On February 9, 2024, the U.S. District Court for the District of Columbia issued its latest ruling in Amaplat Mauritius Ltd. v. Zimbabwe Mining Dev. Corp., No. 22-CV-58 (CRC), 2024 WL 519583 (D.D.C. Feb. 9, 2024). The defendants, the Republic of Zimbabwe (Republic), the Chief Commissioner of the Zimbabwean Ministry of Mines (Commissioner), and the Zimbabwe Mining Development Corporation (ZMDC) collectively, the defendants), filed a motion to dismiss the amended complaint of plaintiffs Amaplat Mauritius Ltd. (Amaplat) and Amari Nickel Holdings Zimbabwe Ltd., (Amari) (collectively, the plaintiffs) for lack of subject matter jurisdiction, lack of personal jurisdiction, and failure to state a claim. 

The Court found that plaintiffs had established an alter-ego relationship between the Republic and ZMDC under the Foreign Sovereign Immunities Act (FSIA), paving the way for American recognition of a foreign arbitral award against the defendants. 

The plaintiffs' underlying complaint alleges a cause of action under the DC Uniform Foreign-Country Money Judgments Recognition Act and seeks an order recognizing and enforcing an August 2019 High Court of Zambia judgment issued in the plaintiffs' favor (the Judgment). The complaint also seeks a finding that the Republic of Zimbabwe is the alter ego of ZMDC and the Commissioner, as well as the entry of a money judgment against the defendants. 

Background

In 2007 and 2008, ZMDC, a corporation that is majority-owned by the Republic, entered Memorandums of Understanding (MOUs) with each of the plaintiffs. The MOUs permitted the plaintiffs to search for nickel and platinum deposits and develop mines in Zimbabwe. Critically, the MOUs included arbitration clauses that required the parties to submit disputes arising out of the MOUs to the ICC International Court of Arbitration in Paris (ICC Court) for final and binding arbitration.

In 2010, ZMDC cancelled the MOUs. Consequently, in 2011, the plaintiffs initiated arbitration proceedings at the ICC Court, which in turn determined that arbitration should take place in Zambia. Pursuant to this determination, an arbitration panel was constituted in Zambia and both parties participated in the arbitration proceedings. During these proceedings, ZMDC and the Commissioner challenged the arbitral tribunal under Article 11 of the ICC Court Rules. When this challenge was denied, the defendants pulled out of the proceedings and withdrew their arbitrator. Subsequently, the Zambian arbitration panel was reconstituted and in January 2014, the panel issued an award ordering ZMDC and the Commissioner to pay damages, costs, and expenses of approximately $50 million. In response, the defendants commenced post-award litigation in Zambian courts challenging the composition and authority of the arbitration panel. The Zambian High Court issued a Judgment in the plaintiff's favor in August 2019.

After several failed efforts to enforce the Judgment, the plaintiffs filed suit in DC District Court against the defendants seeking recognition of the Judgment as well as additional damages. The defendants countered with a motion to dismiss the plaintiffs' complaint.

Facing Obstacles in Zambia, the Plaintiffs turn to U.S. Courts 

In a March 2023 decision, the U.S. Court of Appeals for the DC Circuit granted an initial motion to dismiss in favor of the defendants, finding that the plaintiffs had not adequately alleged that ZMDC was an alter ego of the Republic. On remand, the plaintiffs filed an amended complaint including new allegations relating to the Republic and ZMDC's alter-ego relationship (Amended Complaint). The defendants moved to dismiss the Amended Complaint for lack of subject matter jurisdiction, lack of personal jurisdiction, and failure to state a claim. 

In deciding the second motion to dismiss, the district court found that the plaintiffs had established an alter-ego relationship between the Republic and ZMDC. Here, the primary question the court sought to answer was whether ZMDC was the Republic's agent between 2007 and 2011. The court found that at the time of the decision, the Republic held at least 51 percent of ZMDC's shares and had conditioned the sale of other shares on ministerial approval. Additionally, until at least September 2023, the Republic had owned 100 percent of ZMDC's shares since its founding. Furthermore, the court found that the Republic not only owned all of ZMDC shares from 2007 to 2011, but was also the ultimate beneficiary of ZMDC's conduct, receiving profits in the form of dividends.

Although, "stock ownership does not alone create an alter ego relationship," the court ultimately found that the plaintiffs had sufficiently demonstrated that the Republic exercised significant economic control over ZMDC for several reasons, including that the ZMDC Act, an act that established the Zimbabwe Mining Development Corporation and defined its duties and functions, vested the Republic with control over ZMDC. Under the ZMDC Act, the Zimbabwean government's Minister of Mines was responsible for appointing ZMDC's board members. The ZMDC Act also granted the Minister of Mines authority to give the ZMDC directions of a general character relating to the exercise of the ZMDC's functions, duties, and powers. Under the ZMDC Act, ZMDC is required to comply with the Minister's directions "with all due expedition." Moreover, under Zimbabwe's Public Finance Management Act, an act that governs the control and management of public resources in Zimbabwe, ZMDC is required to notify and seek approval from the government before "the acquisition or disposal of a significant asset," "the commencement or cessation of a significant business activity," or "participation to a significant extent . . . in a partnership, trust, unincorporated joint venture or similar arrangement." 

Finally, the court determined that ZMDC was the alter ego of the Republic because the Zimbabwean government shielded ZMDC from its creditors by selling off parts of the company to satisfy mounting legal judgments. For instance, in 2018, the Republic issued a tender offer for six mines held by ZMDC and separately transferred ZMDCs remaining assets into another government entity. In view of these actions, according to the court, "recognition of [ZMDC] as an entity apart from the state would work fraud or injustice." 

Thus, the court found that the Republic's control of ZMDC was "not merely aspirational," and the ZMDC could be considered an alter ego of the Republic and subject to the court's personal and subject matter jurisdiction. The court also agreed with the plaintiffs' argument that ZMDC had waived the Republic's sovereign immunity under the § 1605(a)(1) waiver exception by agreeing to arbitrate disputes in the 2007 and 2008 MOUs between the plaintiffs and ZMDC and by participating in the arbitration in Zambia. As a result, the court had jurisdiction over the underlying judgment enforcement action. The court based this finding on Seetransport Wiking Trader Schiffarhtsgesellschaft MBH & Co., Kommanditgesellschaft v. Navimpex Centrala Navala, 989 F.2d 572, 582 (2d Cir. 1993) which holds that "[w]hen a sovereign (or its instrumentality) waives immunity by signing on to the New York Convention and agreeing to arbitrate in another signatory's jurisdiction, 'the cause of action to enforce [a] foreign judgment is within the scope of [that] implicit waiver of sovereign immunity.'" See Amaplat, No. 22-CV-58 (CRC), 2024 WL 519583, at *6.

Key Takeaways

U.S courts are generally receptive to applications to enforce arbitration awards, but these applications are not without challenges. Establishing subject matter jurisdiction in an action against a sovereign or government instrumentality that is protected by its immunity from suit can prove a significant hurdle. The DC District Court's analysis of the facts underlying the alter ego relationship between the Republic of Zimbabwe and ZMDC provides a roadmap by which one can pierce the veil of immunity and satisfy the requirements of both subject matter and personal jurisdiction, which are the first fundamental steps towards securing recognition of a foreign arbitral award in the U.S.

For more information, please contact:

Margarita R. Sánchez, msanchez@milchev.com, 202-626-5808

Brian A. Hill, bhill@milchev.com, 202-626-6014

Maame Esi Austin, maustin@milchev.com, 202-626-5941

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