In Hulley Enterprises Ltd. v. Russian Federation, the D.C. Circuit recently considered the role of U.S. courts in determining the existence of international arbitration agreements. The case arose out of a long-standing dispute over the expropriation of Yukos Oil Company by the Russian Federation in 2003 and 2004. In response, Yukos shareholders initiated arbitration in 2005 under the Energy Charter Treaty (the Treaty), which ultimately resulted in a substantial arbitral award of over $50 billion in 2014.
The shareholders then sought to enforce the award in the U.S. District Court in D.C. Russia contested the District Court’s jurisdiction to enforce the arbitral award, asserting sovereign immunity under the Foreign Sovereign Immunities Act (FSIA). The District Court found it had jurisdiction based on the exception in FSIA for enforcement of arbitration awards and also found that an agreement to arbitrate existed based on the findings of the arbitral panel. Russia appealed, arguing that the District Court had improperly deferred to the arbitral tribunal’s findings on jurisdictional facts instead of making its own independent determination. Russia also argued that since its Parliament had never formally ratified the Treaty, it had not agreed to arbitrate claims such as those brought by the Yukos shareholders.
The D.C. Circuit agreed with Russia, vacating the lower Court’s judgment and holding that a U.S. court asked to enforce an arbitral award must independently evaluate the existence — as opposed to the scope — of an arbitration agreement, and cannot simply defer to the arbitral tribunal’s conclusions on such jurisdictional matters. The Court remanded the case back to the District Court for further review, specifically directing it to consider whether Russia, under its domestic law, had in fact agreed to arbitrate by provisionally accepting the Treaty, or whether the lack of formal ratification meant that there was no such agreement. Furthermore, the Court directed the District Court to assess whether factual findings from Dutch courts, which had also been asked to enforce the award, on the jurisdictional issue constituted issue preclusion, preventing Russia from relitigating these factual issues. Given the unique issues involved in applying issue preclusion to findings by foreign Courts, the Court directed the District Court to solicit the views and perspectives of the U.S. government by way of a Statement of Interest.
Hulley Enterprises Ltd. v. Russian Federation, __ F.4th __, 2025 WL 2216545 (D.C.Cir. 8/5/2025)