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In re Application of Oxus Gold PLC

October 10, 2006

IN RE IN THE MATTER OF THE APPLICATION OF OXUS GOLD PLC : FOR ASSISTANCE BEFORE A FOREIGN TRIBUNAL


The opinion of the court was delivered by: Hughes, U.S.M.J.

MEMORANDUM OPINION

This matter is before the Court upon the Motion of Respondent Jack A. Barbanel ("Respondent") to Vacate this Court's Orders of August 14, 2006 and August 18, 2006, to Quash Subpoena, and to Award Fees and Costs pursuant to 28 U.S.C. § 1782, 28 U.S.C. § 1783, and the Federal Rules of Civil Procedure. Petitioner Oxus Gold PLC ("Petitioner") opposes the Motion. Respondent's Motion is in response to two Orders issued by this Court. The first was an ex parte Order on August 14, 2006, which granted Petitioner's Application to serve a subpoena pursuant to 28 U.S.C. § 1782 on Respondent within the District of New Jersey. The second ex parte Order, on August 18, 2006, found that the requirements of 28 U.S.C. § 1783 were satisfied and authorized Petitioner to serve Respondent, who was living in Moscow, Russia, with the subpoena abroad. The subpoena seeks certain documents and testimony from Respondent and would require him to travel from Moscow, Russia to Trenton, New Jersey for a deposition. The Court reviewed the written submissions of the parties and conducted oral argument on October 5, 2006. For the reasons that follow, Respondent's Motions to Vacate this Court's Order of August 14, 2006, to Quash the Subpoena, and for attorneys' fees and costs are denied. Respondent's Motion to Vacate this Court's Order of August 18, 2006, is granted.

I. BACKGROUND AND PROCEDURAL HISTORY

A. Oversees Proceedings

Petitioner Oxus is an international mining group based in the United Kingdom. (Pet.'s Mem. at 6). In 1998, Petitioner's subsidiary, Norox Mining Company Ltd. ("Norox") and the State Enterprise Kyrgyzaltyn Joint Stock Company ("KA") jointly created the Talas Gold Mining Company ("TGMC") for the purpose of developing the Jerooy gold deposit in the Kyrgyz Republic ("the Republic"). (Kolleeny Decl. at ¶¶ 3-4). Petitioner states Norox is its wholly owned subsidiary and that TGMC, which is controlled 66.7% by Norox and 33.3% by KA, is majority owned by Petitioner. (Pet.'s Mem. at 6).

The Republic granted TGMC a license for the right to use the subsoil at the Jerooy gold deposit. (Kolleeny Decl. at ¶ 5). When TGMC failed to fulfill its obligations under the license, the Kyrgyz State Agency on Geology and Mineral Resources ("the Agency") suspended TGMC's license in 2001 and then annulled it in 2002. Id. at ¶ 6. In 2003, the Republic reinstated TGMC's license in return for TGMC's agreement to develop the mine along an accelerated time frame. Id. at ¶ 7. When TGMC again failed to meet its obligations under the license, the Agency canceled the license on August 3, 2004 and formally approved this decision by Resolution No. 597 on August 11, 2004. Id. at 8.

In November 2005, Respondent, managing director of SIG Overseas Limited ("SIG"), a corporate finance and private equity consulting company based outside the United States, contacted the Republic on behalf of a client who potentially was interested in competing for the license to develop the Jerooy mine. (Barbanel Decl. at ¶¶ 2, 4, 6). The Republic's representatives expressed to Respondent that they would not reconsider the decision to annul TGMC's license and that they had no obligation to reinstate the license. Id. at ¶ 6.

Upon request by the Republic's representatives, Respondent met with Petitioner on December 1, 2005 regarding the purchase of Norox's interest in the Jerooy mine. Id. at ¶¶ 8-9. However, no agreement was reached between the parties regarding the sale of Norox's interest. Id. at ¶ 9. KA terminated the TGMC joint venture on February 24, 2006. (Kolleeny Decl. at ¶ 15).

TGMC initiated three court proceedings in Kyrgyzstan in March 2006: (1) an action against the Agency challenging its August 3, 2004 decision to terminate the License; (2) an action against the Republic challenging the government resolution that approved the Agency's decision; and (3) an action against the Republic challenging the validity of Government Resolution No. 619, dated December 28, 2005, which instructed KA to search for a new investor. (Adamyan Decl. at ¶¶ 3, 6, 8). Petitioner is not a named party in any of these three proceedings. (Kolleeny Decl. at ¶ 16). Ultimately, the Republic's and Agency's acts were upheld. (Adamyan Decl. at ¶¶ 3-7; Kolleeny Decl. at ¶ 16). TGMC is currently appealing the decision upholding Government Resolution No. 619. (Adamyan Decl. at ¶ 8).

Petitioner initiated arbitration proceedings against the Republic pursuant to the United Nations Commission on International Trade Law ("UNCITRAL") rules. (Kolleeny Decl. at ¶¶ 19-20; Sheppard Decl. Ex. B.) Based on the Republic's actions concerning TGMC, Petitioner claims that the Republic violated the Agreement for the Promotion and Protection of Investment between the United Kingdom and the Republic. Id. Further, the Prime Minister of the Republic has advised TGMC of potential compensation claims against TGMC for failing to fulfill its obligations under the license. (Sheppard Decl. Ex. C).

On May 25, 2006, an Austrian corporation formed by SIG's client, entered into a joint venture with KA for development of the Jerooy mine. (Resp.'s Br. at 6). On July 6, 2006, the Primary First Trade Union Organization of TGMC then filed a claim in Kyrgyz court seeking invalidation of the resolution by the Republic approving the joint venture agreement. (Adamyan Decl. at ¶ 9; Sheppard Decl. Ex. A). This case was dismissed based on a lack of standing. (Adamyan Decl. at ¶ 9).

2. Subpoena to Respondent

On August 11, 2006, Petitioner filed an ex parte application pursuant to 28 U.S.C. § 1782 to take discovery of Respondent and SIG. (Dkt. no. 06-82, entry no. 1). In its application, Petitioner claimed that the requested discovery was for use in connection with the four claims in the Kyrgyz courts, the international arbitration proceeding, and the notice of compensation claim against TGMC. (August 11, 2006 App. ¶ 3). Petitioner further stated in its application that it was a party in a related arbitration proceeding against the Republic, a likely defendant in the compensation claim, and a party to four pending civil actions. Id. at ¶ 4. Petitioner also stated that Respondent and SIG have information relevant to the proceedings discussed in the application. Id. at ¶ 9.

On August 14, 2006, Petitioner's ex parte Application was granted by this Court pursuant to 28 U.S.C. § 1782 authorizing service of subpoenas for documents and testimony from Respondent and SIG. (Dkt. entry no. 3). When Petitioners could not serve Respondent in New Jersey, it filed an ex parte Application on August 16, 2006, seeking authorization under 28 U.S.C. § 1783 to serve Respondent in Moscow, Russia. (Dkt. entry no. 4). In its second application, Petitioner stated that Respondent resides in Princeton, New Jersey and was expected to be in Moscow, Russia "at least through the end of this week." (August 16, 2006 App. at ¶¶ 1-2). This Court granted Petitioner's Application in an Order signed August 17, 2006 which authorized service abroad under Section 1783 and required that Petitioner tender $7,500 for travel expenses. (Dkt. entry no. 5).

On August 17, 2006, Petitioner served Respondent in Moscow by personal delivery. Respondent contends that "[s]uch service was accomplished by a false representation to Mr. Barbanel's secretary that a deputy to the Minister of Telecommunications and his assistant wished to meet with him at a hotel in central Moscow, where Mr. Barbanel consequently went, only to be met by two persons apparently from the Moscow office of the law firm of Clifford Chance." (Barbanel Decl. at ¶ 11). The subpoena was accompanied by "a written undertaking that tendered a commitment to reimburse [Respondent's] expenses for traveling to, and appearing for, his deposition in New Jersey." (Pet.'s Mem. at 10).

Respondent contends that the subpoena was authorized under neither 28 U.S.C. § 1782 nor 28 U.S.C. § 1783. Respondent further claims that (1) service was not proper, (2) fees were not properly tendered, (3) the information sought is overbroad and not relevant, and (4) Petitioner violated Local Rule 27.1 by applying for the subpoena ex parte. Petitioner claims that the subpoena was proper under Sections 1782 and 1783. Petitioner argues that the subpoena was properly served and fees were tendered. Petitioner further argues that the discovery is relevant and reasonably tailored.

II. DISCUSSION

Respondent contends that the subpoena is not authorized under 28 U.S.C. § 1782 because (1) Respondent resides in Moscow, Russia, (2) the discovery is not for use in a proceeding in a foreign or international tribunal, and (3) Petitioner is not an interested person in the actions currently pending in the Kyrgyz Courts. Respondent further argues that the subpoena was not authorized by 28 U.S.C. § 1783 because (1) Section 1783 applies to service in connection with proceedings pending in the United States, (2) the requirements of Section 1783 are not met, and (3) Petitioner violated Local Rule 27.1 by filing an ex parte Application for a subpoena of Respondent, a United States national who lives in Moscow, Russia. Respondent further argues that the subpoena was not properly served under the Hague Convention on Service and that Petitioner did not tender the required fees. Respondent requests attorneys' fees and costs.

Petitioner claims that the subpoena was proper under Section 1782 because (1) Respondent resides in the District, (2) the pending international arbitration proceeding satisfies the tribunal requirement, and (3) Petitioner is an interested person because it is the majority parent of TGMC. Petitioner further argues that the subpoena was proper under Section 1783 because (1) the statute is not restricted to discovery for use in litigation pending in the United States, (2) Petitioner has met the necessity and interest of justice requirements, and (3) Petitioner properly proceeded with its ex parte applications. ...


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