Tag Archives: Netherlands

Case of the Day: Van Sommeren v. Gibson

The case of the day is Van Sommeren v. Gibson (Ohio Ct. App. 2013). The case involved a dispute in the dairy farming industry in Ohio that I won’t try to summarize. The plaintiff wanted the testimony of a non-party residing in the Netherlands. The trial court obliged by issuing a letter of request under the Hague Evidence Convention. But the defendant came to understand that the testimony would be taken following the Dutch procedure, in which the judge, not the lawyers, would question the witness and in which the judge would dictate the witness’s answers to the clerk, who would transcribe the judge’s dictation. The defendant asked the Ohio court for a protective order precluding the plaintiff from proceeding with the deposition on the grounds that it would not result in a verbatim transcript and there would be no opportunity for unrestricted cross-examination. The judge granted the motion. On appeal, the court affirmed.

I think much of what the court had to say on appeal was muddled and misguided. The court correctly noted that the Convention is not exclusive, citing Aerospatiale among other cases, notably Schindler Elevator Corp. v. Otis Elevator Co., 657 F. Supp. 2d 525 (D.N.J. 2009). But in Aerospatiale (and in Schindler) the issue was whether a party could be compelled to use the Hague Evidence Convention when seeking discovery from another party. The answer, of course, is: “it depends.” But when a party seeks discovery from a non-party, the issue raised in Aerospatiale doesn’t come into play, because there is no choice in such cases between discovery under the law of the forum and discovery under the Hague Evidence Convention: it’s the Convention, or nothing. 1 In effect, the appellate court held that in cases where the adverse party will not be entitled to US-style cross-examination and there will be no verbatim transcript of the testimony, a party can be forbidden to make use of the Hague Evidence Convention even if it is the only way to obtain a witness’s testimony. That seems crazy to me. Suppose the Dutch witness had been willing to give an affidavit to one party or the other for use in summary judgment proceedings. The other party might not be able to take the witness’s deposition in time to oppose the motion, or the only way to take the deposition might be via the Dutch procedures that the court found to be so objectionable here. In that case, the thing to do is to seek relief under FRCP 56(d) (or the Ohio equivalent) and to explain to the judge why it’s not possible to rebut the showing in the affidavit on summary judgment. 2 The answer is not to say that the affidavit should not be considered.

All that being said, the decision whether to grant the protective order, and indeed the decision whether to issue the letter of request in the first place, was within the trial judge’s discretion. Ultimately the holding is that the judge did not abuse his discretion. This may well be correct. But that doesn’t mean the reasoning is sensible.

Notes:

  1. Actually, that’s not quite true. It may be that the foreign state’s domestic law has a procedure to permit discovery without requiring a letter of request, i.e., an analogue to § 1782. Also, US citizens abroad may be subject to subpoenas by US courts. But you get the point.
  2. Rule 56(d), formerly Rule 56(e), provides: ” If a nonmovant shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition, the court may: (1) defer considering the motion or deny it; (2) allow time to obtain affidavits or declarations or to take discovery; or (3) issue any other appropriate order.”

Case of the Day: Chevron Corp. v. Republic of Ecuador

Today’s case of the day, Chevron Corp. v. Republic of Ecuador (D.D.C. 2013), is the latest installment in Chevron’s efforts to enforce a $96 million arbitral award it obtained against Ecuador in an investment treaty arbitration held in the Hague under the US/Ecuador bilateral investment treaty. This arbitration arose out of Chevron’s claim that it had suffered damages on account of undue delay in the settlement of lawsuits TexPet (of which Chevron was a shareholder) had brought against Ecuador in the early 1990s.

I first noted the arbitration in May 2012, when I reported on the decision of a court in the Netherlands rejecting Ecuador’s attempt to have the award set aside. I noted Chevron’s motion to confirm in Washington in July 2012.

Ecuador raised four arguments against confirmation. First, it made a novel argument that the court lacked jurisdiction under the FSIA because it never agreed to arbitration of the underlying dispute about delay damages, the award was not made “pursuant to … an agreement to arbitrate,” as required by 28 U.S.C. § 1605(a)(6) for subject-matter jurisdiction to exist. But there is apparently no authority for the view that questions of arbitrability can be litigated twice, once to the arbitrator (or an appropriate court) on the merits and once as a jurisdictional matter when a foreign state seeks to block confirmation in a US court. The only appropriate questions, according to the judge, are (1) whether the award was made pursuant to an arbitration agreement to which the foreign state was party, and (2) whether the award “is or may be” governed by an agreement such as the New York Convention.

Second, Ecuador argued the same point as a matter of the merits rather than as a jurisdictional matter. Under Article V(1)(c) of the Convention, the court can refuse confirmation if the award “deals with a difference … not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration.” But since there was an agreement to arbitrate (namely, the US/Ecuador BIT, which the court construed, in line with the precedents, as a standing invitation to arbitrate certain kinds of disputes), and since incorporation of the UNCITRAL Rules is, under D.C. Circuit precedent, “clear and unmistakable evidence” that the parties intended the arbitrators to determine questions of arbitrability, the judge held that he could engage only in a deferential review of the arbitrators’ decision. The judge noted the unchallenged impartiality of the arbitrators, the length of the hearings devoted to the arbitrability issue, and the length and comprehensiveness of the arbitrators’ decision. He also approved of the tribunals’ decision construing the BIT on the merits, though I do not cover the reasoning here.

Third, Ecuador argued that the award was contrary to public policy (Article V(2) of the Convention creates a public policy defense to confirmation). But the judge rejected Ecuador’s argument without much effort, noting that it was “primarily a rehashing of its position that the Award was beyond the the scope of the submission to arbitration.” Ecuador also claimed that the award violated its sovereignty—this seems like a complete non-starter in the realm of investment treaty arbitration.

Last, Ecuador sought a stay while its efforts to set aside the award continue in the Hague. A stay is permissible under Article VI of the Convention, but according to the judge, Ecuador’s briefs barely mentioned the factors the court is to consider. The judge did his own analysis and found that the factors favored Chevron. The closest question was whether “the award sought to be enforced will receive grater scrutiny in the foreign proceedings under a less deferential standard of review.” The judge found that the Dutch court would apply a standard that did not differ too much from the standard the US court applied on questions of confirmation, and he noted that “the fact that the Dutch District Court has already denied the motion to set aside suggests that to the extent the standard is any more searching, it has not helped Ecuador in its attempt to resist confirmation.”

Case of the Day: In re Hawker Beechcraft

The case of the day is In re Hawker Beechcraft, Inc. (Bankr. S.D.N.Y. 2013). Hawker Beechcraft was an aircraft manufactuer. In November 2009, Hawker and Lider International Aviation, B.V., entered into a sales contract for a $3.9 million used Premier aircraft, and the sale was consummated. Lider later sold the aircraft to Helicoptor Finance LLC, which the leased the aircraft to Rotorwing B.V., with an option to purchase.

In 2012, Hawker filed a voluntary petition under Chapter 11 of the Bankruptcy Code in the Southern District of New York. Hawker moved for rejection of certain aircraft purchase agreements; the aim was to shed certain warranty obligations. Rotorwing objected to the motion. It asserted various substantive and procedural objections, but for our purposes the issue was whether Hawker had served the motion on Rotorwing, as required by Bankruptcy Rule 6006. Without going into detail, Rule 6006 requires that motions to reject executory contracts must be served in the manner provided for the service of a summons and complaint under FRCP 4. Hawker served the motion on Rotorwing, a Dutch company, by private courier (Fedex or the like) addressed to the “president or legal department” of the company. As we know, FRCP 4(f)(1) permits service by internationally agreed means, and FRCP 4(f)(2)(C)(ii) permits service by “any form of mail that the clerk addresses and sends to the individual and that requires a signed receipt.”

The bankruptcy judge held, correctly in my view, that a private courier is within the Hague Service Convention’s definition of “postal channels”, because it is the functional equivalent of mail. The judge also rejected, again correctly in my view, the minority view that service of process by postal channels is never permissible under Article 10 of the Convention.

But I think the judge missed the main question here. The main question, it seems to me, is whether the service complied with FRCP 4(f)(2)(C)(ii), and if not, whether it was nevertheless authorized by FRCP 4(f)(1). The return of service doesn’t mention a signed receipt, and it seems clear from the return that Hawker itself, not the clerk, mailed the documents. Some cases have given some leeway under FRCP 4(f)(2)(C)(ii) when, for example, the clerk refuses to mail the documents and directs the plaintiff to mail them. But in the absence of a return receipt it seems clear that the service did not meet the requirements of the rule. So the remaining question is whether FRCP 4(f)(1) itself authorizes the service. In the Second Circuit, it may be enough to simply mail the document, without complying with Rule 4(f)(2)(C)(ii), because in Ackerman v. Levine, 788 F.2d 830 (2d Cir. 1986), as interpreted by Papir v. Wurms, No. 02 Civ. 3273 (RCC), 2005 WL 372061 (S.D.N.Y. Feb. 15, 2005), the court arguably held that Article 10 of the Convention affirmatively authorizes service by mail rather than merely permitting it to the extent it is authorized by the law of the forum. I don’t agree with this outcome, and other courts (e.g., Brockmeyer v. May, 383 F.3d 798 (9th Cir. 2004)) have rejected it. But the bankruptcy judge didn’t even address the question.

There is a practical point to all of this. Bankruptcy cases frequently require mass mailings, given the large number of creditors and others involved. It’s worth asking whether a mass-mailing approach is sufficient when sending documents abroad, given the kind of objection that Rotowing raised here.