Updated 2:08 p.m.
An appeals court in Washington today upheld a monetary contempt sanction imposed against the Democratic Republic of Congo for shirking court orders in an arbitration dispute.
At issue in the case in Washington federal district court is whether the Foreign Sovereign Immunities Act prohibits federal trial judges from imposing monetary contempt sanctions against foreign countries. The fine against the DRC continues to increase, now topping more than $2 million.
The U.S. Court of Appeals for the D.C. Circuit unanimously ruled that a monetary contempt sanction can be brought against a foreign sovereign. The more problematic question, the court said, is whether a contempt sanction can be enforced. In the case against the DRC, there has been no attempt to enforce the sanction. The appeals court declined to rule on the merits of enforcement, saying that issue is not before the court.
The investment company FG Hemisphere Associates LLC, represented by Sidley Austin, brought an action against the DRC in Washington’s federal trial court over a dispute about an arbitration award the company won for its involvement in the financing of an electric power transmission facility in the DRC. More background on the case here.
The DRC failed to respond to certain discovery demands, including providing FG Hemisphere a list of all worldwide assets. FG Hemisphere sought the location of property valued at more than $10,000 to execute on its judgment.
U.S. District Judge Richard Leon said DRC’s response to the discovery “fell woefully short of compliance” and held the country in civil contempt. Leon later imposed a fine that started at $5,000 a week and doubled every four weeks until terminating at $80,000 per week. The fine has grown to millions of dollars now.
The Justice Department, representing the interests of the State Department, supported the DRC in its appeal in the D.C. Circuit. DOJ lawyers argued that the contempt sanction is an affront to the DRC’s sovereignty and exposes the United States to similar treatment by other countries. The Justice Department said the contempt sanction “could cause significant friction” in U.S. foreign relations.
Senior Judge Laurence Silberman, writing for the panel, said DOJ “does not explain how the United States would be harmed if it were found in contempt under reciprocal circumstances. The broad, generic argument that the government offers here seems to us to be appropriately presented to Congress—not us.”
Silberman, joined by judges Merrick Garland and Douglas Ginsburg, said the dispute is “really less than meets the eye.” The case marks the first time the court has encountered a contempt sanction imposed against a foreign country. “But there has been as yet no attempt to enforce the sanction (which could prove problematic),” Silberman wrote.
A lawyer for FG Hemisphere, Sidley partner Bradford Berenson, said this afternoon in an e-mail: “FG Hemisphere is gratified that the D.C. Circuit has recognized that foreign sovereigns have no special right to ignore discovery orders or flout the U.S. discovery process. This decision reaffirms the principle that, where jurisdiction exists, foreign sovereigns, like other litigants, must play by the rules and are not exempt from the courts’ powers to enforce those rules.”