Courts generally have the inherent authority to issue civil contempt orders to control the proceedings before them, including discovery proceedings.  Sanctions may be imposed for non-compliance with a Court’s order, either sua sponte or upon a motion by a party.  Even under the Foreign Sovereign Immunities Act (“FSIA”, 28 U.S.C. § 1600 et seq.), which provides immunity for foreign states from being sued in the United States, courts retain the power to enforce discovery obligations in FSIA proceedings.

In the case of FG Hemisphere Associates, LLC v. Democratic Republic of Congo, 2011 WL 871174 (C.A.D.C.), the District of Columbia Circuit Court upheld a monetary contempt sanction and attorneys’ fees and costs imposed against the Democratic Republic of Congo (“DRC”) for failure to respond to discovery requests by FG Hemisphere Associates (“FG”).  FG is an investment company that entered into a credit agreement with the DRC and its state-owned electric company to finance the construction of an electric power transmission facility.  The DRC failed to make payments and FG brought arbitration proceedings against the DRC and obtained two awards against the DRC.  Pursuant to the FSIA provision that permits a party to confirm an arbitration award secured against a foreign sovereign (§1605(a)(6)), FG obtained two default judgments against the DRC.   However, since the FSIA limits the assets available to satisfy a judgment against a foreign sovereign to property in the United States that is used for a commercial activity in the United States (FSIA, §1610(a)(6)), FG served post-judgment discovery requests for the location and types of assets against which to execute the arbitration awards.  The DRC refused to respond to the discovery and was found in civil contempt.  The DRC then moved to vacate the contempt order.

The D.C. Circuit Court ruled that a federal court has inherent authority to issue contempt orders to control its proceedings and that it is within the court’s discretion to exercise that authority when faced with a party’s refusal to comply with a discovery order.  The Court rejected DRC’s argument that international practice prevented the discovery from being obtained from it.  Rather, the Court ruled that the courts must follow the laws of the United States regarding discovery matters, and not international practices or other foreign laws.

The foregoing decision serves as a reminder to foreign parties that they must be careful when refusing to comply with Court orders imposing discovery obligations in proceedings pending in the United States.  Doing so runs the risk that the party will be found in contempt and sanctions will be imposed against the party.  Discovery obligations under the laws of the United States are often more extensive and burdensome than elsewhere in the world.  The courts in the United States will generally follow the discovery rules in the United States and will not allow foreign parties to escape those obligations by claiming the discovery rules of the United States are contrary to international practice or foreign law.

For further information, please contact:  Nicholas P. Connon, Managing Partner and Chair of the Middle East Practice Group; Tel:  +1.626.638.1757;
email: nconnon@connonwood.com