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Case number 23-7016, Zhongshan Fuchang Industrial Investment Co., Ltd.

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versus Federal Republic of Nigeria, Appellants.

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Mr. Bradley for the Appellants, Ms.

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Ternsiewicz for the Appellee.

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Good morning.

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I'm Keith Bradley representing the Federal Republic of Nigeria.

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Sometimes governments have dealings with private parties, maybe to procure services or to sell assets.

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Sometimes those deals go south.

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This is not that case.

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Nigeria has acted throughout this matter solely as a sovereign.

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Our law respects the immunity of foreign sovereigns from the power of our courts, and it denies that immunity only subject to specific exceptions from the FSIA, which are to be narrowly construed.

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The exception claimed here is an arbitration award that is supposedly under the New York Convention.

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That convention is concerned with private law disputes, so says the resolution that adopted.

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So was Nigeria engaged in any private law activity?

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No, it was not.

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Was Nigeria considered as a sovereign entity to be a person?

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Your Honor, in its sovereign capacity,

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It is not a person.

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It is a person only when it engages in private law activity.

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That is the longstanding thread in US law and is certainly what everybody seems to have taken for granted during the preparation.

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So what are you considering to be the sovereign activity?

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Is it the treaty itself and then all the investments and connections for this project?

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Or do you separate the two?

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Well, so I think I would turn the question around.

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What private law activity would there be?

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So yes, Nigeria had a treaty that was surely sovereign, which I think Jongshan agrees was sovereign.

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Nigeria itself made no investments.

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It was a sovereign government of a country within which Jongshan made some investments.

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It is accused of having engaged in certain expropriation activities that are

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police activities, for example, that are well established to be sovereign.

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I don't think that Zhongshan really points to anything that Nigeria did that was private law activity.

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Nigeria didn't transact with them.

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Nigeria did not make the investments itself, for example.

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Nigerian police were very much involved in what's alleged to be the violations, what's found to be violations.

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of the investment agreements that were undertaken in this case.

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Well, Your Honor, I want to break that a little bit, if I could.

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When you talk about the violation of the investment agreements, to the extent that Zhongshan had contracts within Nigeria, the Nigerian police did not reach those.

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Nigeria was not even a party to those.

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Nigerian police were bound to be involved in the expropriation activities.

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Yes, which was allegedly the violation of those agreements.

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But not of the contracts, because it was not a party contract.

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And the activities of police that one might call expropriation are very solidly sovereign activity, not private law activity.

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So it says Saudi Arabia v. Nelson.

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No, I understand.

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But it's not that Nigeria had nothing to do with this dispute.

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I mean, certainly, the arbitrators found that Nigeria itself

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was involved in activity that they found to be expropriation.

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Yes.

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And our point is- More than expropriation, arrest and torture and abuse of a business official.

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And I'm not here to defend the substance of that activity, but as the Supreme Court said in Nelson, however one might feel about, however one might criticize the awfulness of the activity, it is sovereign activity, not

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It's a little hard to separate out commercial activity from sovereign activity in the kind of case we have here, which is a sovereign sets up a bilateral investment treaty, which is designed precisely to induce

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investment activity by investors of the counter sovereign and that happens.

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And when something bad happens to the investor of the counterparty, there's arbitration and you could characterize the dispute as a breach of the relevant contracts.

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or you could characterize the dispute as a breach of the treaty, which provides for fair and equitable treatment, most favorite nation status, no expropriation, all of the above, right?

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It just seems a little artificial to unpack all of that.

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And in some sense, sure, this dispute

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arises out of sovereign acts, but it arises out of a lot of commercial aspects as well.

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Well, if I could, Your Honor, I want to reframe the word commercial has used in so many different ways throughout these areas of law.

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And the crucial thing here is private versus sovereign.

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And I have a couple of things to say in response to what you just offered.

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One is that if you look at the US Constitution, there are so many clauses within the Constitution that are designed

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to facilitate economic activity, the contracts clause, for example, the due process clause, the takings clause.

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These are all provisions in the Constitution that are about the sanctity of property and the sanctity of economic activity that are designed to encourage investment in economic activity.

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I don't think anybody would say that those are private law agreements.

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They are sovereign.

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Same case as this one, except Nigeria rather than Ogan State had entered into a framework agreement.

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I think that if Nigeria itself had a contract with Zhongshan, then yes, then Nigeria itself would have a, would be engaged as a private law citizen, right, as a private law person that had engaged with them.

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Yes, like, and they would be, you know, they would also have breached.

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And I want to go back to the other thing that you said, which is that Nigeria was engaged in the breach of the agreements.

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It was not, it was not a party to any of the agreements.

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I think that's agreed.

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Well, if the breach, all right, so let's tie that one down and then,

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I mean, the breaches were sovereign acts by Hogan State, right, which are attributable to Nigeria in international law.

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Well, if I could, the international law attribution is not really pertinent here.

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The settled precedent from this court and from the Supreme Court is that that kind of attribution, that the presumption of independence is not to be lightly overcome, including for jurisdictional purposes.

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And the Supreme Court has also said very clearly, I'm thinking here, for example, of the Amarada-Hess case, that those international law obligations, whether there is a substantive obligation under international law

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and to behave in a certain way, conduct obligation, or to provide compensation.

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That does not constitute an enforceable obligation, enforceable through our courts.

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These are separate questions.

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And so whether the arbitrators were correct or not to find Nigeria liable in terms of the internationalized obligations to China under that treaty,

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by attribution is not really the question.

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For purposes of deciding whether Nigeria is engaged in private law conduct to bring this dispute within the scope of the New York Convention, it was not.

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There's no precedent under the New York Convention for that kind of attribution.

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That's customary international law.

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That's not US.

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So go back to my hypothetical where Nigeria has formed the, what's it called, the formation agreement, right?

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In between the promulgation of the treaty and the breach, they formed the agreement to induce the investment.

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You said they would be,

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that would be a New York Convention Award.

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But on your first theory, I'm not sure why that would be because

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The breaches claimed in this case are all treaty violations, not contract violations.

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And your test is just, is it sovereign or is it private?

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Those treaty violations are sovereign.

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So it seems to me on your theory, you can't explain why my hypothetical would be covered.

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Do you mind if I, sorry, I was hoping to reserve some time.

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It's fine, keep going.

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So in your hypothetical, Nigeria has engaged in breach of these agreements, and indeed, you know, Ogan allegedly did.

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And in fact, Zhongshan has pursued litigation against Ogan.

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They may or may not have, but the claims are predicated on breaches of the treaty.

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Failure to provide, give fair and equitable treatment, right, which is the rough equivalent of substantive due process.

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Failure to give most favorite nation status, the rough equivalent of equal protection.

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Expropriation, the rough equivalent of takings.

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And as you said, those are all government acts.

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I see.

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So I misunderstood your hypothetical, actually.

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I was thinking about a case where the government has an agreement and engages in conduct that constituted like a breach of that agreement.

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But if you want to hypothesize a government that has an agreement and then the basis of the claim is no breach but purely sovereign acts, in that case, I guess I would have to say if the conduct

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is purely sovereign, then yes, it would still be subject, it would still be outside the convention.

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I don't understand how you can reconcile that with the text of the bilateral agreement.

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Because a bilateral agreement has this interesting two separate dispute resolutions for the United States.

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Article 8 is for disputes between China

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In Nigeria, that's the state to state sovereign activity.

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Article 9, settlement of disputes between investors and one contracting party.

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And so the treaty itself creates a remedy for an investing party against the government that signed this treaty to enforce the terms of this treaty.

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as to the investing investors.

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So, Your Honor, I'm going to go back to Amarada Hess, which actually specifically just talk to me about what the point.

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Sorry, but what I'd really like to know is how you read.

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What does Article 9 cover?

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I mean, Article 9 is certainly about a dispute between either of the sovereigns and an investor.

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That doesn't make it a private law dispute.

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It is a dispute pursuant to a sovereign obligation of these two sovereigns.

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It does not say anything about- That's what Article 8 is for.

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Article 9, you have a treaty here where two parties agree

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to create rights for and protections for third parties, the investing entities.

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And they create a distinct arbitration mechanism so that those investing parties can enforce their benefits under this treaty.

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That's what Article 9 does.

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That is, it gives them, the investor, the right to proceed to arbitration.

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It does not say that arbitration gives rise to an award that is enforceable under the New York Convention or in US courts.

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And I would, so for example- Wait, I want to slow down here.

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All right, so you agree that the treaty creates legal interests and protections for investors.

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it does guarantee fair and equitable treatment, just like the food process.

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And more than that, non-discrimination, non-expropriation, there's a long list of things.

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Right, all of which are sort of comparable to U.S.

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country.

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And it gives them what we would call in sort of our language here, not only those rights, but a cause of action, an arbitral one, to enforce them.

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So is that relationship between Nigeria and its investors

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that the treaty allows to be enforced against Nigeria through arbitration.

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If there is a dispute concerning fair treatment, non-discrimination or discrimination, how is that not within the meaning of the commerce reservation for the New York Convention commercial activity?

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So two thoughts, Your Honor.

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Well, three, actually.

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The first is we have to start with Article 1, Section 1, which tells us that the New York Convention is about private law disputes, sovereigns when they are acting in private capacity.

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That's what everybody understood at the time.

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Second answer is that with respect to the U.S.

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additional limitation, Congress has offered its interpretation, which is that legal relationships are transactional in nature.

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This is certainly not a transaction between- It's very much a transaction.

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It's created third-party beneficiaries, and they've given them protections and rights, and they've given them a way to enforce them.

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And they've done it.

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These are investors.

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It's entirely commercial.

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Well, it is commercial in the connected to commerce sense, but it is not a legal relationship.

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It's commercial and you look at the nature of the protections.

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It's for properties, it's for dividends, it's profits.

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So it is exactly the type of commerce that's covered by the New York Convention.

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But the New York Convention is private law disputes.

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This treaty has nothing to do with private law.

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Which brings me to my third point.

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This is not the first time a U.S.

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court has considered an international convention, an international treaty that gave a remedy.

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And you think it's private because it's used the word persons?

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Actually, I can go back to the adopting conference that says... I don't want a conference.

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I want to tell you we're in the text of the New York Convention that there's an even narrower entry into the Convention, or what you're calling private, that would be narrower than commercial relationships between a country and its investors.

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So the New York Convention, as of document from 1958, was not designed for this.

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That's your position.

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I'm asking for evidence of that.

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So first thing is, when they were considering it, the USSR and Belgium said, wait a second, this looks like people, the original title of it might give you the impression that this should be about states in their public law capacity.

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Everybody agreed that was not the purpose, so they changed the name of the convention.

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It was brought up during the debates.

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Wait a second, could this be applying to states in their public law capacity or should it be only states in their private law capacity when they engage in private law transactions?

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I think what I need you to answer is why this type of investment and creation of an investment relationship between Nigeria and its investors, an enforceable relation, legal relationship with its commercial investors, why that is

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public and not private.

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Your Honor, it is public, sovereign as opposed to private in the same sense as the contract clause in the U.S.

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Constitution or substantive process.

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I don't think those are helpful, at least for me, maybe it's helping other people.

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We're not interpreting a Constitution here.

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Right, we're interpreting a treaty.

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We're interpreting a treaty about investment that time and again in other cases

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and even in the views of the United States government has been recognized to allow exactly these types of arbitrations.

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And I don't see what's more, anymore public.

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I think what you seem to be saying is the only thing that makes it, what makes it public law is that Nigeria didn't have a direct commercial contract also with the investors.

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Is that the only difference?

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I think actually it might.

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That would make a difference for you.

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That would make a difference.

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And what was the conduct that.

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Government enters into public interest contracts all the time.

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that's in their public capacity, as well as in a private capacity.

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They do, and actually... It's a very defense contract.

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Well, actually, if I could go and come to that in particular, the Supreme Court has actually answered that question.

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The weltover case, which is cited in the briefs, established the standard for what is private versus sovereign.

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What it says is when the government is engaged in the marketplace in the way that a private law citizen could, and it drew a line actually, it's in weltover, it says on the one hand, a regulation limiting foreign currency exchange, that would be private, that would be public.

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And then Weltover says further, the military buying bullets, which is exactly the thing you just described, that's private because anybody can buy bullets, even though they are buying it for a public purpose.

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And this court has said also as well, it's not about the purpose.

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Private companies can enter into contracts with investors.

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They can.

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And say that we will treat you fairly and nicely when we do so.

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Well, they do, although they don't enter with, private companies don't undertake to guarantee fair and equitable treatment for the world at large, right?

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This is not a, the agreement here was not with Zhongshan, it was a promise to provide fair and equitable treatment across the board.

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No, are they third party beneficiaries?

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They're interested or protected and they have their own distinct and separate enforcement mechanism.

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Yes, it's separate from the China versus Nigeria.

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My point being though, Your Honor, is not distinct to Zhongshan.

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It is across the board for the entire public that might invest coming from China.

[00:19:17] Speaker 04:
No, it's for actual investors in Nigeria and actual investors.

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Were there any, these actual investors, their commercial

[00:19:31] Speaker 06:
Yes, but the government... They're private actors.

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Yes, but I... And are they the type of entities with which other private entities in Nigeria could contract for investment?

[00:19:43] Speaker 06:
Well, Your Honor, again and again, this Court and the Supreme Court have said... The answer to my question, I think, is yes.

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There are companies in Nigeria that can contract with these same investors, correct?

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I would take for granted there are companies that can do that.

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In fact, there are some examples in the record.

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So the contracting that occurred here with investors is exactly the type of thing that a private entity could do.

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What Zhongshan did is, yes, but what Nigeria did is not.

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And if you look at so many of these cases... What do you think you're saying that Nigeria did that a private company couldn't do?

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Well, so first off, promising fair and equitable treatment across the board.

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Entering a treaty with China.

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The treaty, this agreement itself, treats any dispute with China as distinct from a dispute with investors.

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But the promises that Nigeria made were sovereign promises.

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No private party could have made these promises.

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These are promises to provide fair and equitable treatment as a government.

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Private parties can agree to provide fair and equitable treatment to investors too.

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They can agree not to discriminate.

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They can agree not to steal their property.

[00:20:51] Speaker 06:
They can, but they do that to particular companies.

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Here's our company policy.

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Any investors, anywhere in the world, we won't discriminate.

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We won't steal.

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will treat you fairly inequitably.

[00:21:07] Speaker 06:
Although I will say that Nigeria entered that agreement, made that promise in a contract, sorry, in a treaty with China, which Yangshan has said, the agreement is sovereign.

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If the treaty's only enforcement mechanism was disputes between Nigeria and China, you'd have a lot more force to your position.

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The problem is this agreement itself is an investor agreement focused on commercial development

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and creates rights for investors and a distinct arbitration enforcement mechanism limited to those investors so that they can enforce violations of the terms of this agreement against Nigeria, against a contracting party is what Article 9 says.

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And I don't understand if you're saying

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All that means, that means you have to have a separate contract.

[00:22:01] Speaker 04:
Well, a separate contract is going to tell how to resolve those contract disputes.

[00:22:05] Speaker 04:
So this Article 9 becomes an empty letter, I think.

[00:22:08] Speaker 04:
How does it not become an empty letter under your theory?

[00:22:11] Speaker 06:
Well, so let us suppose that, so there's an arbitral award.

[00:22:15] Speaker 06:
There are so many areas in international law where

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a country may have an obligation that is binding under international law, the treaty of international law, an obligation that is binding under international law that is enforced through international law mechanisms.

[00:22:30] Speaker 06:
Amirata Hess is an example of that, for example, in which the Supreme Court specifically said the fact that these countries have a treaty-based obligation to provide you compensation

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does not mean that you get to enforce it in US courts.

[00:22:42] Speaker 04:
No, but we have law that says special things about when it's an arbitration agreement.

[00:22:48] Speaker 04:
And that's what you have here is an agreement to arbitrate.

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That's what kicks in the New York Convention.

[00:22:55] Speaker 06:
Well, I mean, you know our position on that, obviously.

[00:22:58] Speaker 06:
But I would like to come back to something else that you said, which is that what Zhongshan did is very commercial.

[00:23:05] Speaker 06:
Of course, they are a private company.

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In every one of these cases about the private sovereign distinction, one side of it is a private company that is doing what private companies do.

[00:23:15] Speaker 06:
And yet, this court and the Supreme Court have again and again focused on what did the sovereign do to decide whether the sovereign was in a... If I understand your position, your position is that this was distinctly sovereign because Nigeria made a global promise to investors.

[00:23:35] Speaker 06:
Yes.

[00:23:36] Speaker 06:
A promise to China, like let's accept the third party beneficiary, but it is global.

[00:23:41] Speaker 06:
Yes.

[00:23:41] Speaker ?:
Okay.

[00:23:41] Speaker 04:
To Chinese investors for these purposes, Chinese, you're fair.

[00:23:45] Speaker 04:
Yeah.

[00:23:45] Speaker 04:
Globally to Chinese investors.

[00:23:47] Speaker 04:
Yes.

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That's what made it public and not private.

[00:23:50] Speaker 06:
Yeah.

[00:23:51] Speaker 06:
Yes.

[00:23:51] Speaker 06:
And in addition, um, they made that promise.

[00:23:54] Speaker 04:
Can't do that.

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Private companies can't do that.

[00:23:56] Speaker 06:
I, uh, I cannot think of, uh, an example where a company would make a public, like a binding promise to the world at large.

[00:24:05] Speaker 04:
Well, you just said it's not the world it lies, just to China.

[00:24:07] Speaker 06:
Well, OK.

[00:24:10] Speaker 04:
Not whether they would, but they could.

[00:24:13] Speaker 06:
But I also come back to the others.

[00:24:15] Speaker 04:
Could they?

[00:24:16] Speaker 04:
Microsoft could make such an agreement?

[00:24:20] Speaker 04:
What prevents them?

[00:24:21] Speaker 04:
What about their private character prevents them from doing that?

[00:24:27] Speaker 06:
They would have no

[00:24:31] Speaker 06:
The fair and equitable treatment that Nigeria has promised here is fairness and equity in how it regulates.

[00:24:40] Speaker 06:
It's not a promise about how they're going to buy goods.

[00:24:44] Speaker 06:
It is a promise about how they will operate as a government.

[00:24:48] Speaker 06:
Microsoft can't promise not to expropriate.

[00:24:51] Speaker 06:
It can't promise to tax people in certain ways.

[00:24:54] Speaker 04:
We don't require, I mean, nothing would ever be private then when governments do it because every government has almost everything it does, even when it's participating in the marketplace, it does through sort of regulatory regimes like the government contract.

[00:25:10] Speaker 04:
So it can't be that, that's not how we analyze it.

[00:25:14] Speaker 04:
But of course Microsoft can agree to be fair and equitable in its treatment.

[00:25:21] Speaker 04:
It can agree not to discriminate between investing companies.

[00:25:26] Speaker 04:
It can agree not to steal their property.

[00:25:28] Speaker 06:
It can, but it can agree.

[00:25:31] Speaker 06:
But it can't agree to do that.

[00:25:32] Speaker 04:
Arbitration to be fair and equitable in arbitration proceedings.

[00:25:35] Speaker 06:
But it can't agree to do that by regulatory means.

[00:25:37] Speaker 06:
And I go back to Weltover and Nelson.

[00:25:38] Speaker 04:
Does it say it agrees to do it by regulatory means?

[00:25:41] Speaker 06:
Well, let's go back to the.

[00:25:47] Speaker 06:
It says.

[00:25:49] Speaker 06:
So Article 2, Section 2, investments shall enjoy the continuous protection.

[00:25:54] Speaker 06:
What kind of protection are they talking about?

[00:25:56] Speaker 06:
That is surely regulatory protection.

[00:25:58] Speaker 06:
That is not that Nigeria will contract in certain ways.

[00:26:03] Speaker 06:
It says, subject to its laws and regulations, neither contracting party shall take any unreasonable discriminatory measures.

[00:26:11] Speaker 06:
What measures is it talking about?

[00:26:13] Speaker 06:
It is surely talking about governmental measures.

[00:26:15] Speaker 06:
Measures is not something a word we would usually use for, you know, procurement or contracting.

[00:26:21] Speaker 06:
It then says they shall endeavor to provide assistance in obtaining visas and working permits.

[00:26:27] Speaker 06:
That is also regulatory.

[00:26:28] Speaker 04:
I go back to that all the time.

[00:26:30] Speaker 04:
They endeavor to provide assistance in obtaining visas and work permits for their employees.

[00:26:35] Speaker 06:
They do, and that they pay for it, but they don't issue the investments.

[00:26:40] Speaker 06:
And I go back to what Nelson said and what Weltover said, which is, so when you said that the line, that there would be no such thing as private activity, because governments, obviously anytime a government engages in procurement, it has also

[00:26:57] Speaker 06:
had its own regulatory.

[00:26:58] Speaker 06:
It has regulated the nature of the contract.

[00:27:03] Speaker 06:
But what Nelson said and what Weltover said is that the question is whether the government has entered and engaged in the market in the way the private party does.

[00:27:13] Speaker 04:
Your theory, if they had a direct contract, if Nigeria had a direct contract with Zhongshan, and it failed to provide, it discriminated in its laws or regulations,

[00:27:27] Speaker 04:
or it engaged in unfair treatment through its laws and regulations.

[00:27:33] Speaker 04:
I thought you agreed that they would still be able to enforce this.

[00:27:40] Speaker 06:
I think if you're referring to the discussion I had with Judge Katzis.

[00:27:46] Speaker 06:
I thought you backed off.

[00:27:47] Speaker 06:
Okay.

[00:27:49] Speaker 06:
What we had come to was... You have a direct contract with Zhongshan.

[00:27:53] Speaker 06:
They've got a direct contract with Zhongshan.

[00:27:55] Speaker 04:
Really, the way you end up violating it is because you, as a matter of governmental activity, discriminate.

[00:28:02] Speaker ?:
Right.

[00:28:03] Speaker 04:
Would that be enforceable under this arbitration agreement or not?

[00:28:06] Speaker 06:
If what they have done is, as a government, reach a contract in the way that a private party could, that would be private.

[00:28:15] Speaker 06:
If what they have done is purely governmental, it would be governmental.

[00:28:19] Speaker 04:
They steal their property.

[00:28:22] Speaker 04:
Expropriate it.

[00:28:25] Speaker 04:
Is that the same?

[00:28:26] Speaker 04:
Is that private or public?

[00:28:28] Speaker 06:
Well...

[00:28:30] Speaker 06:
I hate to steal angels on the head of a pin, but the stealing is a word with many meanings that like expropriation, expropriation is something that this court and the Supreme Court have repeatedly said is sovereign.

[00:28:44] Speaker 04:
And so even in a direct contract between Nigeria and Zhongcheng, that hypothetical, if the property is expropriated, that's not protected by, there's nothing they can do under this investment treaty.

[00:28:56] Speaker 06:
Wormos McKesson is a really good illustration of this.

[00:28:59] Speaker 04:
Is that a yes or a no answer?

[00:29:01] Speaker 06:
It depends on the conduct of the sovereign.

[00:29:04] Speaker 04:
I just told you what the conduct of the sovereign is.

[00:29:06] Speaker 04:
It expropriates their property and drives them out of the country.

[00:29:09] Speaker 06:
If I may, you have actually not given enough detail about the conduct.

[00:29:12] Speaker 04:
What more do you want?

[00:29:14] Speaker 06:
Because expropriation is just a word.

[00:29:16] Speaker 06:
Let me talk about Wormos McKesson.

[00:29:18] Speaker 04:
Well, before you told me it was a specialized sovereign activity.

[00:29:21] Speaker 04:
True.

[00:29:21] Speaker 06:
Fair enough.

[00:29:22] Speaker 04:
It seized their property and kicked them out of the country.

[00:29:26] Speaker 06:
that that will tend to be sovereign.

[00:29:28] Speaker 04:
But let me go to that would be no enforcement whatsoever for those investors, even in direct contract case is your opinion.

[00:29:34] Speaker 06:
No, that was not.

[00:29:37] Speaker 04:
Yes, sir.

[00:29:37] Speaker 06:
Sorry, no enforcement in US courts.

[00:29:39] Speaker 04:
So it would not qualify under the New York Convention, even in a direct contract case.

[00:29:44] Speaker 06:
If what they have done is purely sovereign, yes.

[00:29:46] Speaker 04:
If what they have done is seize their assets and kick their employees out of the country.

[00:29:51] Speaker 06:
And if I could, I want to answer your question.

[00:29:54] Speaker 04:
I understand, but I don't want you to, because I need to clarify something before you go on, and then I will let you finish the sentence, I promise.

[00:29:59] Speaker 04:
OK, so your answer there is yes.

[00:30:00] Speaker 04:
That does not qualify under the New York Convention.

[00:30:02] Speaker 06:
There's a reason that I'm hesitating about the yes, because it does matter the details.

[00:30:07] Speaker 06:
And I'm going to go back to Formos-McKesson, if I could, in which the mode of what was alleged to be expropriation was actually breach of contract.

[00:30:19] Speaker 06:
Like they took over the company's board in ways that just violated the actual contract between the sovereign and the private party.

[00:30:26] Speaker 06:
Or if I could go back to Dunhill.

[00:30:28] Speaker 04:
They engaged in sovereign actions that breached a contract.

[00:30:31] Speaker 06:
That did breach a contract, a private law contract that they had.

[00:30:35] Speaker 06:
Or I go back to Dunhill, which is maybe a 1976 case.

[00:30:40] Speaker 06:
in which Cuba did not have sovereign immunity because what it had done was actually just breach.

[00:30:46] Speaker 06:
It's like, some people said, they said expropriation and the Supreme Court said, no, what you've done in this case is the same as the private debtor could do.

[00:30:53] Speaker 05:
Is it the nature of the conduct or the theory of the breach?

[00:31:01] Speaker 05:
Oh, very good question.

[00:31:02] Speaker 05:
Imagine United States versus Winstar, right?

[00:31:06] Speaker 05:
The government does sovereign things.

[00:31:10] Speaker 05:
but the counterparty alleges breach of contract.

[00:31:14] Speaker 06:
Is that, where does that fall?

[00:31:17] Speaker 06:
It's a very good question.

[00:31:19] Speaker 05:
It's the nature of the conduct and what- So even a Winstar type case where the counterparty is alleging breach of contract, no enforcement.

[00:31:34] Speaker 05:
I actually don't know.

[00:31:35] Speaker 05:
If the breach is done through a sovereign act.

[00:31:38] Speaker 06:
I don't know the win star case, so I don't know that like very well.

[00:31:41] Speaker 05:
So that's government.

[00:31:42] Speaker 05:
Government promises certain sovereign acts, forms contracts on that promise, changes the sovereign acts, counterparty sues for breach of contract.

[00:31:54] Speaker 06:
Um, uh, so what I'm hearing is that what the government did, the government's conduct, they changed the regulatory framework.

[00:32:02] Speaker 06:
Yeah.

[00:32:03] Speaker 06:
If all they've done is alleged to breach a contract, if all they've done is purely sovereign, then yes, I think that would be, that would be on the sovereign side of that question.

[00:32:13] Speaker 06:
Um, the, um,

[00:32:16] Speaker 03:
Let me just ask you, you've got China, Nigeria bilateral agreement, and you know, just as a more basic premise, it's meant to encourage foreign investment.

[00:32:28] Speaker 03:
So what I'm really finding difficult is that you're saying that Nigeria should not be responsible for upholding terms of the treaty within its own jurisdiction.

[00:32:37] Speaker 03:
So that's one premise.

[00:32:38] Speaker 03:
The other thing is that as I look to article two, it's called reciprocal promotion and protection of investments.

[00:32:46] Speaker 03:
So investments of the investors of either contracting party shall enjoy the continuous protection in the territory of the contracting party.

[00:32:56] Speaker 03:
And so essentially what's your position signaling with respect to foreign investors?

[00:33:05] Speaker 06:
Um, respectfully, I am not saying that Nigeria is not responsible.

[00:33:13] Speaker 06:
The question here is not whether Nigeria should be liable or whether there should be an arbitration.

[00:33:20] Speaker 06:
That's an issue between Nigeria and China.

[00:33:23] Speaker 06:
What I am saying is that the U. S. Courts

[00:33:26] Speaker 06:
do not have jurisdiction over Nigeria as a sovereign to enforce this arbitration award.

[00:33:34] Speaker 06:
So, you know, Zhongshan is a Chinese company.

[00:33:36] Speaker 06:
There's no connection to this country.

[00:33:38] Speaker 06:
Zhongshan is a Chinese company that wants to enforce this award using the power of the US courts against this foreign sovereign.

[00:33:45] Speaker 06:
Whether Nigeria is responsible or not is a question, and what this means for the protection of private investment, that is a matter between Nigeria and China about the performance under their treaty.

[00:34:01] Speaker 06:
That's not a question of enforcing in the US courts.

[00:34:06] Speaker 06:
which I go back to again, Emirata has, which says, um, just because there is an international law treaty, just because that treaty tells the country how to behave, just because the treaty tells you that tells that country, they have an obligation to compensate you for wrong.

[00:34:22] Speaker 06:
In that case, it was the Geneva convention for the, uh, for the high seas.

[00:34:27] Speaker 06:
None of that tells you that they, you have a, uh, the ability to use us courts to enforce that obligation.

[00:34:36] Speaker 04:
But when it says there's an arbitration provision, that's where I'm struggling.

[00:34:41] Speaker 04:
So I take your theory, which says we focus only on the nature of the activity.

[00:34:48] Speaker 04:
That means that all of our decisions where we have enforced arbitration awards arising out of investment, treaties,

[00:34:59] Speaker 04:
or error if the conduct, even when there's a direct contract, which I thought was your distinction in your brief, but now you have told us even when there's a direct contract, sovereign activity still isn't sufficient to allow arbitration.

[00:35:13] Speaker 06:
Well, this discussion has really fleshed out this distinction.

[00:35:20] Speaker 06:
In the briefing, neither side had thought we were focused on the contracting.

[00:35:24] Speaker 06:
This distinction had not come up.

[00:35:26] Speaker 06:
But in those previous cases, we can go back and look.

[00:35:30] Speaker 06:
But I think actually, in the vast majority of them, the conduct was also private law.

[00:35:35] Speaker 04:
The Republic of Argentina versus BG Group, the investment was dismantled through laws and decrees.

[00:35:45] Speaker 04:
In Crystal X versus Bolivarian Republic, there was expropriation.

[00:35:52] Speaker 04:
Tafnet, we had courts facilitating acquisition of shares in other companies.

[00:35:57] Speaker 04:
I think all of those would qualify as sovereign activity.

[00:36:04] Speaker 06:
I think, if I recall, and I will get lost in the details, in the details, I apologize, but I think in TATNEF, for example, there is also private law activity with respect to the board that the country has.

[00:36:19] Speaker 04:
It wouldn't have worked without the courts also supporting improper facilitation.

[00:36:25] Speaker 06:
So I think in all of these cases, though, what you are asking about is mixed conduct, in which a government has done some private law conduct and some sovereign conduct.

[00:36:37] Speaker 06:
There's no mixed conduct here at all.

[00:36:39] Speaker 06:
Nigeria has done no private conduct.

[00:36:40] Speaker 04:
What is your best authority that the New York Convention's coverage of bilateral investment treaties, arbitration provisions for investors requires

[00:36:53] Speaker 04:
this level of granularity.

[00:36:55] Speaker 04:
I mean, if you're saying it's mixed conduct, I think your position still has to be to the extent as any sovereign contract, any sovereign activity, and that sovereign activity contributed at some sort of causal contribution, it can't be covered.

[00:37:11] Speaker 04:
You can't say, is your position that as long as you mix your sovereign activity with some private activity, then you don't get the sovereignty protections?

[00:37:20] Speaker 04:
Or are you saying that each of those cases courts went through and said that the private activity by itself was the sole cause of the breach?

[00:37:31] Speaker 06:
I don't think that in any of those cases the courts went through that analysis at all, to be honest.

[00:37:35] Speaker 04:
Is that the position that you think they should have taken?

[00:37:37] Speaker 06:
Um, I think that, um, a, if it is mixed, if there is some degree of, um, private law activity, then yes, you have brought yourself in and I don't want to talk.

[00:37:49] Speaker 04:
Just to be clear, if there's some private activity, it doesn't matter by the government.

[00:37:56] Speaker 04:
Sure.

[00:37:56] Speaker 04:
Yes, of course.

[00:37:57] Speaker 04:
Of course.

[00:37:57] Speaker 04:
There's always, like you said, there's always going to be on the other side.

[00:37:59] Speaker 04:
Right.

[00:38:00] Speaker 04:
There's some private activity by the government.

[00:38:04] Speaker 04:
Say 10% of it was 90% of it was government.

[00:38:09] Speaker 04:
And the 10% itself could not have inflicted the harm without the 90% governmental.

[00:38:16] Speaker 04:
What would the answer be?

[00:38:18] Speaker 04:
If you don't mind, I'd rather not try to put a number on the line because I'm trying to show I'm trying to make you may not want to, but I'm trying to make it crystal clear to you that sovereign activity was the driving force, causal force of the breach.

[00:38:31] Speaker 04:
So that's why I'm putting the numbers on.

[00:38:33] Speaker 06:
I see that.

[00:38:37] Speaker 04:
Your position would be?

[00:38:40] Speaker 06:
My position would be that if there's, I mean, I can put together some standard about substantial private activity.

[00:38:47] Speaker 06:
But let's be honest, this is not a question in this context that courts have thought about before, because the New York Condition was not designed for this.

[00:38:55] Speaker 04:
I'm trying to ask you what your legal position is and what its consequences would be were we to adopt it.

[00:39:00] Speaker 06:
You don't need in this case to adopt a position about that line.

[00:39:05] Speaker 04:
You need to be aware if we were to adopt your position that we have to look

[00:39:10] Speaker 04:
that what is determinative, even in a direct contract situation, is what the nature of the conduct is.

[00:39:18] Speaker 04:
We gotta know what we're buying.

[00:39:20] Speaker 04:
We gotta know what we're stepping into and what we're causing other courts to have to deal with in future cases.

[00:39:26] Speaker 04:
So you may not think it's a fair question, but I think it's a fair question to understand you're the one who brought up mixed conduct as the distinction for these cases.

[00:39:35] Speaker 04:
I've got to deal with our circuit precedent.

[00:39:38] Speaker 04:
All right, so I do really need an answer to that because I don't read in any of those cases the determination that the private conduct was either the but for or the primary.

[00:39:50] Speaker 04:
Pick your causal theory of the breaches in those cases.

[00:39:54] Speaker 04:
It just wasn't undertaken by this court.

[00:39:56] Speaker 06:
Yes.

[00:39:58] Speaker 06:
To be honest, here is part of why I struggle with this.

[00:40:04] Speaker 06:
In Weltover and in Nelson, the Supreme Court says, our question is whether the government has engaged purely in the way that a private citizen could in the market.

[00:40:16] Speaker 06:
And as you observed, that theory doesn't quite make sense because no government is ever purely

[00:40:22] Speaker 06:
Purely, they've always got the backdrop that they regulate their own private, like their own content of private law.

[00:40:28] Speaker 06:
But that is what Weldover and Nelson say.

[00:40:31] Speaker 04:
And meanwhile- And you explored purely a lot in your briefs, so you adopted that.

[00:40:34] Speaker 06:
Yes.

[00:40:35] Speaker 06:
And at the same time, I'm aware that we have the Belize case that we've talked about in the briefs for this course, in which it is primarily private law activity.

[00:40:48] Speaker 06:
The government is selling assets, et cetera.

[00:40:50] Speaker 06:
And then one little corner of the contract

[00:40:52] Speaker 06:
is that as part of the exchange of compensation and consideration in both directions, they're going to give the investor tax preferences.

[00:41:02] Speaker 06:
And so that is a primarily the government's activities are like the contract is primarily is private law.

[00:41:13] Speaker 06:
The activities are private law.

[00:41:15] Speaker 06:
In fact, I don't remember what the government's activities, but I don't think they've breached the tax preferences.

[00:41:21] Speaker 06:
And, you know, as you know, this court says in Belize we're not going to ask for the word commercial.

[00:41:31] Speaker 06:
in the US reservation.

[00:41:33] Speaker 06:
We're not going to ask about private versus sovereign.

[00:41:35] Speaker 06:
That's in Belize, obviously.

[00:41:37] Speaker 06:
And you know our position about that and what has to be a legal relationship.

[00:41:41] Speaker 06:
But as I try to reconcile that with Nelson and Weltover, where the Nelson and Weltover line does not make sense even on their own terms to use the word purely for what you said, that's the struggle that I have to be candid with you, Your Honor, about where to draw that line.

[00:41:59] Speaker 06:
whether one should call it, one cannot, you know, I have, yes, I have certainly hewed to Nelson and Weltover.

[00:42:11] Speaker 06:
I have parroted the line from the Supreme Court.

[00:42:14] Speaker 06:
But I acknowledge that, as you say, like, you cannot literally apply it literally in that way.

[00:42:19] Speaker 06:
This case, of course, we don't need to apply it any that way because there's no private law conduct and no, like, in any sense by Nigeria.

[00:42:28] Speaker 06:
If, however, you were to say, if you were to repeat the line from the Supreme Court, you'd probably be on safe ground, at least in adhering to it, even if that would be difficult to flesh out in a case that has got a serious misquestion.

[00:42:44] Speaker 06:
Yeah, I acknowledge.

[00:42:45] Speaker 04:
We've made an opinion that we really don't know what it means in future cases.

[00:42:50] Speaker 06:
respectful your honor that that does that does happen but the this like the line about how to define what is mixed like what to do in a mixed case what is this whether it's substantial or primary or purely.

[00:43:06] Speaker 06:
or whatever.

[00:43:07] Speaker 06:
Even if you put a standard to that, it would have to be fleshed out if that case arises, if there's a case that comes up.

[00:43:13] Speaker 06:
If, for example, in Crystal X, Venezuela had said, no, this is not a New York Convention award.

[00:43:19] Speaker 06:
And of course, in none of those cases is that dispute even coming up.

[00:43:22] Speaker 06:
I'm not saying those cases were decided wrongly, but as you know, if nobody's raised the jurisdictional problem and that the court's decision on it is not is not precedential.

[00:43:33] Speaker 06:
If in Crystal X, for example, Venezuela had said, no, this is not a New York Convention award in the first place, because there was some bit of sovereign activity,

[00:43:45] Speaker 06:
there is no way to write a standard that is going to decide what that should have been in all of those cases.

[00:43:51] Speaker 06:
It will always depend on the details.

[00:43:57] Speaker 05:
Can your position here be reconciled with this third restatement of US law of international commercial and investor state arbitration?

[00:44:10] Speaker 05:
And that restatement has some very bad

[00:44:14] Speaker 06:
Respectfully, your honor, I think it can.

[00:44:17] Speaker 06:
So, you know, so Junction has really looked at two particular things, which I'll talk about separately.

[00:44:23] Speaker 06:
One is that definition of commercial.

[00:44:26] Speaker 06:
That definition is about the scope of what the statement itself covers.

[00:44:30] Speaker 06:
That statement covers awards that are, for example, under the ICSID convention, which is a totally different regime.

[00:44:38] Speaker 05:
Yeah, fair enough.

[00:44:38] Speaker 05:
But it says that for non-ICSID treaty-based arbitrations, not contract-based, treaty-based, you apply the New York Convention and the Federal Arbitration Act.

[00:44:54] Speaker 05:
If you mind, I'm going to pull up my copy here.

[00:44:56] Speaker 05:
It's in 5.1, reporter's note.

[00:45:01] Speaker 05:
And 1.1 says you're in the commercial bucket, even if the sovereign is a party and the dispute arises from public regulatory acts.

[00:45:13] Speaker 05:
And that seems to describe this case too.

[00:45:17] Speaker 06:
It's going to take me just one moment to get to 5.1, because there's a lot of restatement.

[00:45:26] Speaker 06:
Got the general provisions here.

[00:45:30] Speaker 06:
Here we are, 5.1.

[00:45:32] Speaker 05:
So, if I'm looking at, for example... In the reporter's note, the language for you, one, two, three, four, about five paragraphs.

[00:45:47] Speaker 06:
Yes.

[00:45:48] Speaker 06:
But if I could go back to the comments, here we are, the reporter's note.

[00:46:01] Speaker 06:
I agree with you.

[00:46:05] Speaker 05:
This is bad language.

[00:46:07] Speaker 05:
I had thought one way to divide up the world, which you don't make a big deal of, but it's consistent with your brief, is to say private arbitrations, New York convention.

[00:46:23] Speaker 05:
Public arbitrations exist.

[00:46:25] Speaker 05:
Very simple.

[00:46:27] Speaker 05:
But this comment is putting

[00:46:31] Speaker 05:
non-ICSID treaty-based arbitrations under the New York Convention is inconsistent with that.

[00:46:40] Speaker 06:
Yeah.

[00:46:41] Speaker 06:
So I'm going to go back, if I could, to comment C before we get to the reporter's notes.

[00:46:46] Speaker 06:
Comment C is... In 5.1?

[00:46:48] Speaker 06:
In 5.1, yeah.

[00:46:49] Speaker 06:
Comment C is titled Investor State Arbitration Pursuant to an International Investment Contract.

[00:46:55] Speaker 06:
Got it.

[00:46:56] Speaker 06:
That's a contract that did not exist between Chongshan and Nigeria.

[00:46:59] Speaker 06:
An international investment contract is a type of commercial contract entered into between a private party and a state or its subdivision.

[00:47:06] Speaker 06:
The role of the U.S.

[00:47:07] Speaker 06:
court in connection with non-Exit Convention arbitration arising out of such a contract is determined by the same bodies of arbitration law that govern the judicial role generally.

[00:47:16] Speaker 06:
Thus, when the Nixon Convention does not govern, the obligation to arbitrate is subject to any applicable treaty.

[00:47:23] Speaker 06:
That word applicable hides a lot of sin.

[00:47:29] Speaker 06:
Such as the New York Convention?

[00:47:31] Speaker 06:
Such as the New York Convention, but the word applicable is telling you that you first have to understand whether it's applicable.

[00:47:38] Speaker 05:
Right, but 5.1 and some language in, sorry, I have a lot of paper too.

[00:47:50] Speaker 05:
Yeah.

[00:47:53] Speaker 05:
5.1 and some language in 1.1 seem to strongly indicate that we can be under the New York Convention if we're talking about disputes arising from public regulatory acts.

[00:48:10] Speaker 05:
And that phrase is from 1.1.

[00:48:13] Speaker 06:
So 1.1, are you looking at the?

[00:48:17] Speaker 06:
Comment E. Comment B, yes.

[00:48:20] Speaker 06:
So public regulates, sorry, I'm gonna go back to, do you mean comment B from 1.1?

[00:48:26] Speaker 06:
That's arbitral trivial.

[00:48:27] Speaker 06:
Do you mean comments E?

[00:48:28] Speaker 06:
E, okay, thank you.

[00:48:33] Speaker 05:
Yes, even though the dispute arises out of public regulatory,

[00:48:39] Speaker 05:
Yes.

[00:48:41] Speaker 05:
And that as opposed to contract breaches.

[00:48:45] Speaker 06:
Yes.

[00:48:46] Speaker 06:
So, so first off, that is that is about the

[00:48:55] Speaker 06:
That is about the meaning of the context commercial, for one thing, which doesn't tell us about Article 1, Section 1.

[00:49:03] Speaker 06:
It also says, so the restatement.

[00:49:05] Speaker 05:
Fair enough.

[00:49:06] Speaker 05:
But it doesn't make any sense if 1.1 carves out everything based on a government's public act.

[00:49:18] Speaker 05:
You'd have no occasion to ask about any of this.

[00:49:25] Speaker 06:
That's fair, but the but this also points us back to at best to mixed cases and you know they they're writing this they like this this is from last year right like.

[00:49:38] Speaker 06:
5 decades and one yeah one answer is right this is not how yeah things were understood in right.

[00:49:44] Speaker 06:
That is a very important part of the answer.

[00:49:46] Speaker 06:
But they're also writing this in light of Billy's.

[00:49:48] Speaker 06:
They're aware that, for example, this court dealing with that case in which there was a private law asset sale with a corner of tax preference in the agreement held that it was subject to your convention.

[00:50:03] Speaker 06:
So the drafters has got to be dealing with that body of law.

[00:50:08] Speaker 06:
As you know, we don't view the Billy's case as controlling for the reasons that we've said.

[00:50:15] Speaker 06:
Okay.

[00:50:17] Speaker 06:
Now I very much overstayed my welcome.

[00:50:19] Speaker 04:
Any questions?

[00:50:21] Speaker 04:
Thank you.

[00:50:21] Speaker 04:
We'll still give you some time for rebuttal.

[00:50:23] Speaker 06:
Thank you.

[00:50:45] Speaker 02:
Good morning.

[00:50:46] Speaker 02:
May it please the court.

[00:50:47] Speaker 02:
My name is Yovana Tsunchevich, and I'm counsel for Appellee Zongshan Fuchang Industrial Investment.

[00:50:54] Speaker 02:
Zongshan respectfully requests affirmance of the district court's order finding subject matter jurisdiction under the FSIA arbitration exception and this court's well-settled precedent.

[00:51:06] Speaker 02:
Zongshan's award against Nigeria relates to a commercial investment.

[00:51:10] Speaker 02:
Namely, Zongshan obtained an arbitration award directly against Nigeria

[00:51:14] Speaker 02:
under the China-Nigeria BIT, which found Nigeria liable, among others, for expropriating Zongshan's commercial investment in a Nigerian free trade zone and awarded Zongshan more than $55 million in damages and interest.

[00:51:32] Speaker 02:
And the district court correctly decided, based on this court's precedent, that the award arises out of a legal relationship, whether contractual or not, that is considered as commercial for

[00:51:42] Speaker 02:
Section 202 of the Federal Arbitration Act, and that the FSA arbitration exception applies.

[00:51:50] Speaker 02:
Now, Zongshan had the initial burden of production to satisfy the FSA arbitration exception, which it did, pursuant to this court's precedent in Chevron and Stillex.

[00:52:02] Speaker 02:
Namely, Zongshan presented an alleged facts that show that there was an arbitration agreement between

[00:52:11] Speaker 02:
Nigeria and Zongshan.

[00:52:13] Speaker 02:
And again, Nigeria does not contest this.

[00:52:16] Speaker 02:
And second, Zongshan also demonstrated that it has an arbitration award that emanated from this arbitration agreement.

[00:52:23] Speaker 02:
Again, Nigeria does not contest this.

[00:52:25] Speaker 02:
And in fact, Nigeria readily admits and recognizes that the award held it of liable pursuant to the BIT.

[00:52:34] Speaker 02:
And also Zongshan has met its initial burden of production.

[00:52:38] Speaker 02:
to demonstrate that its award against Nigeria is or may be governed by the New York Convention.

[00:52:45] Speaker 02:
And Nigeria has not come even close to meeting its burden of persuasion to show that there's an absence of a factual basis by preponderance of evidence that the FSA arbitration exception does not apply.

[00:52:58] Speaker 02:
And there are three reasons that the arbitration exception applies and why this award is or may be governed by the New York Convention.

[00:53:08] Speaker 02:
And first, the award for damages to Zongshan for Nigeria's unlawful expropriation and treatment of Zongshan's multi-million dollar investment in a Nigerian free trade zone is commercial and falls under the convention pursuant to the plain language of FAA Section 202.

[00:53:26] Speaker 03:
Well, the word commercial, it's referenced in 9 USC Section 202, and it includes legal relationships, but then it gives a descriptor as a transaction, contract, or agreement described in Section 2.

[00:53:41] Speaker 03:
And then it also gives another descriptor saying that it includes any maritime transaction or contract evidencing a transaction involving commerce.

[00:53:52] Speaker 03:
So is the treaty treated like all other documents?

[00:53:56] Speaker 02:
So, Your Honor, I would just point first to this court's precedent in belief, social development, also in D.I.C.

[00:54:04] Speaker 02:
human that really fleshed out the meaning of the term commercial in Section 202.

[00:54:09] Speaker 02:
And really in the context of international arbitration, this court has held

[00:54:13] Speaker 02:
that commercial refers to matters which have a connection with commerce, that a matter may be commercial, even if not contractual, so long as it has a connection with commerce.

[00:54:23] Speaker 02:
And here, the fact that Zongshan was an investor that poured millions of dollars into the whole state of Nigeria as the recipient of that investment created a legal relationship under the framework of the protections guaranteed by the bilateral investment treaty

[00:54:40] Speaker 02:
and also by the extension of Article 9 in the BIT, which provided Zongshen with an ability to directly pursue claims against Nigeria for mistreatment, various breaches of the obligations that it had.

[00:54:57] Speaker 02:
And in that sense,

[00:54:58] Speaker 02:
The term in the framing of Section 202 is very broad.

[00:55:01] Speaker 02:
Again, the plain language tells us that the legal relationship need not be contractual, whether or not it is.

[00:55:08] Speaker 02:
It also says that that can include certain specific types of relationships, a transaction, a contract, or an agreement, but is not limiting.

[00:55:18] Speaker 02:
And in fact,

[00:55:19] Speaker 02:
It is consistent to view the legal relationship between Zongshan and Nigeria that is founded under the framework of the BIT as one, as your honor pointed out, that creates a third party beneficiary relationship.

[00:55:34] Speaker 02:
And that is the important context for the enforcement of this award.

[00:55:38] Speaker 02:
And again, pointing to the restate.

[00:55:41] Speaker 04:
Is that part of the treaty?

[00:55:43] Speaker 04:
Article 9.

[00:55:44] Speaker 04:
It's really focused on creating this article 9, read in light of the promises also made to investors and the rest of the treaty.

[00:55:54] Speaker 04:
In making that commitment to investors to arbitrate for violations of promises made in the treaty, and you guys may differ on the scope of those promises, was that public or private activity?

[00:56:14] Speaker 04:
I get the relationship.

[00:56:15] Speaker 04:
Negotiating with China, that's public.

[00:56:19] Speaker 04:
But that aspect of it that was creating what could be viewed as third party beneficiary, both rights and means of remediation, is that a private activity?

[00:56:32] Speaker 02:
If your honor will permit me, just to answer that question, I'm going to step back a little bit and flesh out what the framework requires and what it doesn't require.

[00:56:41] Speaker 02:
And so, first, if we look at Chapter 2 of the Federal Arbitration Act, nowhere does it make a distinction.

[00:56:47] Speaker 02:
Does it talk about the fact that awards are enforceable under the New York Convention only in situations of private conduct or sovereign conduct?

[00:56:55] Speaker 02:
Indeed, it doesn't talk about the type of conduct at all.

[00:56:58] Speaker 02:
And I think that is particularly germane here because

[00:57:02] Speaker 02:
Council seems to be arguing for a regime, but it does not cite any, uh, any interpretations or any framing any, whether it's in the FAA or in the New York convention that really fleshes out, you know, what, what role conduct here plays or private versus public activity.

[00:57:19] Speaker 02:
And in that sense, uh, even looking at the text of the FSIA arbitration exception.

[00:57:25] Speaker 02:
In which it talks about the types of actions that can be brought it refers to an agreement made by the sovereign state with or for the benefit of a private party to submit to arbitration.

[00:57:36] Speaker 02:
Any and all differences and then it expressly states that to confirm an award may pursue into such an agreement to arbitrate, so there is a contemplation.

[00:57:46] Speaker 02:
that there will be situations where a private party and a state will be arbitrating disputes.

[00:57:51] Speaker 02:
And in that sense, consistent with this court's precedent and the enforcement of investor state arbitration awards, investor state arbitration typically involves and it does involve breaches of a treaty.

[00:58:04] Speaker 02:
And counsel would create a rule that says, well, basically breaches of a treaty are

[00:58:09] Speaker 02:
is going to be considered sovereign acts, but it really is a distinction that is not rooted in anything that counsel.

[00:58:17] Speaker 04:
You had a situation where the dispute were actually between Nigeria and China under this treaty.

[00:58:26] Speaker 04:
Would that be enforceable in US courts under the convention?

[00:58:31] Speaker 02:
So that would arise under a different article.

[00:58:34] Speaker 02:
And that could be a dispute, which could be a rise under a different article.

[00:58:38] Speaker 04:
You said person has a plain meaning and there's no qualifications and it covers states, so.

[00:58:44] Speaker 02:
Yes, so it would arise under Article 8 of the China-Nigeria BITN, would be a separate dispute.

[00:58:50] Speaker 04:
Well, no, that would be that dispute.

[00:58:52] Speaker 04:
But let's say they arbitrate.

[00:58:54] Speaker 04:
And then China wants to enforce that arbitration award in a US court under the New York Convention.

[00:59:02] Speaker 04:
And I'm trying to, there's no qualifications there.

[00:59:05] Speaker 04:
There's a legal relationship.

[00:59:08] Speaker 04:
Your position as person means state.

[00:59:11] Speaker 04:
um for purposes of the convention and so what would be what would prevent courts from enforcing is it your position that those that state to state agreement would be enforceable arbitration award would be enforceable under the new york convention in u.s courts so uh i think it would depend your honor and i think that the reason why it would depend is first

[00:59:37] Speaker 02:
state to state disputes could have a public international law character that is different and that could concern something that is not commercial.

[00:59:44] Speaker 02:
And so it would not fit in.

[00:59:45] Speaker 04:
I'm assuming it meets the commercial reservation.

[00:59:49] Speaker 04:
I'm assuming that China brings a claim here.

[00:59:52] Speaker 04:
Let's imagine it was actually a Chinese governmental company instead of Zhongshan.

[00:59:58] Speaker 04:
And so China brings the claim instead of having this company bring the claim.

[01:00:02] Speaker 02:
So in that specific scenario, if the party that brings, that may have some state ownership brings a claim directly against the state under the investment treaty, it could do so under article nine, the same article that Zhongshan pursued in its claims against Nigeria.

[01:00:23] Speaker 02:
And then it would be a bit of a different analysis.

[01:00:26] Speaker 04:
And I believe the situation- I'm assuming they're proceeding under article eight, because it's China versus Nigeria.

[01:00:32] Speaker 02:
And there have been instances, Your Honor, where if there is state ownership of a particular investor, where those could still proceed under Article 9 because of the definition of the term.

[01:00:42] Speaker 04:
I'm saying they proceed under Article 8, and they didn't have arbitration under Article 8.

[01:00:47] Speaker 04:
They get some arbitral award, and China now wishes to enforce it in district court here.

[01:00:55] Speaker 04:
What I'm trying to ask is, would that type of state versus state enforcement action,

[01:01:02] Speaker 04:
be covered by the New York Convention?

[01:01:06] Speaker 02:
I think that it would depend, Your Honor, it may not be.

[01:01:10] Speaker 04:
Why might it not be?

[01:01:11] Speaker 02:
It depends what kind of... I'm assuming it's also commercial.

[01:01:15] Speaker 02:
If it is commercial, then yes, it is.

[01:01:19] Speaker 02:
Reading the Federal Arbitration Act, that could be a possibility to the extent that it's not about non-commercial activity.

[01:01:27] Speaker 02:
But I submit that it would depend on the particular dispute and the particular situation.

[01:01:32] Speaker 05:
The dispute is over interpreting this investment treaty, which is all about commerce.

[01:01:39] Speaker 05:
So state to state dispute about how to interpret a commercial treaty.

[01:01:46] Speaker 05:
That's covered.

[01:01:48] Speaker 05:
That's enforceable through the New York Convention.

[01:01:52] Speaker 02:
Your Honor, I cannot, I can't say at this moment.

[01:01:56] Speaker 02:
I think that there is a pathway in which it could be

[01:01:59] Speaker 02:
enforceable, but in terms of looking at the FSIA arbitration exception in particular, again, I would just point to the language that says an agreement made by the foreign state with or for the benefit of a private party.

[01:02:13] Speaker 02:
And again, understanding- That's a separate sovereign immunity question.

[01:02:17] Speaker 04:
I think we're just asking about whether it falls under the New York Convention, which is separate from whether there might be a sovereignty bar.

[01:02:24] Speaker 04:
Sovereignty immunity bar.

[01:02:28] Speaker 04:
So in that first question, why wouldn't it fall into New York convention if person always means state?

[01:02:35] Speaker 04:
No exception.

[01:02:38] Speaker 02:
It could, and I think that there are circumstances looking at chapter two of the FAM.

[01:02:44] Speaker 04:
Why wouldn't it?

[01:02:48] Speaker 02:
Your honor, I think it would just depend on the particular type of, and I'm just being mindful of Article 8 and the type of interpretation that

[01:02:58] Speaker 02:
that the two states might be disputing about.

[01:03:00] Speaker 02:
And I think that for the purposes of these types of investor state awards.

[01:03:06] Speaker 04:
They're disputing what fair and equal treatment means.

[01:03:10] Speaker 04:
So that's my hypothetical.

[01:03:13] Speaker 04:
Or non-discriminatory treatment.

[01:03:15] Speaker 04:
They're disputing those things.

[01:03:18] Speaker 02:
Right, Your Honor.

[01:03:19] Speaker 02:
And I think that there is a way in which two states having a dispute pursuant to this particular investment treaty

[01:03:27] Speaker 02:
would be enforceable under the New York Convention, depending on the type of dispute and depending on... Has the New York Convention been applied in the past for a country versus country, state versus state dispute that you're aware of?

[01:03:40] Speaker 02:
I am not aware of that having been applied, Your Honor.

[01:03:43] Speaker 05:
And that's a real difficulty for your position because the one thing that was crystal clear from the negotiations at the New York Convention, to the extent we care about the treaty equivalent of legislative history, is that the convention did not cover state to state awards.

[01:04:05] Speaker 05:
That was crystal clear.

[01:04:09] Speaker 02:
Uh, yes, your honor.

[01:04:11] Speaker 02:
And I think here, uh, just wanting to, to bring it back to for the purposes of disputes that are occurring between an investor and a state.

[01:04:20] Speaker 02:
So out of, out of the realm of, of, of state to state, it is clear enough that in those situations that the New York convention would apply, um, this, the term person has been interpreted.

[01:04:34] Speaker 02:
I believe by the Belize Bank case by the district court finding that essentially in circumstances where a private party is pursuing claims with a state that in that scenario that the New York convention would apply person.

[01:04:47] Speaker 05:
If the word person in the treaty doesn't cover a state.

[01:04:54] Speaker 05:
When it's arbitrating against another state.

[01:04:58] Speaker 05:
I mean, that is.

[01:05:00] Speaker 05:
Just to say, you can't just rest on some dictionary definition of person to encompass state.

[01:05:09] Speaker 05:
It might or might not.

[01:05:11] Speaker 05:
And then you need to look at, and you can't get there from the existence of a private arbitral right of action under section nine, because there's a private arbitral right of action.

[01:05:27] Speaker 05:
There's a state arbitral right of action under section eight.

[01:05:30] Speaker 05:
of the treaty.

[01:05:32] Speaker 05:
So you just need to kind of go back to either background principles or what the negotiators had in mind, which is would the convention cover states?

[01:05:49] Speaker 05:
Do you think about this as more sovereign or more commercial?

[01:05:55] Speaker 02:
Well, I think here, again, just stepping back a bit, if states have legal personality under international law, which they do, and just for the purposes of applying the New York Convention within the United States and in the framework that we know of and recognizing that we don't have a framework under current US jurisprudence for

[01:06:23] Speaker 02:
the application of state to state awards.

[01:06:25] Speaker 02:
That's why I'm just hesitating a bit, because I think in this context, at least it's fairly clear that looking at a circumstance where an investor brings claims against a state pursuant to investment treaty award, and that arises out of an investment in that state, that that is well within the realm of coverage by the New York convention.

[01:06:50] Speaker 05:
Why?

[01:06:51] Speaker 05:
I mean, if you were looking for a template of how to capture disputes between a sovereign country and investors of a different country, it would be exit, which uses all of those terms.

[01:07:10] Speaker 05:
It wouldn't be a convention that

[01:07:14] Speaker 05:
Now, whatever you think its outer bounds are, the primary focus is on private arbitration.

[01:07:20] Speaker 05:
And it just uses this general word, person.

[01:07:23] Speaker 05:
It seems an extremely elliptical way of sweeping in this whole category of investor sovereign disputes.

[01:07:37] Speaker 02:
But so to answer that, there is certainly an exit convention mechanism, but it was not created in a what convention?

[01:07:46] Speaker 02:
Exit convention.

[01:07:49] Speaker 02:
But it was not meant to supplant the application of the New York Convention.

[01:07:52] Speaker 02:
And in fact, many treaties provide for.

[01:07:56] Speaker 05:
Well, it actually does.

[01:07:57] Speaker 05:
If something's enforceable through exit, it's not enforceable through the New York Convention.

[01:08:03] Speaker 02:
Yes, but the arbitration agreement may provide for different types of arbitrations by different types of arbitral institutions.

[01:08:10] Speaker 02:
So for example, if it were an ad hoc arbitration like the case was here, that would not go through the exit convention mechanism.

[01:08:17] Speaker 02:
But there are other mechanisms, namely the New York Convention, that do apply.

[01:08:20] Speaker 02:
And the focus there is, as the New York Convention was implemented in the United States through Chapter 2 of the Federal Arbitration Act,

[01:08:30] Speaker 02:
Section 202 sketches out what falls under the federal arbitration, under the New York convention.

[01:08:37] Speaker 02:
And it states that it is an arbitral award arising out of a legal relationship, whether contractual or not, which is considered as commercial.

[01:08:45] Speaker 02:
And that that shall fall under the convention.

[01:08:48] Speaker 02:
And this court, again, has applied this in the context of investor state awards that have been enforced.

[01:08:54] Speaker 02:
And that is the framework that we are operating with.

[01:08:56] Speaker 04:
The theory, then, that

[01:08:59] Speaker 04:
The portion of this treaty that sort of, or Nigeria sort of turns away from talking to China and turns out to Chinese investors and says, you have these protections and we will arbitrate with you if you please come invest in our country and help develop it economically.

[01:09:21] Speaker 04:
That is,

[01:09:25] Speaker 04:
the state acting more in a private capacity than a public capacity, a private versus sovereign, I guess, capacity.

[01:09:33] Speaker 04:
Is that the theory of these cases?

[01:09:36] Speaker 04:
I get that there's lots of cases where this has happened, although I think they have all involved direct martial contracts, but that doesn't seem to matter to Nigeria.

[01:09:46] Speaker 04:
But is a theory then that for you, since you don't have a direct contract, that this Article 9 and the protections it enforces are sort of like an aside in the middle of the treaty that speaks to and creates these third party rights with commercial entities?

[01:10:04] Speaker 02:
Thank you, Your Honor.

[01:10:05] Speaker 02:
So a couple of answers to that question.

[01:10:08] Speaker 02:
And again, I'll step to Section 202, which says that what is required is a legal relationship, whether contractual or not.

[01:10:15] Speaker 02:
And so in that sense, that does not need to be a direct agreement.

[01:10:20] Speaker 02:
And what is really necessary is to flesh out the relationship between the parties.

[01:10:25] Speaker 02:
And here the relationship is one where Zongshan was an investor that poured millions of dollars into a free trade zone to

[01:10:33] Speaker 04:
develop it to... Under the bilateral treaty, that's what I'm trying to ask, because you don't have a direct contract.

[01:10:40] Speaker 04:
Under the bilateral treaty, what is the relationship between Nigeria and Zhongshan?

[01:10:47] Speaker 02:
That of an investor, Zhongshan, and the recipient of an investment, Nigeria.

[01:10:52] Speaker 04:
I'm sorry, I'm looking for a label.

[01:10:56] Speaker 04:
Is it private or sovereign?

[01:11:00] Speaker 02:
So that is...

[01:11:03] Speaker 02:
in the context in which we have been discussing this morning.

[01:11:09] Speaker 04:
You have the China-Nigeria relationship in the treaty, and then you have this at least third-party relationship with investors.

[01:11:17] Speaker 04:
Yes.

[01:11:17] Speaker 04:
But you agreed upfront, and Judge Cassis's reference is sort of at least background understanding that state-to-state disputes are not under the New York Convention.

[01:11:29] Speaker 04:
That's at least a background.

[01:11:31] Speaker 04:
I don't know that there's case law on that, but that seems to be a background understanding.

[01:11:34] Speaker 04:
And so what I'm trying to understand is, does something change when it's no longer Nigeria, China?

[01:11:39] Speaker 04:
Yes.

[01:11:40] Speaker 04:
When you're talking about this investment relationship, does something change that's material for purposes of the New York Convention if we assume that the New York Convention doesn't cover state to state?

[01:11:53] Speaker 04:
That's what I'm trying to understand is, was there some transition in the treaty?

[01:11:55] Speaker 04:
And is that a tenable reading of treaties?

[01:11:58] Speaker 02:
Yes, your honor.

[01:11:58] Speaker 02:
So in that scenario, there absolutely is a different type of relationship between Zongshan and Nigeria than between China and Nigeria here.

[01:12:06] Speaker 02:
And again, that is within the framework of China entering into the treaty for the express purpose to be able to foster investment.

[01:12:16] Speaker 02:
And as the preamble says,

[01:12:18] Speaker 02:
The BIT sought to be conducive to stimulating business initiatives of investors like Zongshan for the purpose of increasing prosperity in both states.

[01:12:27] Speaker 02:
And so in that sense, there is a relationship that is forged there.

[01:12:32] Speaker 02:
And when Zongshan goes and invests money to develop a free trade zone that was set up and regulated in part by federal agencies of the Nigerian government, like the Nigerian Export Processing Zones Authority,

[01:12:47] Speaker 02:
there is a relationship that is created there.

[01:12:50] Speaker 02:
And there are obligations that Nigeria has toward an investor like Zongshan to protect the investment and not to damage the investment, whether that be through expropriation, through a lack of fair and equitable treatment.

[01:13:01] Speaker 02:
And that framing is what casts the legal relationship between Zongshan and Nigeria.

[01:13:06] Speaker 02:
And that's how Zongshan and Nigeria are not strangers to each other because of how would Zongshan have been able to pursue and obtain

[01:13:16] Speaker 02:
a 50 plus a million dollar arbitration award against Nigeria.

[01:13:20] Speaker 02:
It was based on breaches of obligations that Nigeria owed to Zongshan on the premise that Zongshan was an investor.

[01:13:27] Speaker 02:
And the arbitral tribunal had to find that Zongshan was an investor with a qualifying investment, which it did.

[01:13:33] Speaker 02:
And the qualifying investment is typically a wide range of a non-exhaustive list of assets.

[01:13:38] Speaker 02:
And that's what Zongshan satisfied and the tribunal found.

[01:13:42] Speaker 02:
And I just, at this jurisdictional stage, again,

[01:13:45] Speaker 02:
All that is required to find subject matter or jurisdiction pursuant to the arbitration exception.

[01:13:50] Speaker 02:
And this course precedent is that Zhongshan has produced and Nigeria does not dispute that there is an arbitration agreement that has resulted in an arbitration award against it.

[01:14:02] Speaker 02:
There are myriad cases that enforce investor state arbitration awards that are analogous here.

[01:14:07] Speaker 04:
Do you agree that we have to find that Nigeria is a person under article one of the convention?

[01:14:13] Speaker 02:
Apologies, Your Honor.

[01:14:14] Speaker 04:
Is that part of the predicate inquiry?

[01:14:17] Speaker 02:
So first, I think it is important that Chapter 2 of the Federal Arbitration Act, which implements the New York Convention, does not at all exclude the New York Convention from applying to states and from being enforced against states.

[01:14:35] Speaker 02:
And so I think in that sense, it is material.

[01:14:38] Speaker 02:
Chapter two of the Federal Arbitration Act use the term parties and allows one party to confirm an arbitration award that it obtained against another party.

[01:14:48] Speaker 02:
And so in that sense, the Federal Arbitration Act does not place any strictures on the type of person against human arbitration award.

[01:14:56] Speaker 05:
We wouldn't construe the FAA to be inconsistent with the New York Convention.

[01:15:03] Speaker 02:
Yes, Your Honor.

[01:15:04] Speaker 05:
And in this case, that takes us back to the question about the New York Convention.

[01:15:10] Speaker 02:
Yes.

[01:15:11] Speaker 02:
And Zhangshan's position is that the ordinary meaning of the term persons includes states like Nigeria.

[01:15:19] Speaker 02:
And again, we have the restatement foreign relations third that tells us that the principal persons under international law are states.

[01:15:27] Speaker 02:
And we have the United States.

[01:15:30] Speaker 04:
Does the restatement address state versus state?

[01:15:34] Speaker 04:
arbitration.

[01:15:34] Speaker 02:
Yes.

[01:15:36] Speaker 02:
So the restatement has talked about state versus state taking on a different character depending on the type of dispute.

[01:15:43] Speaker 02:
If it's a border dispute, if it's a certain type of dispute, then that takes it out of, it's a different realm.

[01:15:51] Speaker 02:
It's a different realm.

[01:15:52] Speaker 04:
It's hard to imagine how state versus state isn't always going to be imbued with a lot of sovereign capacity in their agreement, even if they are, you know,

[01:16:05] Speaker 04:
after World War II and we're building up Europe, and we are helping it to develop and flourish, that that was still very much agreements done in a sovereign capacity.

[01:16:17] Speaker 04:
And so I guess what we're struggling with is how that line changes or doesn't when it's sovereign versus an investor without any direct contract.

[01:16:31] Speaker 04:
But I think, again,

[01:16:33] Speaker 04:
Your opponent here says same answer.

[01:16:35] Speaker 04:
There is a direct contact contract and then we're just looking at the activity.

[01:16:41] Speaker 04:
Absolutely.

[01:16:42] Speaker 04:
Now you do you agree with that?

[01:16:43] Speaker 04:
It doesn't matter whether it's a direct contract or not.

[01:16:45] Speaker 04:
We just look at the nature of the sovereign activity.

[01:16:49] Speaker 02:
So no, Your Honor, so there does first there doesn't need to be a direct contractual arrangement between the two parties.

[01:16:57] Speaker 02:
And I also submit that that the type of activity

[01:17:01] Speaker 02:
is not what is the crux of the inquiry in terms of whether the commercial reservation applies, whether under Section 202 or Article 13 of the New York Convention.

[01:17:10] Speaker 02:
Simply what needs to be of a commercial character is the legal relationship between the arbitrating parties.

[01:17:17] Speaker 02:
And in that sense, it takes conduct out of it, which is why it makes sense that investor state awards are enveloped in this system, because there is a commercial character there.

[01:17:28] Speaker 02:
Disputes in in connection with commerce for the sports broad framing

[01:17:32] Speaker 02:
And the fact that the FSIA and taking the FSIA, the New York convention and the FAA as a whole, it has created a regime whereby investors can pursue enforcement of arbitral awards, again, that are not in the exit contract, because exit awards are very specific, that allows them to enforce those awards directly against the state.

[01:17:59] Speaker 02:
And so in that sense, this is why the United States has taken the position in 1980 in an amicus brief in the Liamco case that there is no exception or there's no treaty-based exception to the enforcement of an arbitral award by a private party against a state.

[01:18:18] Speaker 04:
You had a direct contract there.

[01:18:21] Speaker 02:
Yes, Your Honor, but it wasn't necessary to the conclusion.

[01:18:25] Speaker 04:
It might've been necessary to the US positions, we don't know.

[01:18:30] Speaker 02:
Well, I think it's illustrative that even in the absence of hinging something like that on the presence of a contract, I think that speaks a lot because there's, and obviously if the investor state provisions and the bilateral investment treaty is creating a third party beneficiary relationship,

[01:18:52] Speaker 02:
party beneficiary contract with the investor and the state, then that further imbues it with directness.

[01:19:00] Speaker 04:
But again, this is a third party relationship here under the treaty is commercial.

[01:19:05] Speaker 04:
I'm just trying to get, do you think it's private or

[01:19:13] Speaker 02:
Yes.

[01:19:14] Speaker 02:
So the relationship between Zongshan and Nigeria, the legal relationship, is one that, although it's through the vehicle of a treaty, it's the private in the sense that there are obligations that Nigeria as a host state makes to Zongshan as an investor who is a private party here.

[01:19:35] Speaker 02:
who has made the investments.

[01:19:37] Speaker 02:
But in that sense, even looking at jurisprudence that is enforcing arbitration awards pursuing to the FSAI arbitration exception at the jurisdictional stage, especially there isn't a discussion of whether the state was acting in a sovereign or in a private capacity because what is underlying really and truly the relationship and what's underlying of the enforcement regime is that

[01:20:02] Speaker 02:
investor state arbitration awards have been recognized by this court and others to fall within the New York convention regime and to be enforceable.

[01:20:11] Speaker 02:
And that is all that Zonkin is doing.

[01:20:13] Speaker 02:
It is not doing anything unprecedented.

[01:20:15] Speaker 02:
It's simply asking that its arbitration award that arises out of a commercial matter, that arises out of its investments, a multimillion dollar investment being destroyed.

[01:20:27] Speaker 04:
You may not know this, or maybe it's just not in the record.

[01:20:31] Speaker 04:
There was a direct contract with Ogden State, if I'm pronouncing that correctly.

[01:20:36] Speaker 04:
Do you happen to know if there's any reference in that contract to this treaty?

[01:20:41] Speaker 02:
Actually, I believe, Your Honor, there was.

[01:20:44] Speaker 02:
I don't have that before me.

[01:20:47] Speaker 02:
But I believe that there was a reference, and if I may point you to.

[01:20:53] Speaker 04:
Is that in the record, you think, maybe?

[01:21:00] Speaker 02:
I believe there is a reference to that in the arbitration award, if I can find that for you, that there was some expectation and mindfulness about obligations made under the China-Nigeria bilateral investment treaty.

[01:21:17] Speaker 02:
Absolutely.

[01:21:18] Speaker 04:
Maybe you could submit that to us in letter after argument, just so we don't take your time.

[01:21:22] Speaker 04:
It's hard to look.

[01:21:23] Speaker 04:
Yes, of course.

[01:21:24] Speaker 04:
Is that okay?

[01:21:25] Speaker 04:
Any other questions?

[01:21:28] Speaker 05:
I wonder how much of your theory or your position depends on using 2020's understandings projected backwards onto a 1958 treaty.

[01:21:46] Speaker 05:
I mean, we're in a very global world.

[01:21:50] Speaker 05:
There are lots of investment disputes.

[01:21:54] Speaker 05:
I mean, the subject of

[01:21:57] Speaker 05:
government investor disputes is the entire topic of this new restatement.

[01:22:06] Speaker 05:
There's an exit mechanism for arbitrating those disputes, and then judicial enforcement is virtually automatic.

[01:22:15] Speaker 05:
So we've been kind of desensitized to those kinds of awards being enforced.

[01:22:22] Speaker 05:
But a very different world in 1958.

[01:22:27] Speaker 05:
I mean, we're only a couple of years after the United States first accepted the proposition that a government could be, for sovereign immunity purposes, could be treated as private, even when it was engaged in purely commercial activity.

[01:22:47] Speaker 05:
So I just wonder,

[01:22:49] Speaker 05:
From the perspective of the time of the treaty, it seems like this would have been a very big deal to put this kind of dispute into a framework that really was focused on private-private disputes.

[01:23:12] Speaker 02:
Thank you, Your Honor.

[01:23:13] Speaker 02:
There's a lot in there.

[01:23:15] Speaker 02:
Two responses to that, if I may.

[01:23:18] Speaker 02:
And I'll first, I think, start with the context of what you mentioned of what was understood then and now.

[01:23:24] Speaker 02:
And I would submit that even the drafting history that Nigeria has pointed to does not necessarily prove its point.

[01:23:33] Speaker 02:
It does not evidence a consensus that

[01:23:37] Speaker 02:
The term states was meant to exclude states cost states or states that are acting in some particular capacity.

[01:23:43] Speaker 02:
In fact, that's nowhere in the text.

[01:23:46] Speaker 02:
And I would just call attention to the Supreme Court statement and G power energy saying that, you know, generalizations from negotiating and drafting history.

[01:23:55] Speaker 02:
cannot be used to create a rule that finds no support in the treaty's text.

[01:24:01] Speaker 02:
Now, going back to that negotiating history, you know, we have a statement from Belgium that was referenced by council that stated that

[01:24:11] Speaker 02:
The clause should expressly provide that public enterprises and public utilities should be deemed to be legal purposes, legal persons for the purposes of this article, even if their activities were governed by private law.

[01:24:24] Speaker 02:
But frankly, that does not tell us that persons are excluded when engaging in the type of acts that have led to this investor state award.

[01:24:35] Speaker 05:
I mean, it suggests that the hard question in 1958 was whether to cover governments when they're doing private sort of activities, not that anyone would have thought you'd cover governments when they're engaged in sovereign activities.

[01:24:53] Speaker 02:
And still, I think this is why the position is instructed because, and this is a little bit difficult to

[01:25:03] Speaker 02:
Understand from Nigeria's position, because if you have an act like expropriation.

[01:25:09] Speaker 02:
Well, that is an act that is committed by a government and it is sovereign is the taking of property and violation of international law.

[01:25:15] Speaker 02:
And that is the it's unclear whether the fact that that can be a sovereign activity that that is sovereign conduct how that can overwhelm or what that means.

[01:25:26] Speaker 02:
In the context of this private versus sovereign, but certainly this court has enforced and awards that arise out of expropriation and crystal likes and as it also a circumstance where there was no direct contractual relationships and crystal likes the claim it was directly contracting with with an entity.

[01:25:46] Speaker 02:
So it really is difficult to understand what here under counsel's test is positive and who decides there's no framework simply in the case law to even tell us how does one apply this private versus sovereign conduct.

[01:26:01] Speaker 05:
It might or might not be the right test.

[01:26:04] Speaker 05:
But there are all sorts of contexts in which courts have to distinguish sovereign acts from private acts.

[01:26:11] Speaker 05:
So the argument that, gosh, this just isn't manageable doesn't move me very much.

[01:26:19] Speaker 02:
Right.

[01:26:20] Speaker 02:
And so I would point here to Belize social development as a good example, because it discusses a case that was discussed earlier in the day, Weltover.

[01:26:29] Speaker 02:
And I think two things that are important here is also which FSIA

[01:26:34] Speaker 02:
immunity exception is invoked.

[01:26:36] Speaker 02:
And again, here Nigeria cited multiple cases that are exploring whether it's the commercial activity exception in 16052.

[01:26:44] Speaker 02:
Again, those are contexts where a party is bringing a direct claim for liability against a sovereign.

[01:26:49] Speaker 02:
That's just simply inapplicable here.

[01:26:51] Speaker 02:
And another reason why it's inapplicable, because it uses a commercial activity, which is different.

[01:26:57] Speaker 02:
And this court has interpreted it as different than the term commercial and the FSIA arbitration exception.

[01:27:03] Speaker 02:
And specifically,

[01:27:05] Speaker 02:
in police social development, the court has stated that Congress was not trying to codify whatever restrictive theory of immunity is evoked by the term commercial activity.

[01:27:15] Speaker 02:
When it was ratifying the New York convention, this was not the intent.

[01:27:18] Speaker 02:
And that's why in the international arbitration context, the term commercial means something broader and means something more.

[01:27:24] Speaker 02:
And again, I think here looking in totality at the FSA arbitration exception, which is giving the ability

[01:27:31] Speaker 02:
to pursue enforcement of arbitration awards directly against states.

[01:27:35] Speaker 02:
Again, the statute makes express reference to an agreement made by the foreign state with or for the benefit of a private party.

[01:27:43] Speaker 02:
That is a circumstance that we are dealing with here, that that is well unsatisfied.

[01:27:48] Speaker 02:
And indeed, the FSIA arbitration exception only states that the award is or may be governed.

[01:27:54] Speaker 02:
And so at the jurisdictional stage, Zhongshan has met its burden of production.

[01:27:59] Speaker 02:
But again, the burden of preponderance, the heavier burden falls on Nigeria.

[01:28:04] Speaker 02:
And it simply has not shown by a preponderance of evidence by burden of persuasion that this arbitration exception does not apply to enforce Zhongshan's award directly against it.

[01:28:19] Speaker 04:
Thank you very much.

[01:28:19] Speaker 02:
Thank you very much.

[01:28:23] Speaker 04:
Mr. Bradley, we'll give you three minutes.

[01:28:28] Speaker 06:
Thank you.

[01:28:30] Speaker 06:
So a few thoughts.

[01:28:32] Speaker 06:
One is, I think you're right, that Zhangshan's position cannot explain why a state-to-state arbitration would not be covered.

[01:28:41] Speaker 06:
It's been pretty well understood that it's not.

[01:28:44] Speaker 06:
The Restatement of Foreign Relations says, the following are ordinarily not subject to the New York Convention.

[01:28:51] Speaker 06:
Arbitration of a controversy of a public international law character, such as boundary dispute, talking about that obviously,

[01:28:57] Speaker 06:
or a dispute about our interpretation of or performance under an international agreement.

[01:29:03] Speaker 06:
The restatement of foreign relations is obviously a different reporter from the other restatement, but there is some general agreement, that's one standard, performance under international agreement.

[01:29:16] Speaker 06:
If I go back to the committee report on the New York Convention when it was being drafted, the committee that drafted it says this convention will be good because it will facilitate the enforcement of foreign arbitral rewards while at the same time maintaining generally recognized principles of justice and respect the sovereign rights of states.

[01:29:40] Speaker 06:
and respect the sovereign rights of states.

[01:29:43] Speaker 06:
That's what they said right in 1955 as they were drafting it.

[01:29:45] Speaker 06:
That's what the drafting committee says.

[01:29:49] Speaker 06:
Judge Millett, I hear your concept that I think we're all agreed that the agreement with China itself was sovereign, but perhaps the promise to the investors in the treaty was private law conduct.

[01:30:05] Speaker 04:
If that same language were reproduced in a contract between Nigeria and an investor,

[01:30:18] Speaker 04:
So she wouldn't be if you language that will we won't use our laws to discriminate to unfairly treat to expropriate.

[01:30:28] Speaker 04:
And if we violate this agreement, you can arbitrate it against it.

[01:30:31] Speaker 04:
That's the contract.

[01:30:32] Speaker 04:
Same words, but it's a direct contract with the investors.

[01:30:36] Speaker 04:
Let me read you the passage.

[01:30:38] Speaker 06:
Could I read you the passage from weltover that answers this question?

[01:30:42] Speaker 06:
The Supreme Court says the question is whether the particular actions are the type of action by which a private party engages in trade or traffic or commerce.

[01:30:51] Speaker 04:
So we have a lot of cases in this court where, at least when there's been a direct contract between the foreign state and an investor,

[01:31:05] Speaker 04:
that we've allowed those to be enforced under the New York Convention.

[01:31:09] Speaker 04:
We've got a lot of those cases.

[01:31:10] Speaker 04:
And that's why what I'm struggling with on your end is you seem to resist the notion.

[01:31:14] Speaker 04:
In fact, you did expressly resist the notion that if this exact same taxable provisions that are in the bilateral treaty are cut out and planted into a contract directly between Nigeria and Chongqing,

[01:31:30] Speaker 04:
and the exact same conduct occurs, you would say that can't be enforced.

[01:31:35] Speaker 06:
I would go back to this.

[01:31:37] Speaker 04:
Am I right in understanding that or I misunderstood your position?

[01:31:40] Speaker 06:
So we had this, there's multiple discussions about whether the direct contract matters or does not matter.

[01:31:45] Speaker 06:
And you see me being pushed around on that a lot because, and I'll admit it's hard, because lots of times the direct contract is very relevant.

[01:31:54] Speaker 06:
It does represent a way in which a government is engaging in the market.

[01:32:00] Speaker 06:
But I'm going to go back to this standard from the Supreme Court.

[01:32:03] Speaker 04:
I just want an answer.

[01:32:04] Speaker 04:
I understand what the Supreme Court has said.

[01:32:06] Speaker 04:
It's not helping me without some sense of application.

[01:32:10] Speaker 04:
So they speak in a general sense.

[01:32:12] Speaker 04:
So try to resolve this case.

[01:32:13] Speaker 04:
So if we take all the languages in this bilateral agreement and we cut and paste it into a direct contract between Nigeria and Zhongshan,

[01:32:24] Speaker 04:
for the exact activity that happened here, the exact same violations that they allege occurred here, and the same type of arbitration they obtained here.

[01:32:35] Speaker 04:
So they get the award, but they get it for breach of a contract, where that contract provided for arbitration.

[01:32:44] Speaker 04:
Yes or no could be enforced on the New York Convention.

[01:32:48] Speaker 06:
The reason there's not a yes or no,

[01:32:51] Speaker 06:
is that the hypothetical you just posed, again, does not have information.

[01:32:56] Speaker 06:
If, for example, Argentina has a bond that it promises investors certain things that might include that, that could be a contract that's private law activity.

[01:33:05] Speaker 06:
But so when you, in your hypothetical.

[01:33:07] Speaker 04:
I'm giving you the facts, OK?

[01:33:08] Speaker 06:
Yeah.

[01:33:09] Speaker 04:
All right.

[01:33:10] Speaker 04:
All the facts are exactly what happened here.

[01:33:14] Speaker 04:
Factually on the ground.

[01:33:15] Speaker 04:
That's the governmental activity at issue.

[01:33:17] Speaker 04:
Right.

[01:33:18] Speaker 04:
All right.

[01:33:18] Speaker 04:
The exact same factual activity.

[01:33:21] Speaker 04:
The only thing I'm adding in is that in addition to this treaty, there is a direct contract between Nigeria and Zhongshan.

[01:33:30] Speaker 04:
And that contract offers the exact same promises, except it's one-on-one now.

[01:33:36] Speaker 04:
It's not global.

[01:33:37] Speaker 04:
from Nigeria to Zhongshan against discrimination, against expropriation, against this treatment and promising fair and equitable treatment and providing for arbitration for violations of these contract promises.

[01:33:56] Speaker 06:
And what makes it hard is that what you just described is not a contract that a government would enter in the marketplace.

[01:34:06] Speaker 04:
Is that hard for you or is that easy for you?

[01:34:08] Speaker 04:
Is your answer then it's not equivalent to marketplace conduct?

[01:34:11] Speaker 06:
It's hard.

[01:34:12] Speaker 06:
It's not equivalent to marketplace conduct.

[01:34:14] Speaker 04:
Why is it hard then?

[01:34:15] Speaker 04:
Why under your theory you would say it can't be enforced?

[01:34:17] Speaker 06:
Because you could imagine circumstances where it could be part of engaging.

[01:34:23] Speaker 06:
And you go back to the Microsoft example.

[01:34:25] Speaker 04:
I'm not giving you other facts.

[01:34:27] Speaker 04:
I'm giving you these facts.

[01:34:28] Speaker 04:
You should be able to tell me.

[01:34:29] Speaker 04:
Because these facts, you know exactly what these facts are.

[01:34:34] Speaker 06:
I know exactly where you're going, yes.

[01:34:35] Speaker 06:
So let us hypothesize then that Nigeria's... I'm giving you the hypothesis.

[01:34:41] Speaker 06:
Right.

[01:34:41] Speaker 06:
They write a contract for everybody.

[01:34:43] Speaker 04:
No!

[01:34:45] Speaker 04:
The contracts between Zhongshan and Nigeria, not everybody.

[01:34:48] Speaker 06:
Right.

[01:34:48] Speaker 06:
Sorry.

[01:34:49] Speaker 06:
They write a promise to Zhongshan that says those things.

[01:34:52] Speaker 06:
Yes.

[01:34:53] Speaker 06:
That sounds to me like things that a sovereign would do.

[01:34:58] Speaker 06:
That sounds sovereign, not private.

[01:35:02] Speaker 04:
And they get all this investment and everything, and then you're still going to... I get it.

[01:35:07] Speaker 04:
You're saying that the promises in this treaty

[01:35:11] Speaker 04:
all sovereign doesn't matter if they're in a direct direct direct contract or in a treaty for your purposes they can't be enforced um uh because of its sovereign character yes now governments do engage in country activities sovereign character um the

[01:35:28] Speaker 04:
The promise, the promise, the promises are in activities for treatment or don't discriminate.

[01:35:34] Speaker 06:
Right, right.

[01:35:35] Speaker 06:
In that, in your hypothetical, the promise is sovereign and the activities, like the expropriation remains sovereign as well in your hypothetical.

[01:35:43] Speaker 06:
So yes, it remains sovereign.

[01:35:44] Speaker 06:
The reason that I keep hedging is because you can imagine, as you said, Microsoft could write a contract to somebody that says, I will treat you fairly.

[01:35:52] Speaker 06:
But they're doing that in the context of engaging in the market as a private player.

[01:35:56] Speaker 06:
And a government could engage in the market as a private player.

[01:35:58] Speaker 06:
But if all Nigeria does is it writes an agreement to Zhongshan that says, I will treat you fairly, there hasn't been an engagement.

[01:36:05] Speaker 04:
I won't discriminate.

[01:36:06] Speaker 04:
I won't expropriate.

[01:36:07] Speaker 04:
All the rest of it, yes.

[01:36:07] Speaker 04:
And in exchange for these agreements, I'm getting $50 million worth of investment from you.

[01:36:12] Speaker 04:
And I have obtained that $50 million worth of investment from you.

[01:36:16] Speaker 04:
And now I'm breaching it.

[01:36:18] Speaker 06:
When we say Nigeria has obtained,

[01:36:21] Speaker 04:
Yes, just like what happened here.

[01:36:23] Speaker 04:
Well, I want to be careful because there is no matter if you're asking about enforcement up front or after the fact, nothing's changed other than you've actually gotten all the benefits of this agreement without any obligations.

[01:36:34] Speaker 06:
Again, when we talk about the benefits, there is in so much of U.S.

[01:36:38] Speaker 06:
law, there is a difference between the government as a regular and a participant.

[01:36:42] Speaker 06:
Nigeria did not receive Nigeria.

[01:36:44] Speaker 06:
The the the people like the economy of Nigeria

[01:36:48] Speaker 06:
Somebody with, you know, Ogan, in fact, received a contract with Zhongshan, whereby Zhongshan put in however much money.

[01:36:59] Speaker 06:
It wasn't actually 50 million, but Nigeria is not a contracting party that received any money.

[01:37:06] Speaker 04:
No, under my hypothetical, it would be.

[01:37:07] Speaker 04:
Enforcement would result.

[01:37:09] Speaker 06:
Right.

[01:37:10] Speaker 06:
So that sounds actually very much like something like some aspects of the Belize case, in which Belize says, I'm going to sell you these assets for which you're going to pay me $50 million, whatever the number is.

[01:37:24] Speaker 06:
Right?

[01:37:24] Speaker 06:
That is, Belize has entered into the market as a private actor.

[01:37:28] Speaker 04:
Doesn't sound something like Belize under your view, because I've told you what the conduct is that is breached.

[01:37:33] Speaker 06:
Right.

[01:37:34] Speaker 06:
Well, yes.

[01:37:34] Speaker 04:
That is all sovereign.

[01:37:36] Speaker 06:
Yeah.

[01:37:36] Speaker 06:
And I go back to it.

[01:37:37] Speaker 06:
Well, you know where I go back to.

[01:37:40] Speaker 05:
How do you reconcile your invocation of weltover with a pretty clear statement in our Belize decision that we just don't apply that standard in figuring out whether the New York Convention covers sovereign slash investor disputes?

[01:38:05] Speaker 06:
Respectfully, I think that's not quite what the Belize decision said.

[01:38:10] Speaker 06:
The Belize decision says we are not going to apply the weltover line or interpreting the word commercial in that section 202 reservation.

[01:38:22] Speaker 06:
There is nothing in the Belize decision that talks in this Belize decision.

[01:38:26] Speaker 06:
There's a lot of Belize decisions, the one we're talking about now.

[01:38:29] Speaker 06:
that talks about the basic line that person, the New York convention in the first place doesn't encompass states acting.

[01:38:39] Speaker 06:
You can use that line on your first point, but not your second.

[01:38:44] Speaker 06:
That's right.

[01:38:44] Speaker 06:
Although, exactly.

[01:38:45] Speaker 06:
And the second thing I would say about the person, but not on commercial.

[01:38:48] Speaker 06:
Yes.

[01:38:49] Speaker 06:
Although the second thing.

[01:38:49] Speaker 04:
The problem I believe was they just didn't make this person argument, but if they had, it would have come out exactly the opposite.

[01:38:54] Speaker 06:
They did engage in very private law activity as well, though, Your Honor.

[01:38:58] Speaker 06:
They've sold assets and they received payments directly to the government for those assets.

[01:39:02] Speaker 06:
It was very much engaging the private market.

[01:39:05] Speaker 06:
And the breach that was alleged... What assets did they sell?

[01:39:08] Speaker 06:
I think it was, if I remember correctly, state telecommunications property.

[01:39:13] Speaker 04:
Like there was a private, there was a governmental nationalized... State telecommunications, selling state property that's not a sovereign thing to do?

[01:39:21] Speaker 06:
Um, no, I would think of that as being, uh, it's just selling assets.

[01:39:25] Speaker 06:
Like they sold assets.

[01:39:26] Speaker 06:
They had a, um, they had, you know, telecommunications equipment and an entity that does telecommunications, they sold that to a private party and they received payment in the ordinary sense.

[01:39:36] Speaker 04:
And I gave land to Zhongsheng to develop.

[01:39:40] Speaker 06:
Nigeria did not.

[01:39:41] Speaker 04:
If again, sorry, for now, I'm going to drop the Nigeria Ogan distinction.

[01:39:46] Speaker 04:
All right.

[01:39:47] Speaker 04:
Nigeria back into my hypothetical contract.

[01:39:50] Speaker 04:
gave Zhongshan land to develop.

[01:39:55] Speaker 04:
As to that, they can arbitrate.

[01:39:57] Speaker 04:
And that can be enforced here.

[01:39:58] Speaker 04:
That way they can arbitrate, they can be enforced.

[01:40:01] Speaker 06:
That sounds more, that does get more private, Your Honor.

[01:40:04] Speaker 06:
I agree with that.

[01:40:05] Speaker 04:
More private or not?

[01:40:06] Speaker 04:
You just said selling stuff.

[01:40:07] Speaker 06:
Well, the reason I keep resisting is because what is private, what is sovereign depends on what's going on in each case.

[01:40:16] Speaker 06:
Right, if they sell land, that sounds private.

[01:40:17] Speaker 04:
The land doesn't belong to Zhongshan.

[01:40:19] Speaker 04:
It must be under the control of the Nigerian government if they're selling it.

[01:40:22] Speaker 06:
Right, Nigeria's got some land, they sell it.

[01:40:25] Speaker 06:
Sure, sale of land, that's private.

[01:40:27] Speaker 06:
They own some land, they sell it.

[01:40:29] Speaker 04:
And then they boot Zhongshan off.

[01:40:32] Speaker 04:
So if they sell it, and they don't give it to them, they can enforce it.

[01:40:37] Speaker 04:
Well, if they sell it and then boot them off, they can't enforce it.

[01:40:40] Speaker 04:
Is that the difference?

[01:40:41] Speaker 04:
Because it would often require police forces.

[01:40:44] Speaker 06:
Yeah, and this court has cases on this line.

[01:40:49] Speaker 06:
I think Rong versus Laoning, for example, involves commercial activity, but then the expropriation was sovereign.

[01:41:00] Speaker 06:
But if I could go back to Belize, there's a second thing about the way in which Belize doesn't control this case, which is that in the Belize case, again, the one we're talking about,

[01:41:11] Speaker 06:
There's unquestionably a legal relationship.

[01:41:15] Speaker 06:
There's this sale of property under which the buyer is going to be paying Belize various amounts in exchange for the sale of property.

[01:41:24] Speaker 06:
And again, it doesn't have to be a contract because contract is a technical word under some legal regimes in some countries, but it's an agreement.

[01:41:32] Speaker 06:
There's a transaction.

[01:41:34] Speaker 06:
So Belize doesn't even have to, the court didn't have to ask the question whether there was a transaction in that case.

[01:41:39] Speaker 06:
Nobody brought it up because of course there was.

[01:41:41] Speaker 06:
whether that transaction, and all Belize says, is that that transaction, you don't get out of that by saying there was some sovereign conduct in that transaction.

[01:41:52] Speaker 06:
You don't get out of that in terms of the US reservation.

[01:41:54] Speaker 06:
But we still have to ask, what does legal relationship, which is considered as commercial, what does legal relationship mean?

[01:42:02] Speaker 06:
You still have to look at those words in section 202 and in the commercial reservation and in the convention.

[01:42:07] Speaker 04:
I thought your argument wasn't about legal relationship.

[01:42:09] Speaker 04:
It was about the word person.

[01:42:11] Speaker 06:
That's about both.

[01:42:12] Speaker 06:
One of them is section one in the brief, the other is section two.

[01:42:16] Speaker 04:
Any other questions?

[01:42:17] Speaker 04:
Great.

[01:42:17] Speaker 04:
Thank you very much to Council for taking the minute.