Key Takeaways
- Final judgment in favor of Nicaragua: In September, the U.S. District Court for the Northern District of California issued a final judgment recognizing Nicaragua’s $1.5 million International Centre for Settlement of Investment Disputes (ICSID) award against a group of U.S. investors. This recognition allows Nicaragua to enforce the award in the U.S. as a federal judgment.
- Joint and several liability of U.S. investors: The court ruled that Nicaragua could collect the award from any of the U.S. investors on a joint and several basis, meaning each investor can be held responsible for the full amount.
- Rejection of investors’ defenses: The U.S. investors’ defenses (based on public policy, due process and jurisdictional challenges) were rejected. The court emphasized deference to ICSID awards under 22 U.S.C. § 1650a and found no extreme ambiguity in the award.
- Broader implications for recognition and enforcement of ICSID awards: This case strengthens the precedent for recognition and enforcement of ICSID arbitration awards in the U.S., offering creditors a clearer path to collect from U.S.-based debtors.
In September, a federal judge in the U.S. District Court for the Northern District of California recognized a $1.5 million award through a series of orders in favor of the Republic of Nicaragua against U.S. investors.[1] The investors had lost a $198 million investor-state claim against Nicaragua before an ICSID tribunal (ICSID ARB/17/44), brought under the Dominican Republic-Central America Free Trade Agreement. The court’s rulings constitute some of the more robust recent U.S. decisions enforcing ICSID awards against U.S. investors and pave the way for future ICSID creditors to enforce awards against multiple U.S. debtors more efficiently on a joint and several basis.
Background
The underlying ICSID arbitration was initiated by a group of U.S. investors following a failed oil and gas venture in Nicaragua. In March 2023, the ICSID tribunal found that Nicaragua had not breached the relevant agreement and awarded $1.5 million to Nicaragua for its costs and expenses.
In 2024, Nicaragua petitioned the Northern District of California to recognize and enforce that award under 22 U.S.C. § 1650a, the statute implementing the ICSID Convention.
The respondents – the U.S. investors – opposed Nicaragua’s effort on multiple fronts, including contesting personal jurisdiction as well as whether the award should be enforced jointly and severally.
Chronology of Significant Rulings
May: Partial Summary Judgment on Joint and Several Liability
In May, the court addressed Nicaragua’s ICSID award recognition application in stages. First, the court granted Nicaragua’s motion for partial summary judgment on the issue of joint and several liability on the ICSID award, determining that the award’s text – referring to the U.S. investors as a whole – did not reflect any intent by the ICSID tribunal to apportion liability among the individuals and entities. In making this decision, the federal judge applied U.S. law, not Nicaraguan law. The U.S. investors also did not seek timely clarification regarding apportionment under the ICSID Convention, so the court determined it was too late for them to do so. The court concluded that the U.S. investors were jointly and severally liable for the full cost of the ICSID award.
August: Conditional Summary Judgment in Favor of Nicaragua
Next, in August, the court issued an order conditionally granting Nicaragua’s motion for summary judgment to recognize the ICSID award as a U.S. judgment, thereby disposing of the U.S. investors’ remaining defenses based on alleged public policy grounds, violation of due process and purported U.S. sanctions.
September: Final Judgment Entered in Favor of Nicaragua and Notice of Appeal
In September, the court entered a final judgment in favor of Nicaragua. This judgment formalizes the recognition of the ICSID award as a U.S. judgment and paves the way for post-judgment collection measures in the Northern District of California, including potential attachments, garnishments and executions.
Following the court’s September final judgment, certain U.S. investors filed a notice of appeal.
Why These Developments Matter
The court’s recent rulings ensure that Nicaragua can proceed to collection against one or all of the U.S. investors on a joint and several basis. In order words, based on the court’s preliminary ruling on joint and several liability, any U.S. investor with assets in the Northern District of California may now be targeted by Nicaragua for the entire judgment amount. This illustrates a powerful leverage point for future ICSID creditors to more efficiently enforce an award with similar collective liability language against a group of debtors.
The rulings further illustrate the U.S.’s deference to the ICSID and the court’s understanding of the clear statutory limitations to defenses against recognition and enforcement of ICSID awards under 22 U.S.C. § 1650a. For instance, the U.S. investors’ public policy defenses were rejected in full due to statutory carve-outs, and the U.S. investors’ attempts to remand questions back to the ICSID tribunal under Article 50 of the ICSID Convention were rejected as untimely and unlikely to succeed due to the absence of extreme ambiguity in the final ICSID award. The court further declined to rule on collection or execution concerns – such as the U.S. investors’ defense regarding U.S. sanctions – at the recognition stage. These rulings will likely serve as persuasive precedent in other enforcement proceedings in the U.S. for international arbitration awards.
Nicaragua was represented in this proceeding by Marco Molina, Shaia A. Stambuk and Alexandra Trujillo of BakerHostetler.
[1] The Republic of Nicaragua v. The Lopez-Goyne Family et al., case number 3:24-cv-03104, in the U.S. District Court for the Northern District of California.
[View source.]
