Petitioner Commodities & Minerals Enterprise Ltd. (“Commodities & Minerals”) entered into a Transfer Management Contract with CVG Ferrominera Orinoco, C.A. (“CVG”) to manage and operate CVG’s iron ore transfer system. CVG is a Venezuelan state owned company responsible for the exploration of iron ore. Following allegations of breach of the underlying Transfer Management Contract, Commodities & Minerals commenced arbitration pursuant to the contract. Commodities & Minerals won a final award against CVG in the amount of $188 million dollars in damages, plus interest.
On December 19, 2019, Commodities & Minerals filed a petition in the Southern District of Florida to recognize and confirm the award as a judgment of the Court. Petitioner served CVG with a copy of the petition, but did not serve a summons issued by the Clerk of the Court. CVG never appeared in the action and the Court entered an Order confirming the award and granting default judgment against CVG on or about September 23, 2020. Shortly thereafter, Respondent CVG filed a motion to vacate the Order and final judgment on the grounds that Commodities & Minerals failed to properly serve the petition with a summons as required by the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. §1608. Commodities & Minerals argued in response that service was properly effectuated because: (1) service of the petition complied with the Federal Arbitration Act (“FAA”), (2) CVG had actual notice of the action, and (3) service was proper under FSIA.
District Judge Darrin P. Gayles of the United States District Court for the Southern District of Florida rejected Petitioner’s arguments and vacated the judgment. The District Court held that since the FAA does not provide any guidance on how to serve an instrumentality of a foreign state, the proper procedural rule to consult for compliance with service requirements is Fed. R. Civ. P. Rule 4. Pursuant to Rule 4(j), a party must serve an instrumentality of a foreign state in accordance with 28 U.S.C. §1608, which requires that a summons be served on a party with the complaint (i.e., petition). The Court concluded that Commodities & Minerals failed to comply with a material requirement of FSIA by its failure to serve the petition with a summons. Furthermore, the District Court found that under FSIA, actual notice must be accompanied by substantial compliance with the statute, simply giving ‘notice’ or ‘potential notice’ of the action cannot substitute for the statutory requirement to serve a summons with the petition. The Court held that Commodities & Minerals’ failure to serve CVG with a summons was fatal to its position and vacated its prior Order and Default Judgment. Judge Gayles also pointed out that in a related action between the parties, service of process in a similar manner been held insufficient by District Judge Goodman due to a failure by Commodities & Minerals to obtain and serve a summons on CVG in that action.
As of July 20, 2021, Commodities & Minerals has re-filed its petition against CVG to recognize and enforce the arbitration award and has obtained a summons issued by the District Court Clerk to effectuate service in compliance with Rule 4 and the FSIA.