U.S. Court Stays Third Party Funder’s Action To Enforce Foreign Arbitral Award Pending Decision In French Court Of Appeals

The United States District Court for the District of Columbia has temporarily halted an effort to enforce a foreign arbitral awardagainst Uzbekistan where the prevailing party had previously initiated proceedings in France topartially vacatethe same award. The twist in Gretton Ltd. v. Republic of Uzbekistan, 2019 WL 464793 (C.A. No. 18-1755, February 6, 2019) (“Gretton v. Uzbekistan”), is that the prevailing partyinitiated the French proceedings, while the prevailing party’sthird party funder initiated the U.S. proceedings.

In France, the prevailing party (Oxus Gold, PLC, or “Oxus”) sought and received recognition of the $10 million arbitration award against Uzbekistan. Oxus also sought vacatur of the portions of the award denying its claims, and the French court set argument on the vacatur issue for March 26, 2019.

Meanwhile, in the United States, the prevailing party’s third party funder (Gretton Ltd., or “Gretton”), who is the assignee of the award’s proceeds, sought enforcement of the award pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”). In response, Uzbekistan moved to dismiss the U.S. proceedings on jurisdictional and forum non conveniens grounds and, in the alternative, requested a stay of the U.S. proceedings pending the outcome of the French proceedings.

After noting that the New York Convention allows for, but does not favor a stay of enforcement proceedings, the U.S. court considered Uzbekistan’s request for a stay using the six factors set forth in Europcar Italia S.p.A. v. Maiellano Tours, Inc., 156 F.3d 310, 317-18 (2d Cir. 1998):

  1. the general objectives of arbitration–the expeditious resolution of disputes and the avoidance of protracted and expensive litigation;
  2. the status of the foreign proceedings and the estimated time for those proceedings to be resolved;
  3. whether the award sought to be enforced will receive greater scrutiny in the foreign proceedings under a less deferential standard of review;
  4. the characteristics of the foreign proceedings including
    1. whether they were brought to enforce an award (which would tend to weigh in favor of a stay) or to set the award aside (which would tend to weigh in favor of enforcement);
    2. whether they were initiated before the underlying enforcement proceeding so as to raise concerns of international comity;
    3. whether they were initiated by the party now seeking to enforce the award in federal court; and
    4. whether they were initiated under circumstances indicating an intent to hinder or delay resolution of the dispute;
  5. A balance of the possible hardships to the parties …; and
  6. Any other circumstances that could tend to shift the balance in favor of or against adjournment ….

The U.S. court ultimately sided with Uzbekistan and ordered the U.S. proceedings stayed pending the French court’s decision, which is expected this spring. The U.S. court viewed Oxus’ efforts in the French courts as aligned with Gretton’s efforts in the U.S. courts, and the unusual procedural posture of the stay request was a significant factor in the court’s decision:

Ordinarily, the party seeking a stay is also the party seeking to set aside the award in parallel foreign proceedings. That such a party would seek a stay is understandable, for it typically hopes that a subsequent victory in foreign proceedings will render the U.S. ones unnecessary. This case is different. Uzbekistan, the party asking for a stay, is not the one that initiated proceedings to set aside the Award; instead, it is the opposite side that is responsible for the foreign proceedings. Given this posture, Uzbekistan’s motivations are somewhat different from those of the ordinary stay-seeking party. Its request is presumably based on a desire to avoid defending itself in two fora simultaneously and to limit the likelihood of piecemeal enforcement of the Award in the United States. As the Court will explain, this unusual posture influences the direction of several factors and ultimately favors staying the case.

At the end of its decision, the U.S. court considered whether it made a difference that Oxus and Gretton – regardless of their apparent strategic alignment – were not “technically the same party.” This factor did not move the needle for the U.S. court, which treated the party and its funder “as one when their interests and activities are so closely aligned.”

Fitch Law Partners LLP will continue to monitor developments in this case and its French counterpart.


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