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In re Application Stati

United States District Court, D. Massachusetts

January 18, 2018

IN RE APPLICATION OF ANATOLIE STATI, GABRIEL STATI, ASCOM GROUP, S.A., and TERRA RAF TRANS TRAIDING LTD. FOR AN DIRECTING DISCOVERY FROM STATE STREET CORPORATION PURSUANT TO 28 U.S.C. § 1782. NO.

         MEMORANDUM AND ORDER RE: PETITIONERS' MOTION TO COMPEL DISCOVERY (DOCKET ENTRY # 12); THE NATIONAL BANK OF THE REPUBLIC OF KAZAKHSTAN AND STATE STREET CORPORATION'S MOTION TO INTERVENE AND VACATE THE EX PARTE ORDER ISSUED PURSUANT TO 28 U.S.C. § 1782, OR TO STAY § 1782 DISCOVERY (DOCKET ENTRY # 25)

          MARIANNE B. BOWLER UNITED STATES MAGISTRATE JUDGE

         Pending before this court is a motion to compel discovery for use in foreign proceedings under 28 U.S.C. § 1782 (“section 1782”) filed by petitioners Anatolie Stati, Gabriel Stati, Ascom Group, S.A., and Terra Raf Trans Traiding Ltd. (“petitioners”) pursuant to Fed.R.Civ.P. 45 (“Rule 45”). (Docket Entry # 12). In March 2015, the court allowed an ex parte application filed by petitioners seeking leave to serve a subpoena duces tecum with 14 categories of documents and a Fed.R.Civ.P. 30(b)(6) (“Rule 30(b)(6)”) deposition subpoena on State Street Corporation (“State Street”).[1] (Docket Entry # 11). The two subpoenas seek documents and information relative to accounts and other assets owned directly, indirectly, legally, and/or beneficially by the Republic of Kazakhstan (“ROK”). (Docket Entry ## 1-1, 14-3). The subpoenas also seek documents and information regarding accounts held by or on behalf of the National Bank of the Republic of Kazakhstan (“NBK”), including in NBK's capacity as manager of the National Fund of Kazakhstan (“the National Fund”). Seeking to intervene in these proceedings, NBK and State Street move to vacate the ex parte March 2015 Order under Rule 45 or Fed.R.Civ.P. 60. (Docket Entry # 25). After conducting a hearing on January 10, 2018, this court took the motions (Docket Entry ## 12, 25) under advisement.

         BACKGROUND

         The underlying arbitral award in excess of $500 million dollars “rendered by a Stockholm based tribunal” under “the Energy Charter Treaty” against ROK concerned a dispute about investments and construction of a liquified petroleum gas plant in Kazakhstan. (Docket Entry # 29-1, ¶¶ 1-2, 13-14) (Docket Entry # 36, ¶¶ 2, 4) (Docket Entry # 4-1, pp. 10-17). ROK applied to set aside the award in the Seva Court of Appeal in Stockholm and amended the claim to include fraud. (Docket Entry # 29-1, ¶¶ 4, 7) (Docket Entry # 36, ¶ 3). The court refused to set aside the award and the Supreme Court of Sweden denied ROK's motion for review. (Docket Entry # 36, ¶¶ 2-4) (Docket Entry # 29-1, ¶¶ 7-8). The arbitral award is therefore final. (Docket Entry # 36, ¶ 4).

         Thereafter, petitioners “commenced an action” in the District Court of Stockholm (“the Stockholm court”) which rendered an “ex parte provisional sequestration order” allowing enforcement of the arbitral award and the attachment of ROK's assets in Sweden. (Docket Entry # 14, ¶ 8) (Docket Entry # 36, ¶ 7(a)). Based on this ex parte provisional sequestration order in the Stockholm court, the Swedish Enforcement Authority issued attachments of assets “believed to be owned” by ROK, which ROK and NBK are challenging in an appeal to the District Court of Nacka (“the Nacka court”) (collectively, “the Swedish proceedings”). (Docket Entry # 14, ¶¶ 8-12) (Docket Entry # 36, ¶ 7(a)). In an October 20, 2017 reply brief filed in the Stockholm court, ROK argued there is no risk of sabotage to support the attachments because NBK owned and controlled the attached assets.[2] (Docket Entry # 14, ¶¶ 8-12) (Docket Entry # 36, ¶ 7(a)) (Docket Entry # 36-1). Petitioners therefore seek discovery via the document and deposition subpoenas to State Street to use in the Swedish proceedings regarding the interrelationship and the ownership of the attached assets of ROK, NBK, and/or the National Fund in the Swedish proceedings. (Docket Entry # 13) (Docket Entry # 45, ¶ II(B)) (Docket Entry # 35).

         They also seek the discovery to use in a Belgian proceeding in which ROK challenged ex parte attachments issued by the Brussels Court of First Instance (“the Belgian proceeding”). NBK seeks to intervene in the Belgian proceeding and asserts that attached assets to aid in the collection of the arbitral judgment against ROK belong to NBK as opposed to ROK. (Docket Entry # 36, ¶ 7(c)) (Docket Entry # 36-3). Petitioners also identify proceedings in Amsterdam District Court (“the Amsterdam court”) allowing ex parte attachments of ROK property, including assets held by an “Amsterdam branch of a Belgian subsidiary of the Bank of New York Mellon, ‘BNY Mellon SA/NV, concerning [a] savings portfolio of the National Fund'” (“the Netherlands proceeding”). (Docket Entry # 36, ¶ 7(b)).

         As set out in an affidavit by a Vice President and Senior Counsel of State Street Bank & Trust Company, “State Street provides services only to the National Bank” of the Republic of Kazakhstan, i.e., NBK (Docket Entry # 27, ¶¶ 1, 6) (Docket Entry # 22, ¶¶ 1, 6), although other evidence suggests that NBK, as trustee, holds assets of the National Fund with ROK retaining ownership of the assets (Docket Entry # 14, ¶ 16) (Docket Entry # 5). State Street's NBK accounts “are maintained by three State Street subsidiaries in London, England” as opposed to in Massachusetts.[3] (Docket Entry # 22, ¶¶ 7-10) (Docket Entry # 27, ¶¶ 7-10). In February 2014, petitioners sought and obtained recognition of the arbitral award in the High Court of Justice in London (“the London court”). (Docket Entry # 36, ¶ 6) (Docket Entry # 29, ¶ 2). In an application to the London court, ROK sought to set aside the permission granted to enforce the award. (Docket Entry # 29-1, ¶ 5) (Docket Entry # 29, ¶ 4). In June 2017, the London court allowed ROK to amend the application to include fraud allegations. (Docket Entry # 29-1, ¶¶ 6, 95) (Docket Entry # 29, ¶ 6). A trial on the fraud allegations is set to commence in November 2018. (Docket Entry # 36, ¶ 6) (Docket Entry # 29, ¶ 8).

         In August 2017, the Luxembourg District Court issued an ex parte order recognizing and enforcing the arbitral award in Luxembourg. (Docket Entry # 36, ¶ 7(d)). ROK filed an appeal from the order. In the meantime, “a Luxembourg bailiff levied attachments on ROK's property in Luxembourg.” (Docket Entry # 36, ¶ 7(d)).

         In October 2017, ROK filed an action in the United States District Court in the District of Columbia alleging that petitioners violated the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961 et seq., and engaged in fraud and a civil conspiracy (“the RICO action”). (Docket Entry # 28-1). In light of the November 2018 trial in the London court and the pendency of the fraud claims in the RICO action, NBK and State Street alternatively move to stay the section 1782 discovery until a resolution of these proceedings. (Docket Entry # 25) (Docket Entry # 26, ¶ III).

         DISCUSSION

         Section 1782 “authorizes, but does not require, a federal district court to provide assistance to a complainant in a” foreign proceeding. Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 255 (2004) (“Intel”). The three statutory prerequisites to obtain discovery under section 1782 require that: (1) the plaintiff seek discovery from a person who “resides or is found” in this district; (2) the discovery is “for use in a proceeding in a foreign or international tribunal”; and (3) the plaintiff is an “interested person.”[4] 28 U.S.C. § 1782(a); Euromepa, S.A. v. Esmerian, Inc., 154 F.3d 24, 27 (2nd Cir. 1998) (“Euromepa”); In re Barnwell Enterprises Ltd., 265 F.Supp.3d 1, 8-9 (D.D.C. 2017); In re Application of Gazprom Latin Am. Servicios, C.A., 4:14-MC-1186, 2016 WL 3654590, at *3 (S.D. Tex. July 6, 2016) (person “must reside or be found in the district, . . . discovery must be for use in a proceeding before a foreign tribunal[, ]” and “application must be made by ‘any interested person'”), appeal dismissed sub nom., 2016 WL 9959263 (5th Cir. Dec. 15, 2016) (No. 16-20469); Minis v. Thomson, 14-91050-DJC, 2014 WL 1599947, at *1 (D. Mass. Apr. 18, 2014); see Intel, 542 U.S. at 256-65. Once these three requirements are satisfied, the court considers the following “discretionary factors” commonly referred to as the Intel factors:

(1) whether the person from whom discovery is sought is a participant in the foreign proceeding; (2) the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign body to U.S. federal court assistance; (3) whether the “request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States[, ]”; and (4) whether a request is unduly intrusive or burdensome.

Minis v. Thomson, 2014 WL 1599947, at *3 (quoting Intel, 542 U.S. at 264-65); accord Application of Consorcio Ecuatoriano deTelecomunicaciones S.A. v. JAS Forwarding (USA), Inc., 747 F.3d at 1271-72; see In re ...


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