Case of the Day: Hardy Exploration v. Government of India
Posted on December 8, 2016
The case of the day is Hardy Exploration & Production (India), Inc. v. Government of India (D.D.C. 2016). Hardy was a participant, initially with other private firms and later on its own, then in the end with an Indian state-owned company, GAIL (India) Ltd., in a contract with the government of India for the development and production of hydrocarbons in an area off India’s southeastern coast. After Hardy and GAIL found hydrocarbons in 2006, a dispute arose as to whether the find was natural gas (as the government thought) or oil (as Hardy and GAIL thought). If the find was oil, then Hardy, for reasons unimportant here, would have forfeited its interest under the contract. Hardy demanded arbitration in Kuala Lumpur, as per the parties’ arbitration agreement. The tribunal found that Hardy’s position was correct, ordered a restoration of the status quo ante, and awarded damages of 5 billion rupees (about $74 million). India sought to vacate the award in the Indian courts (not the Malaysian courts), but its petition was dismissed. Hardy filed a petition to enforce the award in India, and then sought confirmation in Washington. India’s defense was that service of process (by FedEx) was defective under the FSIA. Hardy countered that the contract contained a special arrangement for service of process, and that service was therefore proper under 28 U.S.C. § 1608(a)(1).
I have written about this kind of issue before. The basic doctrine is that an “all-inclusive” notice provision in a contract (“all notices … shall”) constitutes a special arrangement for service, while a more limited provision (“all notices required or permitted under this agreement … shall”) does not. The textual rationale for this result is that service of process is not a notice “required or permitted” under the agreement, even though it obviously relates to the agreement, or the alleged breach of the agreement, in some way.
Here, the provision read: “All notices, statements, and other communications to be given, submitted or made hereunder …” This appears to fail the test for a special arrangement. But the case presents a complication not present in the case I considered in the prior post. Here, the parties agreed that the contract was governed by Indian law. I could imagine a case in which this kind of complication makes a mess of things, and it is not clear to me that it makes much sense for a court to look to a foreign law to decide whether a particular contractual provision constitutes a special arrangement for service under the FSIA. But the court found that Indian law, as one would expect, says that contracts should be interpreted in a way that is faithful to their plain text if possible. The word “hereunder” was, in the court’s view, key. It’s the equivalent of “under this agreement.” This seems clearly right to me. Hardy proposed a series of somewhat convoluted arguments seeking to avoid the plain language, but none were successful.
Dismissal at this stage would be, in effect, with prejudice, since the statute of limitations would bar a new suit. The court was unwilling to dismiss, citing the Barot case among authorities. Thus Hardy will have another chance.
The case illustrates a practical problem in FSIA litigation. A plaintiffs has to try the methods of service set out in the statute in order. So if it is possible that a contractual provision could be construed as a special arrangement for service, the plaintiff may feel it has to try service by that method first, on pain of a motion to dismiss if it proceeds immediately to the Service Convention, for example. There are two practical consequences for plaintiffs. First, avoid the issue altogether by better drafting. There are now cases, in the District of Columbia at least, that provide a framework for deciding whether an “all notices” provision is a special arrangement for service, but nothing precludes parties from being even more explicit than that when they draft. Second, bring actions very promptly rather than towards the end of the limitations period. Give yourself time to start over in case the court dismisses and you have to begin again. And in the worst case, if you sue early and your service is held insufficient, you have put yourself in the best position possible, as far as the equities are concerned, to persuade the judge to quash the service rather than to dismiss the action outright.