Arbitration - The World in U.S. Courts: Summer-Fall 2018

FSIA Precludes Enforcement of Arbitral Award Against Property Held by the Government of India Outside the US

Hardy Exploration & Production (India), Inc. v. Government of India, US District Court for the District of Columbia, June 7, 2018

Hardy acquired an interest in a joint venture between the Government of India and private companies for the development of oil and gas reserves off the coast of India. A dispute arose, and an arbitration panel in India awarded Hardy damages, interest, and specific performance relating to the company's continuing exploration of the Indian territory. After much maneuvering and delay, Hardy filed an action in federal court in Washington, D.C. seeking an order confirming the arbitral award so that it could be enforced judicially against the Government of India.

After first deciding that it would not stay the case because of the pendency of related litigation outside the US, the Court stated that its ability to decline to enforce an arbitral award was limited—as relevant here, precluded only where enforcement would violate the US's "most basic notions of morality and justice, as defined by its laws and legal precedents." To determine whether this condition was met, the Court consulted the Foreign Sovereign Immunity Act ("FSIA"), which reflected a strong US policy against interfering with the sovereign acts of other nations. The relevant provisions of the FSIA permit the execution of arbitral awards against the property of non-US sovereigns under certain conditions. But they do not expressly apply to property held by the sovereigns outside the US, and the Court found US policy therefore was to refrain from interfering with governmental actions in such circumstances. It concluded that ordering the Government of India to permit Hardy to continue exploration in Indian waters would thus run contrary to the articulated policy of the US, and it declined Hardy's effort to enforce specific performance. The Court likewise rejected Hardy's request for interest on the award, finding the interest to be "inextricably intertwined" with the rejected request for specific performance and that the interest, if ordered, would operate impermissibly to "coerce" India into allowing Hardy to continue operations.

[Editor's note: The Hardy Exploration case also appears in the Foreign Sovereign Immunity section of this report.]