• The D.C. Circuit has ruled in a consolidated appeal of three award enforcement actions against Spain (NextEra, 9REN, and Blasket) that district courts have jurisdiction to enforce “intra-EU” investor-State arbitral awards. The D.C. Circuit rejected Spain’s contention that federal courts lack jurisdiction to enforce these awards under the arbitration exception in the Foreign Sovereign Immunities Act (“FSIA”).
• The D.C. Circuit’s opinion resolves the latest in a series of challenges to award enforcement based on the Court of Justice of the European Union’s (“CJEU”) decisions in Achmea and Komstroy, which closed the door to investor-State arbitration within Europe. While the D.C. Circuit resolved the issue of jurisdiction under the FSIA in relation to such “intra-EU” awards, it leaves open the impact of the CJEU’s decisions on the merits of the enforcement actions.
• The D.C. Circuit also held that it is rarely appropriate for district courts to issue anti-suit injunctions against foreign sovereigns. This holding may create challenges for enforcement of “intra-EU” awards as it prevents district courts from responding to foreign injunctions aimed at impeding their jurisdiction.

On August 16, 2024, the U.S. Court of Appeals for the District of Columbia Circuit released its much-anticipated opinion in the consolidated appeal of three award enforcement actions against Spain (NextEra v. Spain, 9REN v. Spain, and Blasket v. Spain) involving challenges to federal court jurisdiction under the Foreign Sovereign Immunity Act (“FSIA”). The D.C. Circuit held that district courts have jurisdiction under the FSIA’s arbitration exception, 28 U.S.C. § 1605(a)(6), to enforce the intra-European Union (“EU”) investor-State awards under the Energy Charter Treat (“ECT”), rejecting Spain’s objection to jurisdiction based on the Court of Justice of the European Union’s Achmea and Komstroy judgments.

Additionally, the D.C. Circuit vacated two anti-anti-suit injunctions against litigation that Spain initiated in Europe to stall the U.S. enforcement proceedings. The Circuit found that, based on principles of international comity, anti-suit injunctions should rarely be issued against foreign sovereigns, even where their purpose is to protect U.S. courts’ jurisdiction to enforce ICSID Convention awards.

The D.C. Circuit’s decision rejecting Achmea-based jurisdictional objections is a positive development for investors seeking to enforce intra-EU awards in the U.S. But the decision did not address the merits of Achmea-based challenges to arbitrability, and left investors exposed to the risk of respondent States commencing anti-suit proceedings in favorable foreign jurisdictions.

U.S. Courts’ Enforcement of Intra-EU Awards Post-Achmea. Since the landmark Achmea decision in 2018, courts in several EU Member States have set aside and refused to enforce intra-EU awards (as we reported here, here, here, and here). This practice, however, has mostly been limited to EU Member States. Courts in the United Kingdom and Australia have thus far upheld the enforcement of such awards notwithstanding Achmea-based objections. And arbitral tribunals have almost unanimously rejected analogous jurisdictional objections, with just one exception.

U.S. courts’ approach to this question has, prior to the D.C Circuit’s decision, been less straightforward. D.C. district courts were initially cautious, frequently opting to stay proceedings pending decisions on set-aside or annulment. Then in 2019, the D.C. district court declined to stay proceedings in Micula v. Romania, and enforced the intra-EU ICSID award against Romania’s objection that there was no valid intra-EU arbitration agreement post-Achmea, and thus no jurisdiction under the FSIA’s arbitration exception. The district court’s decision, which was affirmed on appeal, found that Achmea did not apply because the parties’ dispute predated Romania’s accession to the EU. More recently, in May 2024, the D.C. Circuit upheld the enforcement of the Micula award for a second time against a Rule 60(b) challenge on largely the same grounds.

Thus, while favorable to investors, Micula ultimately did not fully resolve the question of Achmea’s impact on FSIA jurisdiction for award enforcement given its focus on the effect of Romania’s accession to the EU.

The NextEra/9REN/Blasket Consolidated Appeal. The D.C. Circuit’s consolidated appeal in NextEra/9REN/Blasket resulted from three conflicting D.C. district court decisions reached in early 2023. On one side of the split, on February 15, 2023, the district court in 9REN and NextEra upheld jurisdiction to enforce two intra-EU ICSID awards. The district court rejected Spain’s argument that Achmea and Komstroy had voided Spain’s consent to arbitrate under the ECT, reasoning that the challenge was not to the “fact” of the arbitration agreement in the ECT, but rather to the arbitrability of the dispute, which is left to the merits of the enforcement action. On the other side of the split, on 29 March 2023, the district court in Blasket Renewables accepted Spain’s Achmea arguments, finding no jurisdiction under the FSIA to enforce an UNCITRAL ECT award on the basis that Achmea retroactively vitiated Spain’s agreement to arbitrate.

The district court in 9REN and NextEra also entered anti-anti-suit injunctions at the request of the award creditors against Spain in response to litigation Spain initiated in Luxembourg and The Netherlands to thwart the U.S. enforcement proceedings.

ECT Arbitral Awards Fall Within the FSIA’s Arbitration Exception. On appeal, the D.C. Circuit upheld jurisdiction to enforce the intra-EU awards, finding that the ECT provided the relevant agreement to arbitrate. According to the Circuit, the arbitration exception in § 1605(a)(6) requires “an agreement made by [a] foreign state” either “with” or “for the benefit” of a private party. Because Spain had made an agreement to arbitrate “for the benefit” of at least some investors under the ECT, it was unnecessary to also consider whether they had made that agreement “with” these specific investors.

In reaching this conclusion, the Circuit rejected Spain’s argument that the ECT was made for the benefit of only non-EU investors, reasoning that that argument pertained merely to the “scope” of the ECT, not the fact of its “existence.” According to the Circuit, “existence” questions may instead concern such matters as whether a government minister had the authority to enter into an agreement at all.

By finding Achmea-based objections non-jurisdictional under the FSIA, the D.C. Circuit has effectively closed the door to threshold-stage Achmea challenges, bringing the United States in line with similar holdings reached by the U.K. High Court and the High Court of Australia. At the same time, the D.C. Circuit was careful to emphasize that it was not passing judgment on the merits of Achmea-based challenges to arbitrability, which will be the next issue for district courts to consider.

Anti-Anti-Suit Injunctions against Foreign Sovereigns Unlikely in Enforcement Proceedings. In a second holding—on which the panel divided—the majority held that even if the district court’s anti-anti-suit injunctions were “defensive” and intended to preserve U.S. court jurisdiction—in contrast to Spain’s own “offensive” or jurisdiction-defeating injunctions—they were nonetheless “virtually unprecedented” and improper.

When considering anti-suit injunctions, district courts must weigh (1) “whether an action in the foreign jurisdiction prevents United States jurisdiction or threatens a vital United States policy,” and (2) “whether the domestic interests outweigh concerns of international comity.” According to the majority, the fact that the district court’s injunctions targeted a foreign sovereign put comity concerns “near their peak,” particularly because Spain sought resolution in European courts of an issue of EU law. By comparison, the U.S.’ interest in upholding its obligations under the ICSID Convention was minimal. In this regard, the majority took the view that the ICSID Convention does not require U.S. courts to “remove obstacles in other countries that might make it harder for foreign investors to find their way to our courts.”

In her dissent, Judge Pan disagreed, emphasizing that the decision to vacate the anti-anti-suit injunctions may render the investors’ U.S. enforcement actions entirely for “naught” and the U.S. “an inhospitable forum for enforcing ICSID awards.” In her view, the majority gave insufficient weight to the U.S.’ strong interests in upholding its ICSID obligations, and overlooked Spain’s own lack of comity in seeking “foreign injunctions that plainly are intended to disrupt and hamper the cases before the district court.”

Going forward, investors should expect more foreign sovereigns to seek anti-suit injunctions to halt U.S. enforcement proceedings, including from their own courts, which will in turn hamper their efforts to enforce intra-EU awards within the U.S.

This publication is for general information purposes only. It is not intended to provide, nor is it to be used as, a substitute for legal advice. In some jurisdictions it may be considered attorney advertising.