US Court deals double blow to Spain’s cross-actions in Dutch and Luxembourg courts

By Diego Luis Alonso Massa, 20 February 2023

On 15 February 2023, in two separate decisions, the District Court of the District of Columbia ordered Spain to withdraw its actions before the Dutch and Luxembourg courts, holding that they were “specifically intended to interfere with and terminate” the proceedings before the US courts.

In the  first decision, the Court granted a request by NextEra for a preliminary injunction against Spain’s demand, before the District Court of Amsterdam (under Article 223 of the Dutch Code of Civil Procedure), that NextEra suspend, hold in abeyance or withdraw its proceedings to confirm a €290.6 million ICSID Arbitration Award in the District of Columbia.

[See TAO’s detailed report on the Kingdom of Spain and NextEra’s cross-actions here.]

In the second decision, the Court granted 9REN Holding’s request for a preliminary injunction against Spain’s requests (before the Luxembourg courts) that 9REN “cease... any enforcement” of a €42 million ICSID Arbitration Award in the US or be subject to a penalty of € 100,000 per day until “the cessation by [9REN] of all actions or judicial or administrative proceedings which violate the terms of this ruling.”

In launching its cross-actions before the Dutch and Luxembourg courts, Spain claimed that it was seeking to protect the Treaty on the Functioning of the European Union by asking for a declaration that the enforcement of both NextEra and 9REN’s ICSID Arbitration Awards were illegal – at least until the European Commission declares the aid measure contained in the awards compatible with the internal market as per Article 107(3) TFEU.

However, United States District Court was not convinced.

The Court’s decision

According to the District Court, the requests by NextEra and 9REN raised virtually identical factual considerations, arguments and defences. So, even though the Court rendered separate decisions, it applied the same precedents and considerations in granting both injunctions. 

Spain’s main defence before the Court was that – absent an agreement to arbitrate – it enjoyed sovereign immunity under the FSIA and that the US courts lacked subject-matter jurisdiction. Spain contended, with reference to Achmea and Komstroy, that as a matter of EU law no arbitration agreement existed between Spain and its counterparties because any such agreement would violate core tenets of EU sovereignty as set out in the EU Treaties.

In support of those contentions, Spain pointed out that the District Court has previously recognised the significance of this argument in InfraRed Env’t Infrastructure GP Ltd. v. Kingdom of Spain. There, the Court had noted that “[if] Spain is correct, the dominoes begin to fall. If there was no agreement to arbitrate, the ICSID tribunal never had jurisdiction, its award is not enforceable, and therefore it is not entitled to full faith and credit in this Court.”

However, in its Memorandum Opinion of 15 February 2023 (in respect of NextEra’s petition) as well as its Memorandum Opinion of 15 February 2023 (in respect of 9REN’s petition), the District Court held that – as in Micula – Spain had failed to show that Achmea forecloses the court’s jurisdiction under the FSIA’s “arbitration” exception.

Instead, following DC Circuit’s decisions in Stileks and Chevron, the Court held that there was no need to reach an analysis of EU law and the CJEU’s Achmea decision since the assertion that a party lacked a legal basis to enter or invoke an arbitration agreement is not a challenge to the jurisdictional fact of that agreement’s existence but rather a challenge to that agreement’s arbitrability.

And as both NextEra and 9REN had submitted copies of the underlying treaty (the ECT), their respective notices of arbitration, and the relevant ICSID Tribunal decisions, the District Court concluded that there was no question as to the existence of the arbitration agreement and, therefore, the FSIA arbitration exception was applicable in that case.

Based on these conclusions, the Court decided that it had jurisdiction under the FSIA’s arbitration exception, 28 U.S.C. § 1605(a)(6).

In doing so, the Court held that Spain’s defence of “forum non conveniens is not available in proceedings to confirm a foreign arbitral award because only US courts can attach foreign commercial assets found within the United States”, and that therefore both cases presented sufficiently unusual circumstances to warrant a preliminary, anti-suit injunction against a foreign sovereign.

While noting that a preliminary injunction is an “extraordinary and drastic” remedy, the Court recalled Laker Airways, 731 F.2d at 930, where it was held that “where the foreign proceeding is not following a parallel track but attempts to carve out exclusive jurisdiction over concurrent actions, an injunction may be necessary to avoid the possibility of losing validly invoked jurisdiction” and protect “the court’s ability to render a just and final judgment.”

In this regard, with both NextEra and 9REN having demonstrated that all four conditions required in Winter v. Nat were met, the Court noted that the proceedings before the Dutch and Luxembourg courts were “specifically intended to interfere with and terminate” the proceedings before the US courts.

Thus, whereas NextEra and 9REN were seeking injunctions to protect the US court’s jurisdiction, Spain was seeking to eliminate it. Therefore, the District Court considered that anti-suit injunctions were necessary “to meet the force of Spain’s attempt to deprive this court of jurisdiction”.

In doing so, the Court noted with displeasure Spain’s failure to provide the court with “any prior notice” that it was seeking an anti-suit injunction against NextEra in the Netherlands and 9REN in Luxembourg. It seemed, the Court went on to say, as though Spain was planning to simply later advise it of the “fait accompli... which would have virtually eliminated the court’s effective jurisdiction over [both claims].” As a result, the Court considered that it was left with “the stark choice of either protecting or relinquishing [the court’s] jurisdiction.”

The District Court also noted, however, that while Spain could not seek to foreclose NextEra and 9REN’s respective petitions to confirm their international arbitral awards pursuant to United States law, the State remained free to seek a declaration from the Dutch and Luxembourg courts vindicating its interpretation of EU law.

TAO will continue to monitor any developments in these proceedings.