 582 F.3d 393, 399 (2d Cir. 2009). Therefore, Esso argues, because NNPC is a
“foreign state” under the FSIA and foreign states are not entitled to due process, this Court can
exercise jurisdiction without conducting a due process analysis. NNPC counters that whether an
entity is considered a “foreign state” under the FSIA is irrelevant to the question of whether it is
entitled to constitutional due process. Put another way, that an instrumentality is a foreign state
under the FSIA does not automatically brand it a foreign state for purposes of due process.
Esso’s argument is based largely on TMR Energy Limited v. State Property Fund
of Ukraine, 411 F.3d 296, 303 (D.C. Cir. 2005), which held that personal jurisdiction could be
properly asserted over a foreign state’s agent “based solely upon the requirements of the
FSIA”—i.e., without due process. However, NNPC’s reliance on TMR is inapposite for two
reasons. First, the TMR court held that the State Property Fund of Ukraine was an alter ego of
Ukraine, and thus it was considered a literal foreign state. TMR, 411 F.3d at 302. Next, in
Frontera, the Second Circuit analyzed TMR but declined to hold that instrumentalities of foreign
states do not require due process. 582 F.3d at 400.
In Frontera, the Second Circuit explained that just “because the FSIA treats
foreign states and their agencies and instrumentalities identically . . . does not answer the
constitutional question of [an agent or instrumentality’s] due process rights.” Frontera, 582 F.3d
at 400 (emphasis in original). But the Second Circuit never answered the constitutional question.
8
Because the district court failed to determine whether the State Oil Company of Azerbaijan was
an alter ego of Azerbaijan, the Second Circuit remanded the case for such a determination.
As discussed below, this Court finds that NNPC is an alter ego of Nigeria.
Accordingly, it need not address whether an instrumentality requires constitutional due process.
C. Alter Ego
It is well established that if NNPC is considered an alter ego of Nigeria, then it
should not be afforded due process rights and minimum contacts need not be established. See
Frontera, 582 F.3d at 401. The primary test for whether an instrumentality is an alter ego of a
foreign state originates from First National City Bank v. Banco Para El Comercio Exterior de
Cuba (“Bancec”), 462 U.S. 611 (1983). There, the Supreme Court held that a “foreign
government’s determination that its instrumentality is to be accorded separate legal status” is
presumptively valid. Bancec, 462 U.S. at 628. However, that presumption can be overcome,
and the instrumentality will be considered as one with the foreign state, i.e., an alter ego, where
(1) “a corporate entity is so extensively controlled by its owner that a relationship of principal
and agent is created”; or (2) recognizing the entities as separate “would work fraud or injustice.”
Bancec, 462 U.S. at 629; accord EM Ltd. v. Banco Cent. De La Republica Arg., 800 F.3d 78, 90
(2d Cir. 2015).
As a threshold issue, Esso barely waves its bat at the “fraud or injustice” prong.
The “common thread” in cases finding an alter ego under the “fraud or injustice” theory “is that
the sovereign states at issue abused the corporate form.” EM Ltd., 800 F.3d at 95; see Bancec,
462 U.S. at 629–30 (“In particular, the Court has consistently refused to give effect to the
corporate form where it is interposed to defeat legislative policies.”). Here, Nigeria and NNPC’s
relationship does not fall within this “common thread.” In EM Ltd., the Second Circuit sampled
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various cases in which an instrumentality’s separate juridical status was used to avoid liability or
block enforcement attempts. For example, in Cuba, the government dissolved Bancec and took
complete control of assets to avoid creditors. In Turkmenistan, the government transferred assets
from one instrumentality to another to escape liability. And in the Congo, the government
created a sham entity with purported sovereign immunity. See EM Ltd., 800 F.3d at 95–96.
Based on these examples, the Second Circuit found there was not an alter ego relationship in EM
Ltd. because the instrumentality’s “separate juridical status has [not] been actively used by
Argentina to block plaintiffs’ enforcement attempts against Argentina itself,” and because
“Argentina has [not] transferred its funds to [the instrumentality] in order to shield them from
plaintiffs.” EM Ltd., 800 F.3d at 96.
The same is true here. Nigeria is not using the separate juridical status of NNPC
to avoid liability or thwart enforcement attempts. This dispute revolves around whether NNPC
overlifted oil and whether the Arbitral Panel had jurisdiction to hear the overlifting dispute. The
only “fraud or injustice” alleged by Esso is that NNPC moved funds to new accounts held by the
Central Bank of Nigeria (“CBN”) to avoid unspecified creditors. (TAP ¶ 21.) Simply put, Esso
fails to allege that Nigeria has used NNPC to shield itself from liability. Accordingly, Esso must
demonstrate that Nigeria extensively controlled NNPC.
Determining whether there is extensive control “over an instrumentality by a
foreign sovereign is fact-intensive,” and courts consider whether the sovereign nation:
(1) uses the instrumentality’s property as its own; (2) ignores the instrumentality’s
separate status or ordinary corporate formalities; (3) deprives the instrumentality of
the independence from close political control that is generally enjoyed by
government agencies; (4) requires the instrumentality to obtain approvals for
ordinary business decisions from a political actor; and (5) issues policies or
directives that cause the instrumentality to act directly on behalf of the sovereign
state.
10
EM Ltd., 800 F.3d at 91. In addition, courts in this district consider:
(1) whether the foreign state created the entity for a national purpose; (2) whether
the foreign state actively supervises the entity; (3) whether the foreign state requires
the hiring of public employees and pays their salaries; (4) whether the entity holds
exclusive rights to some right in the [foreign] country; and (5) how the entity is
treated under foreign state law.
In re 650 Fifth Ave. & Related Props., 881 F. Supp. 2d 533, 549–50 (S.D.N.Y. 2012) (alteration
in original) (citations omitted). No one factor is dispositive, and the underlying facts should be
weighed collectively. See Funnekotter v. Agric. Dev. Bank of Zim., 2015 WL 9302560, at *6
(S.D.N.Y. Dec. 17, 2015). Ultimately, this Court must determine “whether the sovereign state
exercise[d] significant and repeated control over the instrumentality’s day-to-day operations.”
EM Ltd., 800 F.3d at 91. Thus, the question is whether Nigeria and NNPC “operated as a single
enterprise.” Cortez Byrd v. Corporacion Forestal y Indus. de Olancho, S.A., 974 F. Supp. 2d
264, 271 (S.D.N.Y. 2013).
Esso argues that NNPC was an alter ego of Nigeria for the following reasons: (1)
the Committee allegedly instructed NNPC to overlift oil in Erha and it complied; (2) Nigeria
controls the day-to-day operations of NNPC; (3) NNPC and Nigeria shared property, including
bank accounts; and (4) NNPC acted as Nigeria’s agent. 4 In response, NNPC attacks each ground
individually. While this Court discusses these grounds in turn for sake of clarity and
organization, it weighs them collectively. See Funnekotter, 2015 WL 9302560, at *6.
4
Esso argues that because several NNPC employees stated that NNPC is an agent of the Nigerian
government, NNPC has admitted that it is an alter ego. This argument is meritless. The NNPC employees cited do
not make the judicial admission that NNPC is an alter ego of Nigeria—rather, they state that NNPC is generally an
agent of Nigeria. Such a statement does not solve the legal question of whether NNPC is Nigeria’s alter ego,
especially given the fact that NNPC concedes it is an instrumentality of Nigeria.
11
1. The Committee
The parties spar over whether NNPC overlifted oil from Erha at the direct behest
of the Nigerian President. While it is unclear whether NNPC made the overlift decision
completely on its own, it is clear that—at a minimum—President Yar’Adua influenced NNPC’s
decision.
By the latest November 2007, President Yar’Adua created the Committee to
review the performance of the Erha and Bonga oil fields. (First Hoon Decl. Ex. 10 at 9; Kyari
Decl. ¶¶ 2, 6.) The Committee included 10 members who were all Nigerian officials or NNPC
employees. (First Hoon Decl. Ex. 10 at 9.) And a Technical Subcommittee—formed to “collate
and analy[z]e all relevant data”—also consisted of 10 members who were all Nigerian officials
or NNPC employees. (First Hoon Decl. Ex. 10 at 10.) Neither the Committee nor the
Subcommittee included any Esso officials.
In February 2008, the Committee signed its report, which recommended lifting
additional oil from Erha. (First Hoon Decl. Ex. 10.) The Committee met with President
Yar’Adua to give him its recommendation in April 2008. (First Hoon Decl. Ex. 15.) The
following month, President Yar’Adua ordered NNPC to overlift oil. (First Hoon Decl. Ex. 8.)
Esso argues that President Yar’Adua contrived the Committee for the specific
purpose of obtaining a recommendation to lift more oil for the benefit of Nigeria. NNPC
counters that because the lifting allocations were disputed before the Committee’s formation and
it began overlifting before President Yar’Adua’s order to do so, NNPC could not have been
influenced by Nigeria. While the parties do not agree on when NNPC began overlifting, the
record reflects that it started sometime in December 2007 or January 2008. (ECF No. 238 Ex. D
12
¶ 13 & Ex. E.) Accordingly, the overlifting began after the Committee convened but before
President Yar’Adua’s overlift order.
Ultimately, this Court finds that, regardless of whether the overlift order was the
sole reason NNPC overlifted oil, President Yar’Adua’s influence on NNPC’s actions suggests an
alter ego relationship. See McKesson Corp. v. Islamic Republic of Iran, 52 F.3d 346, 352 (D.C.
Cir. 1995) (finding an alter ego relationship where the instrumentality took action because it
“believed that Iran desired them to take these steps”); EM Ltd., 800 F.3d at 91 (listing whether
the sovereign “issues policies or directives that cause the instrumentality to act directly on behalf
of the sovereign state” as a factor in the alter ego inquiry). Markedly, oil was not overlifted until
after the President convened the Committee. And the Committee—which consisted solely of
Nigerian officials and NNPC staff—was formed with “[t]he key objective . . . to determine if
there are revenue opportunities that might have been lost by [the] Government in the
implementation of the [Agreement].” (First Hoon Decl. Ex. 10 at 4.) Moreover, NNPC
overlifted oil—specifically, Royalty and Tax Oil—for the direct benefit of the Nigerian
government—not NNPC. (See Decl. of Matthew T. Page, ECF No. 186 (“Page Decl.”), ¶ 36;
TAP ¶ 61.) In sum, NNPC “believed that [Nigeria] desired [it] to take . . . steps” to overlift oil.
McKesson, 52 F.3d at 352. However, the overlift order is merely one policy directive and is not
entitled to dispositive weight.
2. Day-to-Day Operations
The totality of the circumstances demonstrates that Nigeria exerts substantial
control over NNPC’s day-to-day business. As a preliminary matter, the act that created NNPC
(the “NNPC Act”) provides that one of NNPC’s general duties is to “engag[e] in activities that
would enhance the petroleum industry in the overall interest of Nigeria.” (Atake Decl. Ex. 10
13
§ 5(1)(h) (emphasis added).) See In re 650 Fifth Ave., 881 F. Supp. 2d at 549 (stating that a
factor to consider is “whether the foreign state created the entity for a national purpose”). This is
unsurprising given that Nigeria is NNPC’s sole shareholder. (First Hoon Decl. Ex. 1 at 198:8–10
(“Well, and the shareholder is Nigeria? A. Yes.”), Ex. 4 at 30:2–4 (“Has NNPC ever had a
shareholder other than the Government of Nigeria? A. No.”).) And in addition to wholly owning
NNPC, Nigeria exerts substantial control over NNPC’s board of directors and its operations.
For instance, the Nigerian President appoints the Minister of Petroleum
Resources, who is also the Chairperson of NNPC’s board. (First Hoon Decl. Ex. 4 at 31:1–18;
Atake Decl. Ex. 10 § 1(2)-(3).) And historically, Nigerian presidents have served as the Minister
of Petroleum—and thus as chairman of NNPC. (See Page Decl. ¶¶ 23–25.) In fact, President
Yar’Adua served as the Minister of Petroleum (and chairman of NNPC) at the time he convened
the Committee. (See Page Decl. ¶¶ 23–25.) Moreover, the Nigerian President retains substantial
power to hire and fire NNPC officers. Specifically, the Nigerian President appoints and has the
power to remove all of NNPC’s board members, as well as NNPC’s Group Managing Director
(essentially the CEO), all of NNPC’s senior executives, including the equivalent of the CFO,
COO, and the CEO of the Crude Oil Marketing Division, and other officials such as general
managers, group general managers, and managing directors. 5
5
(See First Hoon Decl. Ex. 4 at 31:1–32:7 (“And does the president [of Nigeria] appoint all chairmen of the
board of directors of NNPC? A. Yes. Q. And can the president remove the chairman of the board of directors of
NNPC? A. Yes. Q. . . . [C]an the president remove the chairman of the board of directors of NNPC for any reason?
A. He can remove . . . a member and appoint a member.”); 32:15–33:21 (“Are there any board members that are not
appointed by the President of Nigeria? A. No. . . . And can the president remove the CEO of NNPC? A. Yes. Q. And
can the president remove the CEO of NNPC at any time? A. Yes. Q. And can the president remove the CEO of
NNPC for any reason? A. Yes.”); 33:22–34:5 (“Does the president appoint other senior officials of NNPC? A. Yes.
Q. Which officials at NNPC are appointed by the president? A. From the general managers to the group managing
director and those include general managers, group general managers, managing directors and group managing
director.”).)
14
Although “the appointment or removal of an instrumentality’s officers and
directors, standing alone,” does not demonstrate the presence of an alter ego relationship, it does
suggest such a relationship when considered with other indicia of substantial control, especially
where the sovereign “uses its influence over these directors in order to interfere with the
instrumentality’s ordinary business affairs.” EM Ltd., 800 F.3d at 92–93; see McKesson, 52
F.3d at 351 (finding alter ego relationship where, among other reasons, “the[] government
entities held 52 percent of Pak Dairy’s stock and controlled six of the seven seats on its board of
directors”); In re 650 Fifth Ave., 881 F. Supp 2d at 549 (considering “whether the foreign state
requires the hiring of public employees” as a factor). Indeed, between 2007 and 2016, Nigerian
presidents appointed seven different CEOs, indicating that they served at the pleasure of the
Nigerian President. (See Page Decl. ¶ 21.) See EM Ltd., 800 F.3d at 91 (explaining that a factor
counseling in favor of finding an alter ego relationship is whether the sovereign “deprives the
instrumentality of the independence from close political control that is generally enjoyed by
government agencies”).
Further, it is apparent that Nigeria interjects itself into NNPC’s “ordinary business
affairs.” EM Ltd., 800 F.3d at 93. For instance, the Nigerian President can make decisions for
NNPC without board approval or that benefit Nigeria rather than NNPC. (See Decl. of Megha
Hoon in Supp. of Pets.’ Opp. to Resp. NNPC’s Mot. to Dismiss the Third Am. & Suppl. Pet.,
ECF No. 222 (“Second Hoon Decl.”), Ex. 18 at 58:13–19 (“And so consistent with the law, if the
decision being contemplated by NNPC is large enough that it has to go to the president it would
not need to be disclosed to the board of directors? A. It doesn’t need to.”); First Hoon Decl. Ex. 1
at 289:23–293:20 (
15
).) 6
Indeed, the President “can approve expenses that are not directly for the benefit of NNPC to be
paid by NNPC, which NNPC would treat as [an interest-free] loan to the government.” (See
Second Hoon Decl. Ex. 16 at 191:4–192:10; First Hoon Decl. Ex. 1 at 289:23–293:20.) See Am.
Federated Title Corp. v. GFI Mgmt. Servs., Inc., 39 F. Supp. 3d 516, 525 (S.D.N.Y. 2014)
(finding that interest-free loans suggest an alter ego relationship in a veil-piercing case).
Nigeria also exerts control over NNPC’s business transactions and budget. See
EM Ltd., 800 F.3d at 91 (considering whether the sovereign “requires the instrumentality to
obtain approvals for ordinary business decisions from a political actor” in alter ego analysis); In
re 650 Fifth Ave., 881 F. Supp. 2d at 549 (considering “whether the foreign state actively
supervises the entity” in alter ego inquiry). For example, the NNPC Act states that the Nigerian
President must personally approve all contracts entered into by NNPC exceeding 5 million naira
(approximately $14,000). (Atake Decl. Ex. 10 § 6(2)). In practice, the Nigerian President
delegates this authority to the NNPC Tenders Board, but he still must approve any local contracts
valued over $7.5 million and foreign contracts valued over $20 million. (See First Hoon Decl.
Ex. 4 at 55:15–24 (“If it is in excess of 2.7 billion naira, the board cannot approve it? Q. Yes[.]”);
Feb. 1, 2019 Oral Arg. Tr., ECF No. 243 (“Oral Arg. Tr.”) at 8:23–9:5, 35:10–18.) At oral
argument, NNPC did not know how many foreign contracts it enters into valued under $20
million, but given that NNPC’s revenue purportedly exceeds $7 billion, the Nigerian President
likely must approve a substantial portion of NNPC’s contracts. (See Second Hoon Decl. Ex. 23;
Oral Arg. Tr. at 11:3–5.) See EM Ltd., 800 F.3d at 95 & n.77 (suggesting that a requirement for
“all checks in excess of a certain amount [to] be signed by a government-appointed director”
6
The redactions in this Opinion & Order reference exhibits that the parties filed under seal or in redacted
form. The parties are directed to advise this Court whether there is a continuing need for these redactions.
16
demonstrated control over “business decisions and daily functions” (quoting Hester Int’l Corp. v.
Fed. Republic of Nigeria, 879 F.2d 170, 178 (5th Cir. 1989))). Further, the Nigerian President
must review and approve NNPC’s annual budget, as well as loans taken out by NNPC. (See
Atake Decl. Ex. 10 §§ 7–8; Decl. of Jeremiah Oluwaniyi, ECF No. 199 (“Oluwaniyi Decl.”),
¶ 7.) Cf. Bancec, 462 U.S. at 624 (“Except for appropriations to provide capital or to cover
losses, the instrumentality is primarily responsible for its own finances. The instrumentality is
run as a distinct economic enterprise; often it is not subject to the same budgetary and personnel
requirements with which government agencies must comply.”). Finally, NNPC even required
the Nigerian President’s approval to
.
(See Second Hoon Decl. Ex. 22.)
Taken together, these examples of control demonstrate that Nigeria has a
substantial role in the day-to-day operations of NNPC. Nigeria’s control over NNPC is similar
to Zimbabwe’s control over the Zimbabwe Mining Development Corporation (“ZMDC”) in
Funnekotter. There, a judge in this district held that ZMDC was an alter ego of Zimbabwe where
(1) ZMDC’s enabling act required Zimbabwe to own no less than 51% of ZMDC’s stock; (2)
members of ZMDC’s board of directors were to be appointed after consultation with the
President; (3) ZMDC could not make investments or loans without seeking direction and advice
from the Minister of Mines; and (4) the Minister of Mines could direct ZMDC to take “any
actions that the minister deems to be in the national interest.” See Funnekotter, 2015 WL
9302560, at *5–6; see also In re 650 Fifth Ave., 881 F. Supp. 2d at 551 (finding alter ego
relationship where, among other reasons, the instrumentality terminated employees and board
members pursuant to directives from the government of Iran).
17
3. Shared Property
There is also ample evidence that Nigeria uses NNPC’s “property as its own.”
EM Ltd., 800 F.3d at 91. For instance, the Ministry of Petroleum Resources maintains office
space at premises used and owned by NNPC without a lease and without paying rent. (See First
Hoon Decl. Ex. 1 at 288:10–289:10.) Not only does this demonstrate that Nigeria and NNPC
share property, but the lack of a lease or any written agreement suggests that they are one and the
same. See Am. Federated Title, 39 F. Supp. 3d at 525 (finding that the lack of documentation for
agreements suggested an alter ego relationship in a veil-piercing case). Further, and as discussed
earlier, NNPC
. (First Hoon
Decl. Ex. 1 at 289:23–293:20.)
In addition, evidence suggests that NNPC and Nigeria share bank accounts. See
Kensington Int’l Ltd. v. Republic of Congo, 2007 WL 1032269, at *12 (S.D.N.Y. Mar. 30, 2007)
(explaining that “commingling of . . . assets” is a “classic earmark[] of an alter-ego
relationship”). Although the parties dispute NNPC’s control over certain accounts, there are at
least three JPMorgan accounts held in New York that relate to NNPC: a CBN/NNPC Crude Oil
Revenue (U.S. Dollars) Account, a CBN/NNPC Gas Revenue (U.S. Dollars) Account, and a
Joint Venture Cash Call Account. (See Decl. of Effiong Jack Ukitetu, ECF No. 100 (“Ukitetu
Decl.”), ¶ 5.)
18
NNPC contends that these accounts—and any funds within them—belong solely
to the CBN and that NNPC exercises no control beyond the authority to instruct the CBN to
make transfers. (Ukitetu Decl. ¶ 8.) But NNPC cannot explain why it needs the ability to direct
fund transfers for accounts it does not own. (Oral Arg. Tr. at 12:10–12 (“I think it’s part of the
relationship with the government in doing business for the government related to its oil . . . .”).)
And, apparently, NNPC is the only entity that can direct the CBN to transfer funds from the
accounts. 7 Further, NNPC receives account statements for the accounts. 8 In addition, even if
NNPC does not own the accounts or funds within them, the mere ability to direct fund transfers
indicates close ties between NNPC and Nigeria.
Moreover, the record evidence belies NNPC’s argument that it does not share the
accounts with the Nigeria government—including the names of the accounts, which suggest they
belong to or are maintained for NNPC. (See Second Hoon Decl. Ex. 25 (reference by
); Second Hoon Decl. Ex. 26 (statement by
auditor that the CBN maintains the revenue accounts with JPMorgan “on behalf of the NNPC”).)
For example, NNPC ordered the CBN to transfer funds from the accounts for non-NNPC,
governmental activity,
. (See First Hoon Decl. Ex. 1 at 197:18–204:11
7
(See First Hoon Decl. Ex. 1 at 105:21–106:24 (“Does anybody other than NNPC direct transfers to the oil
revenue account [held at JPMorgan]? A. Not that I know of. . . . Q. Now, NNPC periodically instructs CBN to make
transfers of funds from this account, correct? A. CBN, yes. Q. Does any entity other than NNPC have authority to
direct CBN to transfer funds from the oil revenue account? A. . . . So NNPC does. No other entity documentarily is
given the road to do that . . . .”), 111:21–112:10 (“Are you aware of any entity other than NNPC that directs
transfers to the guest revenue account? A. No. Q. And NNPC periodically instructs the CBN to transfer money from
the guest revenue account, correct? A. Yes, it does. Q. Does any entity other than NNPC direct the CBN to transfer
money from the guest revenue account? A. To date, no.”), 129:14–131:13 (“Q. Does any entity other than NNPC
direct transfers to [the JV Cash Call] account? A. Not that I know of. Q. Does NNPC periodically instruct CBN to
make transfers of funds from this account? A. From time to time, yes.”).)
8
(See First Hoon Decl. Ex. 1 at 105:21–106:24 (“Q. Does NNPC receive account statements for th[e oil
revenue account held at JPMorgan]? A. Yes, we do.”), 129:14–131:13 (“Does NNPC receive bank statements for
t[he JV Cash Call] account? A. From CBN, yes.”).)
19
(
), 222:5–235:5 (
); Ex. 5 (
; Ex. 6
); Ex. 7 (
). It is unclear why NNPC
would have the authority to instruct account transfers for non-NNPC, governmental transactions
unless there is an alter ego relationship. And conversely, activity logs from the Joint Venture
Cash Call Account—an account that NNPC claims belongs to the CBN—show that funds were
transferred from that account to purchase laptops for NNPC. 9 (See Second Hoon Decl. Ex. 24.)
4. Conclusion on Alter Ego
After weighing the totality of the circumstances and applying the various alter ego
considerations, this Court finds that NNPC is an alter ego of Nigeria. Accordingly, no due
process analysis is required, and this Court can exercise personal jurisdiction over NNPC.
D. Due Process
Even if due process were required, this Court finds that NNPC has sufficient
minimum contacts to satisfy due process. “Determining personal jurisdiction over a foreign
defendant in a federal-question case such as this requires a two-step inquiry. First, we . . .
determine whether personal jurisdiction will lie. If jurisdiction lies, we consider whether the
district court’s exercise of personal jurisdiction over a foreign defendant comports with due
process protections established under the United States Constitution.” Licci ex rel. Licci v.
9
NNPC argues that Nigeria paid for NNPC’s laptops because they were needed for a government project.
(Decl. of Cecilia Froelich Moss, ECF No. 196, Ex. F at 44:20–46:10 (explaining generally that expenditures are for
NNPC work on government projects).) But it fails to explain how these laptops were related to a government
project or why Nigeria would be responsible for paying for NNPC’s laptops in such a situation.
20
Lebanese Can. Bank, SAL, 732 F.3d 161, 168 (2d Cir. 2013) (citation omitted). “[D]ue process
requires a plaintiff to allege (1) that a defendant has certain minimum contacts with the relevant
forum, and (2) that the exercise of jurisdiction is reasonable in the circumstances.” SPV Osus
Ltd. v. UBS AG, 882 F.3d 333, 343 (2d Cir. 2018) (quotation marks omitted).
Here, because Esso invokes federal question jurisdiction under the FSIA, the Fifth
Amendment’s Due Process Clause controls, and the forum is the United States rather than New
York. “When the jurisdictional issue flows from a federal statutory grant that authorizes suit
under federal-question jurisdiction and nationwide service of process, . . . the Fifth Amendment
applies, and the Second Circuit has consistently held that the minimum-contacts test in such
circumstances looks to contacts with the entire United States rather than with the forum state.”
SEC v. Straub, 921 F. Supp. 2d 244, 253 (S.D.N.Y. 2013) (quotation marks omitted); see
Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 497 (1983) (holding that the FSIA
creates federal question jurisdiction); L’Europeenne de Banque v. La Republica de Venez., 700
F. Supp. 114, 124 n.10 (S.D.N.Y. 1988) (“Because the FSIA creates federal question jurisdiction,
the due process clause of the fifth amendment, rather than that of the fourteenth amendment,
controls.”). Accordingly, this Court must consider NNPC’s contacts with the United States
generally—not just its contacts with New York. See Waldman, 835 F.3d at 330 (holding that the
due process analyses under the Fifth and Fourteenth Amendments are essentially the same and
explaining that courts must consider “the defendant’s contacts throughout the United States”
where it applies the Fifth Amendment); Alfandary v. Nikko Asset Mgmt. Co., 337 F. Supp. 3d
343, 359 (S.D.N.Y. 2018) (same).
To determine whether a party has sufficient minimum contacts with the forum,
courts “evaluate the quality and nature of the defendant’s contacts with the forum . . . under a
21
totality of the circumstances test. . . . [M]inimum contacts . . . exist where the defendant
purposefully availed itself of the privilege of doing business in the forum and could foresee
being haled into court there.” Charles Schwab Corp. v. Bank of Am. Corp., 883 F.3d 68, 82 (2d
Cir. 2018) (quotation marks omitted). Stated differently, “the jurisdictional inquiry focuses on
the affiliation between the forum and the underlying controversy.” Licci, 732 F.3d at 170
(quotation marks omitted). Therefore, “the relationship among the defendant, the forum, and the
litigation” are “the central concern of the inquiry into personal jurisdiction.” Daimler AG v.
Bauman, 571 U.S. 117, 126 (2014).
“Due process requires that a defendant be haled into court in a forum . . . based on
his own affiliation with the [forum], not based on the random, fortuitous, or attenuated contacts
he makes by interacting with other persons affiliated with the [forum].” Walden v. Fiore, 571
U.S. 277, 286 (2014) (quotation marks omitted). “And although physical presence in the forum
is not a prerequisite to jurisdiction, physical entry into the State—either by the defendant in
person or through an agent, goods, mail, or some other means—is certainly a relevant contact.”
Walden, 571 U.S. at 285 (citation omitted). Further, when dealing with contractual claims,
courts look specifically to “prior negotiations and contemplated future consequences, along with
the terms of the contract and the parties’ actual course of dealing.” Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 479 (1985); Stone v. Patchett, 2009 WL 1108596, at *12 (S.D.N.Y.
Apr. 23, 2009) (applying Burger King analysis to an action to confirm an arbitral award related
to a contract dispute).
Esso alleges that NNPC has sufficient minimum contacts with the United States
because NNPC (1) marketed, solicited, and negotiated the Agreement in the United States, then
traveled to the United States in performing it; (2) used U.S. currency and bank accounts in
22
connection with transactions involving Erha oil; and (3) entered into a contract containing an
arbitration clause with an affiliate of an American corporation who is subject to the New York
Convention. NNPC argues that these are insufficient contacts because the underlying dispute
relates to the overlifting of oil in Nigeria. It also points out that the Agreement was negotiated in
Nigeria, was executed by Nigerian corporations, contemplated performance in Nigeria, and was
subject to arbitration in Nigeria under Nigerian law. In addition, NNPC attempts to rebut each
category of contacts by disaggregating them and arguing that they are individually insufficient.
But this Court must “evaluate the quality and nature of [NNPC’s] contacts with the forum . . .
under a totality of the circumstances test.” Charles Schwab Corp., 883 F.3d at 82.
1. Contacts Regarding the Agreement
Considerable evidence shows that NNPC solicited and negotiated the Agreement
in the United States. In 1991, representatives from the Nigerian government and NNPC
attempted to convince Exxon (an affiliate of Esso U.S.) to invest in Nigeria’s offshore oil fields,
including Erha. Specifically, Esso cites two advertisements in the Oil and Gas Journal (based in
Oklahoma) taken out by Nigeria’s Ministry of Petroleum Resources and promoted by TGS
Mabon International (“TGS”) announcing second-round bidding in offshore Nigerian oil fields.
(Decl. of Edwin Barrett Turner, ECF No. 185 (“Turner Decl.”), Exs. 3 & 4.) Further, on October
17, 1991, TGS invited Exxon to attend a late-November 1991 roadshow in Houston related to
second-round bidding. (Turner Decl. ¶ 10; Turner Decl. Ex. 2.) While NNPC did not take out
the advertisement or send the invitation, the brochure attached to the invitation states that
“[u]nder a Production Sharing Contract the foreign company is considered as a contractor,
NNPC is the title holder.” (Turner Decl. Ex. 2 at 5.) Simply put, NNPC cannot completely
disclaim responsibility for these contacts, given that they were made to induce investors to enter
23
into agreements with NNPC. Moreover, as previously discussed, Nigeria’s Minister of
Petroleum Resources also serves as chairman of NNPC.
In any event, NNPC’s involvement with Exxon began to pick up after these initial
solicitations. In November 1991, Edwin Turner, an Exxon employee, attended the roadshow in
Houston and states that NNPC officials in attendance promoted investment opportunities in
Nigeria’s offshore oil fields, including the one in Erha. (Turner Decl. ¶¶ 9–11.) Specifically,
Turner avers that he attended the first day of the roadshow with several Exxon colleagues and
that representatives of Nigeria and NAPIMS (a unit of NNPC) 10 solicited bids from them.
(Turner Decl. ¶ 11.) He states that NNPC informed him and his colleagues about the contractual
form the potential investments would take—namely, agreements with NNPC. (Turner Decl.
¶ 11.)
After the roadshow, Turner and his Exxon colleagues met privately with Nigerian
and NNPC representatives, where the Nigerian representatives reiterated their desire to see
Exxon invest in Nigeria. (Turner Decl. ¶ 12.) Turner further states that the roadshow and that
meeting “substantially advanced Exxon’s business relationship with NNPC[] and were essential
for Exxon to decide to enter into the [Agreement].” (Turner Decl. ¶ 13.)
On March 12, 1992, Exxon—through Esso U.S.—applied for Blocks 209 (Erha)
and 210 of Nigeria’s offshore oil fields, both of which were marketed at the roadshow. (Turner
Decl. ¶ 14.) That application—which stated that any potential license would be issued to a
Nigerian subsidiary of Exxon—was sent from the United States to Nigeria’s Ministry of
10
NAPIMS is the Corporate Services Unit of NNPC. (See Mot. at 20 n.6.) And “[i]n determining whether a
defendant has ‘minimum contacts’ with the forum . . . , courts can take into account the activities of a defendant’s
co-venturer or agent to determine whether the defendant had minimum contacts with the forum state.” Stone, 2009
WL 1108596, at *11. And, in any event, NNPC does not dispute that NAPIMS’ conduct can be imputed to NNPC.
24
Petroleum Resources and discussed a production sharing contract, but it did not directly mention
NNPC. 11 (First Hoon Decl. Ex. 12.)
However, after Exxon submitted its bid, Turner began “negotiating what would
become the Erha [Agreement]” and “was in constant contact with Nigerian officials, including
NNPC’s representatives,” and NNPC representatives “were in contact with [Turner] in Houston
via phone, fax, and telex messages.” (Turner Decl. ¶¶ 15, 17.) And on June 5, 1992, the
Ministry of Petroleum Resources—whose Minister is also the chairman of NNPC—sent a letter
awarding an Oil Prospecting Lease for Block 209 (Erha) to Exxon in Houston. (Turner Decl.
¶ 16; First Hoon Decl. Ex. 13.) In that letter, the Ministry of Petroleum Resources advised
Exxon to “get in touch with NAPIMS for details on the” Agreement to be entered with NNPC.
(First Hoon Decl. Ex. 13.)
Exxon and NAPIMS/NNPC began negotiating the Agreement in the summer of
1992. Turner “played a key role” in those negotiations and states that he “had extensive contact
with NNPC” and NAPIMS. (Turner Decl. ¶¶ 18–19.) In doing so, Turner typically met with
NNPC/NAPIMS in Lagos, Nigeria, but he sent letters on Exxon letterhead from Houston to
NNPC/NAPIMS, and he and NNPC/NAPIMS “exchanged phone calls and faxes” while he was
in Houston. (Turner Decl. ¶ 19.) Notably, Exxon and its affiliates had no presence in Nigeria
until Esso was incorporated on February 26, 1993. Thus, any contact NNPC had with Exxon
that was not in person during negotiations was directed to the United States. (Turner Decl.
¶¶ 19, 22.) Simply put, NNPC/NAPIMS directed its communications to American companies in
Houston during the bulk of negotiations. And as a result of these United States-directed
negotiations, the parties executed the Agreement on May 21, 1993. (Turner Decl. ¶ 22.)
11
This Court notes that bids or communications sent by Exxon from the United States to Nigeria cannot serve
as purposeful availments of the forum by NNPC.
25
Moreover, NNPC concedes that Esso was created solely for the purpose of entering the
Agreement. (Oral Arg. Tr. at 26:2–19.)
In addition, Esso claims that “there have been multiple meetings between NNPC
and Exxon representatives in Houston concerning the [Agreement], the exploration of the Erha
field, and where to drill wells.” (TAP ¶ 43 n.18.) However, there is evidence of only two such
meetings. First, NNPC representative Mele Kyari travelled to now ExxonMobil’s Houston
office “in connection with” the Erha oil field in the early 2000s “to determine where to drill the
well” in Erha. (Second Hoon Decl. Ex. 17 at 80:5–81:2.) Second, in 2013, ExxonMobil hosted
NAPIMS officials for training programs, and “[t]he sponsorship of the training program for
NAPIMS [wa]s based on both the legal and contractual obligations placed on” Esso by the
Agreement. (Second Hoon Decl. Ex. 27 at 29–40.) 12
NNPC’s primary counterargument is that many of these contacts occurred over 20
years ago and that they were not directly related to this dispute. It cites Moncrief Oil
International Inc. v. OAO Gazprom, 481 F.3d 309, 312–13 (5th Cir. 2007), for the proposition
that contract negotiations and messages sent from outside the forum are insufficient to
demonstrate minimum contacts. But that case—which is not binding on this Court—should not
be read so broadly. There, the Fifth Circuit held that “a plaintiff’s unilateral activities in [the
forum state] do not constitute minimum contacts where the defendant did not perform any of its
obligations in [the forum state], the contract did not require performance in [the forum state], and
the contract is centered outside of” the forum state. Moncrief Oil, 481 F.3d at 312 (emphasis
12
Esso argues that several other instances help establish minimum contacts but fails to tie them to this dispute
or the Agreement. For example, Esso claims that NNPC regularly ships oil, including oil that was lifted from Erha,
to the United States. Esso provides no evidence for this assertion beyond a news article stating that NNPC generally
ships oil to the United States—but this motion concerns specific personal jurisdiction, and there is no indication that
any of the shipped oil mentioned in the article came from Erha. In addition, Esso argues that NNPC registered its
website in the United States to solicit business from and market its services to American companies. But Esso has
provided no evidence that NNPC has used its website in connection with this dispute or the Agreement.
26
added). The Fifth Circuit also noted that a visit to Texas by defendant that “helped to further
planning and negotiations” was insufficient where no agreement was established. Moncrief Oil,
481 F.3d at 313.
But here, NNPC entered the United States to solicit bids from and directed
communications to Exxon representatives in Houston that led to the formation of the Agreement.
And courts in this district have found negotiations essential to the formation of contracts at issue
to be sufficient, on their own, to establish minimum contacts. See Sherwin-Williams Co. v.
C.V., 2016 WL 354898, at *3–4 (S.D.N.Y. Jan. 28, 2016) (findings minimum contacts where the
parties negotiated “key terms” of the contract in New York, even though the concluding
negotiations and the contract’s execution were not in New York, neither party was from New
York, the transactions contemplated by the contract had nothing to do with New York, and the
parties agreed to arbitrate in Texas under Mexican law); Millennium, L.P. v. Dakota Imaging,
Inc., 2003 WL 22940488, at *4 (S.D.N.Y. Dec. 15, 2003) (holding that defendant’s attendance at
a trade show to solicit business, which led to the formation of a contract outside the forum, was
sufficient to establish minimum contacts); Nat’l Cathode Corp. v. Mexus Co., 855 F. Supp. 644,
647 (S.D.N.Y. 1994) (finding minimum contacts where defendant’s agents “physically entered
New York and engaged in discussions that were essential to formation of the contract at the heart
of this action”); see also Topnotch Tennis Tours, LLC v. Glob. Tennis Connections Ltd., 2014
WL 6389587, at *6 (E.D.N.Y. Nov. 14, 2014) (finding minimum contacts based on a single onehour meeting in which defendant solicited plaintiff’s business, culminating in the parties’
negotiation of a contract).
When all NNPC’s Agreement-related contacts are considered together, it is clear
NNPC purposely availed itself of the forum. See Eades, 799 F.3d at 168 (finding minimum
27
contacts in a Federal Debt Collection Practices Act action in New York where defendant mailed
a debt collection notice to plaintiff in New York, engaged in one debt collection phone call while
plaintiff was in New York, and mailed a Pennsylvania state-court summons and complaint to
plaintiffs in New York); Porco v. Phoenix Bldg. Corp., 2019 WL 2210659, at *5 (S.D.N.Y. May
21, 2019) (finding minimum contacts where defendant’s “communications with Plaintiff reflect[]
that he purposefully solicited investment from New York persons for his own financial gain”);
Hypnotic Hats, Ltd. v. Wintermantel Enters., LLC, 2016 WL 7451306, at *4 (S.D.N.Y. Dec. 27,
2016) (finding were minimum contacts with New York where “Defendants marketed and sold
their products nationwide through their websites; on multiple occasions received orders from
New York and shipped products to New York; and . . . directly solicited New York customers
via email”); MasterCard Int’l Inc. v. Fed’n Internationale de Football Ass’n, 2006 WL 2320408,
at *4 (S.D.N.Y. Aug. 10, 2006) (finding minimum contacts in part because defendant “came to
New York for two days to negotiate key aspects of a contract” with a New York-based company
“and then continued to have electronic and telephonic communications with that company
toward completing negotiations and performance of the contract”). Specifically, NNPC attended
the Houston roadshow to solicit bids, engaged in preliminary negotiations in Houston, directed
communications to the United States during contract negotiations, and travelled to the United
States on more than one occasion to facilitate performance of the Agreement.
2. U.S.-Dollar Transactions and Bank Accounts
Next, Esso argues that there are minimum contacts because NNPC (1) transacts in
U.S. dollars; (2) maintains, controls, and uses bank accounts held in the United States, including
correspondent bank accounts; and (3) directs the proceeds of oil—including oil lifted from
28
Erha—to bank accounts in the United States. (TAP ¶ 23.) 13 Esso’s primary focus appears to be
that NNPC may hold bank accounts in the United States. But this Court finds the evidence of
U.S.-dollar transactions and payments directed to United States accounts far more persuasive.
Indeed, the record reflects that NNPC transacts business in U.S. dollars and uses
United States bank accounts to receive and transfer funds related to the Erha oil field. For
instance, bidding fees for Erha were to be paid in U.S. dollars, (Second Hoon Decl. Ex. 28 at 4),
and the letter accepting Exxon’s bid required Exxon to “pay the signature bonus and reserved
value of U.S. $10 million,” (First Hoon Decl. Ex. 13). See Republic of Arg. v. Weltover, Inc.,
504 U.S. 607, 619–20 (1992) (finding that Argentina had sufficient minimum contacts with the
United States in part because it issued “negotiable debt instruments denominated in United States
dollars and payable in New York”); Official Comm. of Unsecured Creditors of Arcapita v.
Bahrain Islamic Bank, 549 B.R. 56, 71 (S.D.N.Y. 2016) (holding that defendant’s decision to
transact in U.S. dollars and use New York accounts to effectuate transactions established
minimum contacts).
In addition, an auditor found that proceeds from Equity Oil were directed to the
CBN and NNPC’s joint “JPMorgan USD Crude Oil Account.” (Second Hoon Decl. Ex. 26 at
38–39, 112 (2015 Report on the Investigative Forensic Audit into the Allegations of Unremitted
Funds into the Federation Accounts Held by the NNPC).) Moreover, in at least three specific
instances, NNPC directed purchasers of oil lifted from the Erha field to send payments to the
13
Any allegations that NNPC generally uses U.S. dollars or bank accounts or directs oil payments to accounts
held in the United States are irrelevant to the extent they do not relate to the Agreement or the Erha oil field because
minimum contacts relate to specific, not general, jurisdiction. For instance, Esso alleges that NNPC shipped
155,000 barrels of Naphta crude oil from Nigeria to New York in 2014. But it is entirely unclear how “Naphta” oil
has anything to do with this dispute. See In re N. Sea Brent, 2017 WL 2535731, at *6 (finding no specific personal
jurisdiction in a case with claims for manipulative trading of crude oil where evidence of shipment of crude oil to
the forum did not show “that th[o]se shipments included crude oil cargoes subject to the manipulative trading
described in the Complaints”).
29
JPMorgan accounts in the United States, and in one of those instances specifically requested U.S.
dollars. (Second Hoon Decl. Ex. 29.) And beyond that, monthly reports provided by NNPC to
Nigeria’s Federation Account Allocation Committee indicate that NNPC often directs purchasers
of Erha oil to deposit large U.S. dollar amounts into JPMorgan accounts in New York. (See ECF
No. 239 & Exs. 2–5.) And NNPC’s General Manager of Banking Operations explained that
NNPC directs U.S. dollar purchasers of oil to make payment into JPMorgan accounts in the
United States. (Oluwaniyi Decl. ¶ 11.)
NNPC’s purposeful and repeated use of accounts held in the United States
relating to this dispute demonstrate that NNPC purposely availed itself of the forum. See Licci,
732 F.3d at 171 (holding that, while the “mere maintenance” of a bank account in the United
States is insufficient, the use of a bank account “as an instrument to achieve the very wrong
alleged” is sufficient to establish minimum contacts); Bahrain Islamic Bank, 549 B.R. at 70
(finding minimum contacts where defendant “chose to receive . . . funds in U.S. dollars and
designated correspondent bank accounts in New York to receive the funds, even though they
presumably could have performed the . . . transactions without ever directing the funds through
New York or anywhere else in the United States,” and the commodities and securities at issue
were not purchased in the U.S.); Eldesouky v. Aziz, 2014 WL 7271219, at *8–9 (S.D.N.Y. Dec.
19, 2014) (finding minimum contacts in a fraud, breach of contract, and conversion action where
defendants directed plaintiffs to send payments for flaxseed purchases to defendants’ New York
bank account); Ge Dandong v. Pinnacle Performance Ltd., 966 F. Supp. 2d 374, 384 (S.D.N.Y.
2013) (finding minimum contacts in a securities action because the defendants used “New York
bank accounts to deposit funds it raised through the issuance of the Notes, which were then used
to purchase . . . CDOs” subject to the dispute).
30
NNPC’s primary counterargument is that the CBN—not NNPC—owns the
JPMorgan accounts held in the United States. For the same reasons described in the alter ego
section of this Opinion & Order, this argument is unpersuasive. NNPC receives account
statements and has authority to direct transfers to and from the accounts. (See First Hoon Decl.
Ex. 1 at 105:21–106:24, 111:21–112:10, 129:14–131:13.) And regardless, the point is not
whether NNPC owns the accounts, it is that they made purposeful use of them for reasons related
to the underlying dispute.
3. Conclusion on Minimum Contacts
Ultimately, this Court finds that NNPC has sufficient minimum contacts with the
United States to satisfy constitutional due process because NNPC attended a roadshow in
Houston, solicited bids and engaged in early contract negotiations in Houston, directed
communications to Houston during contract negotiations, visited the United States on more than
one occasion during the performance of the Agreement, transacted in U.S. dollars in dealings
related to this dispute, and directed purchasers of oil from the Erha field to deposit funds into
bank accounts in the United States. 14
4. Reasonableness
Even though NNPC purposefully directed its activities at the forum, it may still
defeat jurisdiction if it makes “a compelling case that the presence of some other considerations
14
Esso also argues that NNPC has minimum contacts with the United States merely because it agreed to an
arbitration clause with an affiliate of an American entity and knew that both Nigeria and the United States were
signatories to the New York Convention. Esso bases this argument on a Second Circuit case holding that “when a
country becomes a signatory to the Convention, by the very provisions of the Convention, the signatory State must
have contemplated enforcement actions in other signatory States.” Seetransport Wiking Trader
Schiffarhtsgesellschaft MBH & Co., Kommanditgesellschaft v. Navimpex Centrala Navala, 989 F.2d 572, 578 (2d
Cir. 1993). But Esso’s argument is inapposite because Seetransport’s holding pertained to subject matter
jurisdiction, and the Second Circuit separately found personal jurisdiction for unrelated reasons. Seetransport, 989
F.2d at 579. Esso points to no precedent—and this Court is unaware of any—holding that minimum contacts are
established where a defendant agrees to an arbitration clause with an affiliate of an American company.
31
would render jurisdiction unreasonable.” Licci, 732 F.3d at 173. Specifically, “a court considers
[a respondent’s] contacts in light of other factors to determine whether the assertion of personal
jurisdiction would comport with fair play and substantial justice.” Charles Schwab, 883 F.3d at
82 (quotation marks omitted); Int’l Shoe Co. v. State of Wash., Office of Unemployment Comp.
& Placement, 326 U.S. 310, 316 (1945). “These considerations include: (1) the burden that the
exercise of jurisdiction will impose on the defendant; (2) the interests of the forum . . . in
adjudicating the case; (3) the plaintiff’s interest in obtaining convenient and effective relief; (4)
the interstate judicial system’s interest in obtaining the most efficient resolution of the
controversy; and (5) the shared interest of the states in furthering substantive social policies.”
Eades, 799 F.3d at 169 (citations and quotation marks omitted). “Where other elements for
jurisdiction have been met, dismissals on reasonableness grounds should be few and far
between.” Rosa v. TCC Commc’ns, Inc., 2017 WL 980338, at *8 (S.D.N.Y. Mar. 13, 2017);
accord Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 575 (2d Cir. 1996).
In sum, the factors favor Esso. The burden on NNPC is limited—this is a
summary proceeding to confirm an arbitral award that is approaching its conclusion. And Esso
has an interest in using this forum to obtain relief. Of course, there is also a substantial interest
in obtaining an efficient resolution of this controversy and in confirming arbitral awards. See
Corporacion Mexicana De Mantenimiento Integral, S. De R.L. De C.V. v. Pemex-Exploracion Y
Produccion (“Pemex”), 832 F.3d 92, 105 (2d Cir. 2016) (discussing New York Convention’s
“pro-enforcement bias” and stressing “the need to ensure legal claims find a forum”);
Encyclopaedia Universalis S.A. v. Encyclopaedia Britannica, Inc., 403 F.3d 85, 90 (2d Cir.
2005) (observing the “strong public policy in favor of international arbitration”); Ottley v.
Sheepshead Nursing Home, 688 F.2d 883, 898 (2d Cir. 1982) (“It has become the fashion for
32
courts to encourage and foster the use of arbitration as a more expeditious and inexpensive
means of settling disputes, particularly as the pressure of mounting judicial caseloads is thereby
reduced. No one can doubt that the public interest is generally served when parties to disputes
agree upon such means for their resolution.”). Accordingly, this Court finds that even if due
process were required, this Court may properly exercise personal jurisdiction.
II.
Forum Non Conveniens
In the alternative, NNPC argues that—after years of jurisdictional discovery—this
Court should invoke the doctrine of forum non conveniens to dismiss the action. Forum non
conveniens is “a discretionary device permitting a court in rare instances to dismiss a claim even
if the court is a permissible venue with proper jurisdiction over the claim.” DigitAlb, Sh.a v.
Setplex, LLC, 284 F. Supp. 3d 547, 560 (S.D.N.Y. 2018). In exercising their discretion, courts
apply the three-step analysis set forth in Iragorri v. United Technologies Corp., 274 F.3d 65 (2d
Cir. 2001). See Abdullahi v. Pfizer Inc., 562 F.3d 163, 189 (2d Cir. 2009). “Under the Iragorri
analysis, the court (1) determines the degree of deference properly accorded the plaintiff’s choice
of forum; (2) considers whether the alternative forum proposed by the defendants is adequate to
adjudicate the parties’ dispute; and (3) balances the private and public interests implicated in the
choice of forum.” DigitAlb, 284 F. Supp. 3d at 561.
However, as a threshold issue, “[t]he central purpose of any forum non
conveniens inquiry is . . . to ensure that the trial is convenient.” Norex Petroleum Ltd. v. Access
Indus., Inc., 416 F.3d 146, 154 (2d Cir. 2005). This alone counsels in favor of denying NNPC’s
motion. There will be no trial in this case and no witnesses will be inconvenienced because no
additional discovery is necessary. And given that the parties have expended substantial time and
resources litigating this matter, it makes little sense—at this late stage—to dismiss on a
33
discretionary basis. In addition, this Court finds that the Iragorri factors weigh in favor of
denying the motion.
The first step “starts with a strong presumption in favor of the plaintiff’s choice of
forum.” Norex, 416 F.3d at 154 (quotation marks omitted). “Indeed, it is generally understood
that, unless the balance is strongly in favor of the defendant, the plaintiff’s choice of forum
should rarely be disturbed.” Norex, 416 F.3d at 154 (quotation marks omitted). However, “the
degree of deference given to the plaintiff’s forum [can vary] with the circumstances” on a sliding
scale: “[u]sually the greatest deference is afforded a plaintiff’s choice of its home forum, while
less deference is afforded to a foreign plaintiff’s choice of a United States forum.” Norex, 416
F.3d at 154 (quotation marks and citations omitted) (alteration in original). Ultimately, Esso’s
choice of this forum should be given deference, but “less deference” than had it chosen a forum
in Nigeria.
However, this is not an “abrupt or arbitrary” rule, and, like here, “[t]he more it
appears that a . . . foreign plaintiff’s choice of forum has been dictated by reasons that the law
recognizes as valid, the greater the deference that will be given to the plaintiff’s forum choice.”
Norex, 416 F.3d at 154 (quotation marks omitted). Moreover, this Court notes that “Congress
enacted the FSIA specifically to provide access to the United States’ courts, and [NNPC]
purposefully availed itself of the privilege of conducting business within the United States.”
Figueiredo Ferraz Consultoria E Engenharia De Projeto Ltda. v. Republic of Peru, 655 F. Supp.
2d 361, 375 (S.D.N.Y. 2009), rev’d on other grounds sub nom. Figueiredo Ferraz E Engenharia
de Projeto Ltda. v. Republic of Peru, 665 F.3d 384, 390 (2d Cir. 2011) (noting that the district
court “appropriately gave somewhat reduced deference”).
34
The second step does not weigh strongly in favor of either side. On the one hand,
the Set Aside and FIRS Appeals effectively hold NNPC liable but prevent Esso from recovering
damages. Cf. DigitAlb, 284 F. Supp. 3d at 562 (“An alternative forum is adequate . . . if it
permits litigation of the subject matter of the dispute” and inadequate where it “provides a
remedy so clearly unsatisfactory or inadequate that it is tantamount to no remedy at all.”).
However, those rulings do not necessarily grant a right without a remedy—they arguably grant
declaratory relief but hold that the Arbitral Panel was without jurisdiction to issue the Award.
And those holdings were supported by the Nigerian courts’ interpretations of Nigerian statutes
and case law. Moreover, for the reasons stated in Section III, Nigeria could be an adequate
forum.
In any event, the third step requires balancing both private and public interest
factors to determine whether the case should be adjudicated here or in Nigeria. “The first set of
factors . . . [relate to] the convenience of the litigants,” including “the relative ease of access to
sources of proof;” the availability of compulsory process for attendance of witnesses; the
possible need to inspect premises; and other logistics “that make trial of a case easy, expeditious,
and inexpensive.” Iragorri, 274 F.3d at 73–74. Given the arbitration posture of this case, the
private interest factors favor Esso. See In re Arbitration between Monegasque De Reassurances
S.A.M. v. Nak Naftogaz of Ukr., 311 F.3d 488, 500 (2d Cir. 2002) (“[T]he private interest
factors might not ordinarily weigh in favor of forum non conveniens dismissal in a summary
proceeding to confirm an arbitration award . . . .”); Constellation Energy Commodities Grp. Inc.
v. Transfield ER Cape Ltd., 801 F. Supp. 2d 211, 220 (S.D.N.Y. 2011) (“With respect to
confirmation of the arbitration awards against ER Cape, the relevant sources of proof—the
[contract] and the arbitration awards—are already before this Court.”).
35
The public interest factors are “(1) [the] administrative difficulties flowing from
court congestion, (2) the local interest in having controversies decided at home, (3) the interest in
having the trial in a forum that is familiar with the law governing the action, (4) the avoidance of
unnecessary problems in conflict of laws or in the application of foreign law, and (5) the
unfairness of burdening citizens in an unrelated forum with jury duty.” Constellation Energy,
801 F. Supp. 2d at 220–22; see Iragorri, 274 F.3d at 74. The first, third, fourth, and fifth factors
counsel in favor of denying the motion, while the only the second factor counsels in favor of
granting it. In sum, the Iragorri analysis suggests that this action should proceed in this forum.
However, NNPC argues that Figueiredo requires dismissal of this action. In
Figueiredo, the Second Circuit dismissed the action on forum non conveniens grounds based on
two considerations. First, the Second Circuit held that the district court improperly deemed Peru
an inadequate forum, because the fact that only a United States court could attach assets located
in the United States does not render a foreign forum inadequate. Figueiredo, 665 F.3d at 390–92.
Second, a Peruvian statute limiting the amount of money a Peruvian agency could pay annually
to satisfy a judgment was a “highly significant public factor warranting FNC dismissal” that the
district court overlooked. Figueiredo, 665 F.3d at 390–92. Here, the first consideration is not
implicated. And while the second consideration has some relevance, given that Nigeria arguably
has an interest in barring tax disputes from arbitration, this Court is not persuaded that it alone
warrants dismissal on discretionary forum non conveniens grounds at this advanced stage of the
litigation.
III.
Confirmation of the Award
NNPC also moves under Rule 12(b)(6) to dismiss the Third Amended Petition on
the merits, arguing that this Court cannot confirm the Award because it has been set aside at the
36
seat of the arbitration in Nigeria. Conversely, Esso requests that this Court grant the relief
requested in the petition and confirm the Award.
In general, “when a party brings an action to confirm an arbitration award falling
under the [New York] Convention, a court ‘shall confirm the award unless it finds one of the
grounds for refusal or deferral of recognition or enforcement of the award specified in the said
Convention.’” Baker Marine (Nigeria) Ltd. v. Chevron (Nigeria) Ltd., 191 F.3d 194, 196 (2d
Cir. 1999) (quoting 9 U.S.C. § 207). The party opposing enforcement has the heavy burden of
proving the existence of one of these grounds. See NTT DoCoMo, Inc. v. Ultra d.o.o, 2010 WL
4159459, at *2 (S.D.N.Y. Oct. 12, 2010). The relevant ground here falls under New York
Convention Article V, paragraph (1)(e), which provides that a court may refuse to confirm an
award when it “has been set aside or suspended by a competent authority of the country in
which, or under the law of which, that award was made.” Yusuf Ahmed Alghanim & Sons v.
Toys “R” Us, Inc., 126 F.3d 15, 20 (2d Cir. 1997) (quoting Convention on the Recognition and
Enforcement of Foreign Arbitral Awards art. V, ¶ (1)(e), June 10, 1988, 21 U.S.T. 2517, 330
U.N.T.S. 38 (hereinafter “New York Convention”)). The parties do not dispute that the Award
has been set aside in Nigeria.
Notably, this ground is permissive, not mandatory. See Pemex, 832 F.3d at 106.
Accordingly, the decision to confirm is committed to this Court’s sound discretion. Thai-Lao
Lignite (Thai.) Co. v. Government of Lao People’s Democratic Republic, 864 F.3d 172, 181 (2d
Cir. 2017). Moreover, there is a “strong public policy in favor of international arbitration,” and
the “review of arbitral awards . . . is very limited.” Encyclopaedia Universalis, 403 F.3d at 90
(quotation marks omitted). Indeed, confirmation “is a summary proceeding in nature, which is
not intended to involve complex factual determinations, other than a determination of the limited
37
statutory conditions for confirmation or grounds for refusal to confirm. A district court
confirming an arbitration award does little more than give the award the force of a court order.”
Zeiler v. Deitsch, 500 F.3d 157, 169 (2d Cir. 2007) (citation omitted).
Esso argues that this Court should confirm the Award—even though it has been
set aside in Nigeria—because (1) the liability portion of the Award was reinstated, this Court
should confirm that portion of the Award and use its inherent power to award damages; (2) this
case is analogous to Pemex, where the Second Circuit confirmed an arbitral award that had been
set aside; and (3) Esso has not received due process in Nigeria.
A. The Liability Portion of the Award Has Been Reinstated
Esso’s first argument is that because the Nigerian Court of Appeal restored the
part of the Award related to the preparation of Petroleum Profit Tax returns and the calculation
of lifting allocations, this Court should confirm that part of the Award—which includes no
damages—and use its inherent power to award damages in presumably the same amount as set
forth in the Award. NNPC argues that the Court of Appeal merely ordered declaratory and
prospective relief, and that no monetary award exists to be enforced.
The authorities Esso cites do not support the proposition that a district court can
fashion a $1.8 billion award using only its inherent authority. For instance, it claims that Zurich
American Insurance Co. v. Team Tankers A.S., 811 F.3d 584, 588 (2d Cir. 2016), holds that
courts have discretion to compensate petitioners for damages. But there, the district court
awarded the respondent attorneys’ fees and costs—not a massive damages award. Zurich Am.,
811 F.3d at 592. And in any event, the Second Circuit reversed the district court’s order
awarding fees and costs. Zurich Am., 811 F.3d at 592. Nor is Seed Holdings, Inc. v. Jiffy
International AS, 5 F. Supp. 3d 565, 591 (S.D.N.Y. 2014), on point. In Seed Holdings, the
38
district court merely augmented an arbitral award to provide interest. Finally, Esso cites Pemex,
where the Second Circuit affirmed a district court’s interpretation of an arbitral award to include
an additional $106 million, reflecting the value of certain performance bonds that should have
been included in the original award. See Pemex, 832 F.3d at 112. But resuscitating a vacated
award using only a court’s inherent authority is in a different dimension than interpreting the
proper value of an arbitral award. Indeed, the Federal Arbitration Act provides that courts “may
modify and correct [an arbitral] award, so as to effect the intent thereof and promote justice
between the parties.” 9 U.S.C. § 11.
Ultimately, while this Court may have inherent authority to fashion appropriate
relief in certain circumstances, exercising that authority to create a $1.8 billion judgment is a
bridge too far.
B. Pemex
Esso next argues that this Court should confirm the Award based on the reasoning
in Pemex. In Pemex, the Second Circuit ruled that a foreign arbitral award should be confirmed
even though it was set aside by the foreign arbitration tribunal. Pemex, 832 F.3d at 107.
Specifically, the Second Circuit explained that “[a] judgment is unenforceable as against public
policy to the extent that it is repugnant to fundamental notions of what is decent and just in the
State where enforcement is sought.” Pemex, 832 F.3d at 106; see also Fed. Treasury Enter.
Sojuzplodoimport v. Spirits Int’l B.V., 809 F.3d 737, 743 (2d Cir. 2016). In other words, a
United States court should determine whether the judgment setting aside the award is
unenforceable because it offends notions of justice from the point of view of the United States.
However, the public policy exception is narrow and available only in “rare circumstances,” and
“[t]he standard is high[] and infrequently met.” Pemex, 832 F.3d at 106, 111 (alteration in
39
original). Indeed, “a final judgment obtained through sound procedures in a foreign country is
generally conclusive.” Ackermann v. Levine, 788 F.2d 830, 837 (2d Cir. 1986). Therefore,
“[a]ny court should act with trepidation and reluctance in enforcing an arbitral award that has
been declared a nullity by the courts having jurisdiction over the forum in which the award was
rendered.” Pemex, 832 F.2d at 111.
The Second Circuit instructs courts to weigh four considerations: “(1) the
vindication of contractual undertakings and the waiver of sovereign immunity; (2) the
repugnancy of retroactive legislation that disrupts contractual expectations; (3) the need to ensure
legal claims find a forum; and (4) the prohibition against government expropriation without
compensation.” Pemex, 832 F.3d at 107. Esso concedes that the fourth consideration is not at
issue. When weighing these considerations, courts must “accommodate[] uneasily two
competing (and equally important) principles: [i] ‘the goals of comity and res judicata that
underlie the doctrine of recognition and enforcement of foreign judgments’ and [ii] ‘fairness to
litigants.’” Pemex, 832 F.3d at 106 (second and third alterations in original) (quoting
Ackermann, 788 F.2d at 842).
1. The Vindication of Contractual Undertakings
With respect to the first factor, the parties agreed to an arbitration clause. See
Pemex, 832 F.3d at 107. However, the Agreement required any arbitral proceeding to occur in
Nigeria and to apply Nigerian law. And because it is at least arguable that this is a non-arbitrable
tax dispute under Nigerian law, it cannot be said that the parties agreed to arbitrate this dispute.
While Esso of course denies that this is in fact a tax dispute, NNPC appears to have maintained
from the outset of the arbitration that the matter was a non-arbitrable tax dispute. (TAC ¶¶ 55–
56; Atake Decl. ¶ 23 (“From the outset of [arbitral] proceedings, NNPC did all that it could to
40
avoid arbitration, arguing that the Tribunal lacked jurisdiction because the dispute between
Petitioners and NNPC was allegedly a ‘tax dispute,’ rather than a contractual one.”).) That
position is unlike the respondent’s in Pemex, who participated in the arbitration “without
contending that its act of administrative rescission was beyond the reach of arbitration.” Pemex,
832 F.3d at 107. Further, the respondent in Pemex did not dispute that the arbitration clause
applied to the underlying dispute. See Pemex, 832 F.3d at 107. Ultimately, while it may be
unclear whether this matter is a non-arbitrable tax dispute under Nigerian law, the concerns
voiced in Pemex do not apply—namely, the Agreement does not clearly call for this dispute to
be arbitrated. Accordingly, the first factor favors NNPC.
2. Retroactivity
With respect to the second factor, courts consider whether “[r]etroactive
legislation . . . cancels existing contract rights.” Pemex, 832 F.3d at 108. This case presents a
unique scenario in that Esso does not argue that Nigeria passed a law retroactively nullifying the
arbitration clause. Rather, Esso argues that the Nigerian courts’ “unprecedented” decisions to
hold this dispute not arbitrable serve as a retroactive application of the law. To put this argument
in context, it helps to understand the concerns at play in Pemex.
In Pemex, the state oil and gas company of Mexico (“PEP”) contracted with
COMMISA to build oil platforms in the Gulf of Mexico. Pemex, 832 F.3d at 97–98. That
contract included an arbitration clause governed by Mexican law. Pemex, 832 F.3d at 98. At the
time of the contract’s execution, the PEMEX and Affiliates Organic Law provided that PEP
could execute arbitration agreements. Pemex, 832 F.3d at 98. After a dispute arose, COMMISA
filed a demand for arbitration, and both parties actively participated in an arbitration and the
arbitration panel issued a preliminary award. Pemex, 832 F.3d at 98. To that point, PEP never
41
argued that the dispute was not subject to arbitration. Pemex, 832 F.3d at 99. Thereafter,
however, the Mexican Congress shortened the statute of limitations for the types of claims raised
by COMMISA from 10 years to 45 days and vested exclusive jurisdiction of those claims in the
Tax and Administrative Court, rather than Mexican district courts. Pemex, 832 F.3d at 99. In
addition, the Mexican Congress enacted a law (“Section 98”) prohibiting arbitration for certain
claims, including those raised by COMMISA. Pemex, 832 F.3d at 99. After that, the arbitration
tribunal issued its final award. PEP challenged the arbitral award in Mexico (while COMMISA
confirmed it in the United States), and a Mexican appeals court held that COMMISA’s claims
were not arbitrable and annulled the award, relying on the newly enacted Section 98 in its
decision. Pemex, 832 F.3d at 99.
Ultimately, the Second Circuit held that the application of Section 98 served as a
retroactive change in law, because it was “an abrupt departure from the ‘Pemex and Affiliates
Organic Law’” that was in effect at the time the parties executed the arbitration clause. Pemex,
832 F.3d at 108. Simply put, the Second Circuit believed that “allowing Section 98 to nullify
COMMISA’s arbitral award would deprive COMMISA of its contract rights through a
retroactive change in law.” Pemex, 832 F.3d at 108. The Second Circuit noted that PEP
“actively participated in the arbitration proceedings,” Pemex, 832 F.3d at 108, and that the new
laws divested arbitral jurisdiction and shortened the statute of limitations.
Here, the Nigerian Court of Appeal relied on several Nigerian laws to determine
that this dispute was an non-arbitrable tax dispute, including: (1) the Arbitration and Conciliation
Act of 1990 (passed before the Agreement), (2) the Petroleum Profit Tax Act (“PPT Act”)
(passed before the Agreement), (3) Section 251 of Nigeria’s 1999 Constitution, and (4) the 2007
FIRS Act. While some of these laws—namely, the 1999 Constitution and the 2007 FIRS Act—
42
were enacted after the Agreement was executed, all of them were enacted before this dispute
arose. That distinguishes this case from Pemex, where the Second Circuit’s primary concern was
that Mexico changed its law after the petitioner obtained a preliminary award.
However, Esso argues that the Nigerian courts interpreted these laws in
contravention to legal precedent, serving as the equivalent of a retroactive application of law.
Specifically, Esso argues, at least in part, that no Nigerian court had ever held that Section 251 of
the 1999 Constitution made this type of dispute non-arbitrable until Esso had its award in hand.
(See First Oguntade Decl. ¶¶ 24–27.) NNPC counters that the Nigerian courts relied primarily
on the Arbitration and Conciliation Act and the PPT Act—both of which were enacted prior to
the execution of the Agreement—and that Section 251 of the 1999 Constitution only served as a
secondary basis for holding the dispute non-arbitrable. As a threshold issue, NNPC is correct
that the Nigerian Court of Appeal relied on more than Section 251 of the 1999 Constitution in
the Set Aside Appeal and did not appear to rely on the constitution at all in the FIRS Appeal.
(See Pets.’ Mem. of Law in Opp., ECF No. 219, at 29 (“[T]he Set Aside Appeal . . . interpret[ed]
. . . the PPT Act . . . .”); Atake Decl. Ex. 5 at 10–15; Atake Decl. Ex. 6 at 4, 40–43, 58.) But
even so, the Nigerian Court of Appeal relied, at least in part, on the 1999 Constitution and 2007
FIRS Act in making its determination in the Set Aside Appeal.
While Esso may not agree with the result, the Nigerian Court of Appeal
conducted a fulsome analysis to determine whether tax disputes were arbitrable and whether the
dispute at bar was a tax dispute. In doing so, the Nigerian Court of Appeal applied the relevant
statutes and case law. (See Atake Decl. Ex. 5 at 10–15; Atake Decl. Ex. 6 at 4, 40–43, 58.)
Ultimately, this Court is “in no position to pass upon [the Nigerian] court[s’] interpretation of
43
[Nigerian] law, or upon the sufficiency of its precedent.” Pemex, 832 F.3d at 108. But that is
precisely what Esso asks this Court to do.
Instead, this Court must “assess whether the nullification of the [A]ward offends
basic standards of justice in the United States.” Pemex, 832 F.3d at 108, 111. While this Court
is sympathetic to Esso’s situation, new interpretations of constitutional provisions and
amendments are commonplace in American jurisprudence. Criminal exclusionary rules are a
prime example. Before Mapp v. Ohio, 367 U.S. 643 (1961), evidence seized during an illegal
search was not inadmissible in state trials, and before Miranda v. Arizona, 384 U.S. 436 (1966),
statements obtained without full warnings of constitutional rights were not inadmissible. The
words in the Fourth and Fifth Amendments were the same before and after the Supreme Court
interpreted those provisions. And Supreme Court jurisprudence is replete with similar examples.
See, e.g., Bell Atl. Corp. v. Twombly, 550 U.S. 544, 563 (2007) (changing pleading standard
under Rule 12); Gideon v. Wainwright, 372 U.S. 335 (1963) (holding, for the first time, that the
Sixth Amendment required the appointment of counsel for indigent criminal defendants); Brown
v. Board of Educ. of Topeka, Shawnee Cty., Kan., 347 U.S. 483 (1954) (holding that racial
segregation in schools violates the Equal Protection Clause, overturning prior interpretations of
the same constitutional amendment). Accordingly, the Nigerian courts’ holdings do not offend
basic standards of justice from the point of view of the United States.
Separately, this consideration favors NNPC because the retroactivity concerns
from Pemex are not at issue here, given that Esso knew that NNPC contested jurisdiction before
the Award was issued. Conversely, in Pemex, the petitioner received a preliminary award, only
to have a Mexican court set aside its award and find its claims retroactively time-barred. Pemex,
832 F.3d at 99. In addition, Esso’s insistence on including the Stabilization Clause in the
44
Agreement demonstrates that it understood Nigerian laws were subject to change. Nevertheless,
it executed the Agreement. Therefore, the retroactivity concerns addressed in Pemex are not at
issue here.
3. The Need to Ensure Legal Claims Find a Forum
With respect to the third factor, Esso argues that it will be left without a forum to
confirm the Award or to seek redress for NNPC’s liability. On the one hand, even though Esso
views its prospects of prevailing in the Nigerian courts as slim, it has multiple appeals pending
and could still achieve confirmation of the Award there. Moreover, the fact that the Nigerian
Court of Appeal restored part of the Award undercuts Esso’s argument that Nigerian courts are
inhospitable and that it stands no chance of winning on appeal. In contrast, the petitioner in
Pemex had no other forum in which to confirm its award because it was set aside and because a
new law shortened the statute of limitations for its claim, retroactively time-barring it. In
addition, while this Court understands Esso’s complaint that a finding of liability without an
ability to recover damages seems inconsistent, the Nigerian Court of Appeals decisions
essentially function as a declaratory judgment and a finding that the Arbitral Panel did not have
jurisdiction to hear the damages dispute.
On the other hand, if Esso loses its Nigerian appeals, it can no longer bring a
claim in Nigeria and it will be left without a forum to recover damages for conduct which
Nigerian courts have held NNPC liable. That said, Esso knew that NNPC contested the Arbitral
Panel’s jurisdiction and could have pursued its claims through litigation. Further, and as
discussed above, the Set Aside and FIRS Appeals do not necessarily grant a right without a
remedy—they grant declaratory relief while holding that the Arbitral Panel lacked jurisdiction to
issue the Award.
45
Ultimately, this consideration favors NNPC. Simply put, this case is not Pemex.
Esso has multiple appeals pending in Nigeria and it was on notice that NNPC contested the
Arbitral Panel’s jurisdiction before the Award was issued.
4. Prohibition Against Government Expropriation Without Compensation
Esso does not address the fourth factor in its papers. However, this Court finds
that it could favor Esso—at least by analogy. Here, NNPC—an alter ego of Nigeria—overlifted
oil which deprived Esso of profit. While this situation may not be entirely congruent with
Pemex, this Court has the same concerns as the Second Circuit—namely, overlifting “amounted
to a taking of private property without compensation for the benefit of the government.” Pemex,
832 F.3d at 110.
5. Conclusion on Pemex
In sum, although a close call, this Court finds that the Pemex considerations favor
NNPC. Despite the seemingly anomalous rulings by the Nigerian courts—i.e., that NNPC is
liable but that no damages can be recovered—and the alter ego relationship between NNPC and
Nigeria, this case does not raise the concerns animating the Second Circuit’s decision in Pemex.
Here, NNPC contended “[f]rom the outset of [arbitral] proceedings . . . that the Tribunal lacked
jurisdiction because the dispute between Petitioners and NNPC was allegedly a ‘tax dispute,’
rather than a contractual one.” (Atake Decl. ¶ 23.) Moreover, this is not a case where the
Nigerian government changed the law after Esso had the Award in hand. Accordingly, and
because this Court must act with “trepidation and reluctance” in enforcing an arbitral award that
has been set aside at the seat of the arbitration, it declines to confirm the Award under Pemex.
See Baker Marine, 191 F.3d at 197 n.3 (“Recognition of the Nigerian [annulment of the arbitral
award] in this case does not conflict with United States public policy.”).
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C. Due Process
Finally, Esso argues that this Court should confirm the Award despite its being set
aside because Esso did not receive due process in Nigeria. Specifically, Esso argues that because
it expects “substantial delays” in receiving a ruling on its appeals, its due process rights have
been violated. As of November 2018, Esso claimed that it expects that rulings “may take at a
minimum a further four to six years.” (First Oguntade Decl. ¶ 78.) Esso cites no case law within
this Circuit to support the proposition that a court should confirm a $1.799 billion award that was
set aside in its home country because of a lengthy appeals process.
Esso’s argument that any judgment entered in Nigeria will be difficult to collect
there is also meritless. If Esso received a judgment in Nigeria, it is free to convert that judgment
to a United States judgment. Moreover, Esso—a Nigerian company—executed a contract in
Nigeria with another Nigerian corporation containing an arbitration clause requiring any
arbitration to be held in Nigeria under Nigerian law, and it then sought to confirm the Award in
Nigeria. It cannot now reasonably complain that its efforts to collect will be frustrated in
Nigeria.
D. Conclusion on Confirmation
Under the New York Convention, a court may refuse to confirm an award when it
“has been set aside or suspended by a competent authority of the country in which, or under the
law of which, that award was made.” Yusuf Ahmed, 126 F.3d at 20 (quoting New York
Convention art. V, ¶ (1)(e)). Indeed, “a final judgment obtained through sound procedures in a
foreign country is generally conclusive.” Ackermann, 788 F.2d at 837. And the public policy
exception that Esso primarily relies on is narrow, and “[t]he standard is high, and infrequently
met.” Pemex, 832 F.3d at 106 (alteration in original). For the foregoing reasons, this Court is
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not persuaded that it should confirm the Award that has been set aside in Nigeria. Accordingly,
NNPC’s motion to dismiss the Third Amended Petition is granted.
IV.
Adverse Inference Motion
Esso’s adverse inference motion seeks to establish 12 facts as a sanction for
discovery violations regarding the production of documents related to the Committee and certain
bank accounts. “An adverse inference instruction based on the failure to produce . . . requires a
showing that (1) the party having control over the evidence had an obligation to timely produce
it; (2) that the party that failed to timely produce the evidence had a culpable state of mind; and
(3) that the missing evidence is relevant to the party’s claim or defense such that a reasonable
trier of fact could find that it would support that claim or defense.” Kortright Capital Partners LP
v. Investcorp Inv. Advisers Ltd., 330 F.R.D. 134, 137 (S.D.N.Y. 2019) (quotation marks
omitted). The bulk of Esso’s motion fails on the third requirement—relevance.
Facts 1 through 8, 11, and 12 15—some of which this Court found supported by the
record anyway—relate entirely to jurisdiction. Because this Court need not draw the requested
inferences to exercise jurisdiction, the motion as it pertains to those facts is denied as moot.
Through Fact 9, Esso seeks to establish that “[t]he team building workshop
referenced in the Committee Report took place during the first quarter of 2008. At the team
15
Facts 1 through 8, which Esso seeks to establish, are: (1) During the third quarter of 2007, President
Yar’Adua established the [Committee]; (2) While the Committee was investigating the operation and performance
of the Bonga and Erha oilfields, Petitioners were neither included on the Committee nor consulted in connection
with the Committee’s work; (3) The Committee’s goal was to extract more revenue from the Bonga and Erha
oilfields at Petitioners’ expense; (4) President Yar’Adua supervised the Committee’s work; (5) The Committee’s
recommendations were delivered to President Yar’Adua during April 2008; (6) President Yar’Adua instructed
NNPC to lift Petitioners’ oil from the Erha field in excess of its contractual entitlements based on the Committee’s
recommendation; (7) NNPC received President Yar’Adua’s instruction to lift Petitioners’ oil from the Erha field in
excess of NNPC’s contractual entitlements; and (8) NNPC’s management understood President Yar’Adua’s
instruction to mean that the President wanted NNPC to recover the amounts identified by President Yar’Adua from
Erha, even if doing so required it to lift oil in excess of its contractual entitlement. (Decl. of Shannon M. Leitner in
Supp. of Pets.’ Mot. for an Order Establishing Facts or Drawing Adverse Inferences, ECF No. 207, Ex. 1 (“List of
Proposed Facts”), ¶¶ 1–8.)
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building workshop, the Ministry of Energy, NNPC, DPR, FIRS, and the National Planning
Commission harmonized their interpretation of the relevant sections of the [Agreement] and PPT
Act.” (List of Proposed Facts, ¶ 9.) And through Fact 10, Esso seeks to establish that
During the course of the underlying Arbitration and resulting Nigerian Litigations,
NNPC coordinated with various organs of the Nigerian government, including but
not limited to the Department of Petroleum Resources, Ministry of Energy,
Ministry of Justice, Revenue Mobilization and Fiscal Commission, [FIRS], and
National Planning Commission, to seek to prevent the enforcement of the Award.
The Nigerian President approved this approach.
(List of Proposed Facts ¶ 10.) But these facts do not relate to the Nigerian judiciary and
therefore do not factor into a Pemex or due process analysis. Moreover, Esso provides no basis
for how the discovery violations relate to these two facts or how this Court could establish them.
Specifically, the discovery violations set forth in Esso’s motion for sanctions relate to the
production of documents regarding the Committee and various bank accounts—not to whether
NNPC coordinated with the Nigerian government. Accordingly, the motion with respect to Facts
9 and 10 is also moot. 16
Ultimately, this Court has “wide discretion” to impose discovery sanctions
pursuant to Rule 37. Daval Steel Prods. v. M/V Fakredine, 951 F.2d 1357, 1365 (2d Cir. 1991).
However, because the requested inferences are mostly moot, and the only facts that are arguably
not moot are irrelevant to the discovery violations, this Court cannot impose the requested
sanctions.
But this Court would be remiss if it did not address NNPC’s conduct during
discovery. Specifically, NNPC stonewalled Esso’s requests for documents related to the
Committee at every turn. Despite this Court’s orders to produce the Committee documents,
16
To the extent Esso seeks to use Facts 9 and 10 to establish that Nigeria has control over NNPC’s litigation
strategy, this Court need not consider them because it already found an alter ego relationship.
49
NNPC turned over a paltry four documents. And its excuses for its lack of production were
equally lacking—particularly that the Committee documents were with someone who died and
accordingly lost forever. Moreover, one of NNPC’s Rule 30(b)(6) witnesses appeared
unprepared for his deposition in London, further obfuscating discovery related to the
Committee’s work. However, because the only relevant facts requested are not related to any
discovery violations, the motion must be denied.
CONCLUSION
For the foregoing reasons, NNPC’s motion to dismiss is granted and Esso’s
motion for an adverse inference is denied. The Third Amended Petition is dismissed. The
parties are directed to advise this Court whether there is a continuing need for redactions in this
Opinion & Order by September 21, 2019. The Clerk of Court is directed to terminate all pending
motions and to mark this case as closed.
Dated: September 4, 2019
New York, New York
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