# Republic of Ecuador v. ChevronTexaco Corp.

> District Court, S.D. New York · June 27, 2005 · 376 F. Supp. 2d 334

URL: https://www.frixlaw.com/law-library/cases/2469261

## Case

- **Full name:** The REPUBLIC OF ECUADOR and Petroecuador, Plaintiffs, v. CHEVRONTEXACO CORPORATION and Texaco Petroleum Company, Defendants; Chevrontexaco Corporation and Texaco Petroleum Company, Counterclaim Plaintiffs, v. the Republic of Ecuador and Petroecuador, Counterclaim Defendants
- **Court:** District Court, S.D. New York
- **Decided:** June 27, 2005
- **Citations:** 376 F. Supp. 2d 334; 161 Oil & Gas Rep. 441; 2005 U.S. Dist. LEXIS 12562; 2005 WL 1514031
- **Precedential status:** Published
- **Opinion:** Opinion by Sand
- **Judges:** Sand
- **Cited by:** 24 later opinions in the Frix Law Library

## Citator (automated)

- **Yellow flag:** Criticized by International Chartering Services, Inc. v. Eagle Bulk Shipping Inc., 138 F. Supp. 3d 629 (2015).
- Negative treatments: 1
- Distinguished by: 0
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/2469261

## How later opinions describe it (automated extraction)

- noting that court’s jurisdiction over claims that “do not fall within 9 U.S.C. § 203 . . . and do not raise a jurisdiction- bestowing federal question in any other respect . . . must [stem] from 28 U.S.C. § 1332 , or perhaps from 28 U.S.C. § 1367 (a) (supplemental jurisdiction)”
- noting the apparent conflict in Second Circuit law

## Opinion text

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OPINION AND ORDER
SAND, District Judge.
In this action, the Republic of Ecuador (“Ecuador” or “the Republic”), and its state-owned oil company Petroecuador, seek a permanent stay of an arbitration proceeding commenced by defendants ChevronTexaco Corporation (“Chevron-Texaco”) and Texaco Petroleum Company (“TexPet”), as well as other injunctive and declaratory relief. ChevronTexaco and TexPet (collectively “Defendants”) counterclaim against Ecuador and Petroecua-dor (collectively “Plaintiffs”), alleging breach of contract and failure to indemnify an implied agent, and seeking damages as well as injunctive and declaratory relief.
The matter is currently before the Court on two motions by Plaintiffs: a motion for summary judgment on their own claims, and a motion to dismiss Defendants’ counterclaims under Rule 12(b) for lack of subject matter jurisdiction and failure to state a claim. Also before the Court are various motions incidental to these two dispositive motions, such as applications to strike certain filings as untimely and for permission to file sur-replies. For the reasons stated below, Plaintiffs’ motion for summary judgment is denied, and Plaintiffs’ motion to dismiss the counterclaims is granted in part, denied in part, and in part left unresolved pending supplemental briefing regarding Ecuadorian law.
I. Background
Because of the different legal standards governing the various motions before the Court, it is impossible to establish a single and complete set of facts that can be assumed to be true for purposes of this entire Opinion and Order. Before turning to the individual motions, however, it is useful to outline the basic facts regarding which the parties agree,
1
and the procedural history of this action, in order to place the motions and specific factual disputes in context.
A. The Napo Concession
In 1965, following a grant to them by Ecuador of an oil concession in the Oriente region of that country, known as the “Napo Concession,” TexPet and the Ecuadorian Gulf Oil Company (“Gulf’) entered into a Joint Operating Agreement (the “1965 JOA”).
2
TexPet was named the first “Operator” under the 1965 JOA. The 1965 JOA contained an arbitration clause, requiring the parties to submit disputes to the American Arbitration Association (“the AAA”) in New York. It contained an indemnification clause providing as follows:
If the Operator shall exercise its best judgment and care to select competent personnel and competent contractors to carry out and discharge its duties and obligations under this Agreement, the Operator shall not be hable to the Parties in damages or otherwise for its acts or omissions in carrying out and discharging or failing to carry out and discharge its duties and obligations under this Agreement. The Parties shall indemnify and save the Operator harmless from all claims and demands which may
*339
be made against Operator by third parties due to, arising out of, or related to the performance by the Operator of its duties under this Agreement.
(Perez Aff. Ex. C ¶ 6.4.) It also contained a choice-of-law clause stating that “[t]his Agreement and the relationship - of the Parties hereunder shall be governed by and interpreted in accordance with the laws of the State of New York ... except for those matters which are necessarily governed by the laws of the Republic of Ecuador.”
(Id.
¶23.1.) The 1965 JOA provided that it would “inure to the benefit óf and be binding upon the successors and assigns of the parties hereto and each of them respectively.”
(Id.
¶ 26.1.)
In February 1972, a military government took power in Ecuador. The military government wished to increase the Ecuadorian state’s control over, and participation in, the development of Ecuador’s oil reserves. In furtherance of this goal, on June 6, 1972, the government issued Supreme Decree No. 430, which,
inter alia,
required TexPet and Gulf “to agree to new oil concession contracts with the Republic and to relinquish a substantial percentage of Napo Concession lands.” (PI. R. 56.1 Stmt. ¶ 52; Def. R. 56.1 Resp. ¶ 52.) The Ecuadorian state-owned oil company Compañía Estatal Petrolera Ec-uatoriana or CEPE, which after reorganization later became plaintiff Petroecuador, immediately began to exploit those portions of the relinquished land where oil production was already ongoing. TexPet and Gulf requested compensation for the land they had relinquished, but these requests were rejected.
On or about March 27, 1973, Ecuador published Decree No. 317,
3
which established a Model Contract containing certain new terms to which TexPet and Gulf were required to agree. A modified version of this contract was published on or about August 4, 1973 in Decree No. 925, and signed by Ecuador, TexPet and Gulf on or about August 6,1973.
The contract published in Decree No. 925 and signed on August 6, 1973 (the “1973 Contract”) substituted for certain previous contracts; whether the 1965 JOA was among those contracts replaced by it is one of the main points of contention in this case. As had been mandated by Supreme Decree 430 in 1972, “the 1973' Contract incorporated the terms of a 1971 Hydrocarbons Law that gave the Republic greater control over oil pricing and a larger percentage of royalties.” (PI. R. 56.1 Stmt. ¶ 58; Def. R. 56.1 Resp. ¶ 58.) The 1973 Contract also mandated that CEPE be allowed an option to purchase a stake, in the Napo Concession, or Napo Consortium (as Plaintiffs describe the organization formed to explore the Napo Concession), in 1977. The 1973 Contract did not contain an arbitration clause.
On or about January 10, 1974, Ecuador issued Supreme Decree No. 9, mandating that CEPE would begin participating in the Napo Concession or Consortium in 1974, rather than in 1977 as had been indicated by the 1973 Contract. In ensuing negotiations, “the Republic informed Texaco
4
and Gulf that CEPE’s 25% partie-
*340
ipation in the Napo Consortium would begin on June 6, 1974, whether or not the Republic and the companies had reached an agreement on compensation.” (PI. R. 56.1 Stmt. ¶ 63; Def. R. 56.1 Resp. ¶ 63.) Given this ultimatum and fearing complete expropriation of the Napo Consortium by the Republic if it did not comply, TexPet executed a contract or “Acta” on or about June 14, 1974 (the “1974 Contract”).
5
The other signatories to the compelled 1974 Contract were Gulf, CEPE, and the Republic; Plaintiffs assert that the Republic and CEPE were “acting jointly as one party” (PI. R. 56.1 Stmt. ¶ 68), but Defendants deny this.
Under the 1974 Contract, CEPE acquired a 25% share of all of the Napo Concession’s operations, including “proportional parts of all investments, operational costs, obligations, royalties, [and] sales of crude for internal consumption.... ” (PL R. 56.1 Stmt. ¶ 23, quoting Pis.’ Ex. Q. cl. 10; Def. R. 56.1 Resp. ¶ 23.) The 1974 Contract also provided for acquisition of a share of the Trans-Ecuadorian Pipeline by either CEPE or the Republic
of
Ecuador, but this provision was unilaterally voided by the Republic in 1975. The 1974 Contract did not itself contain a clause providing for arbitration; it did, however, contain a clause stating that “[t]he totality of the activities that will develop in the Joint Operation will be regulated by an operating agreement entered into by the parties”
6
(PI. R. 56.1 Stmt. ¶ 24, quoting Pis.’ Ex. Q. cl. 8; Def. R. 56.1 Resp. ¶ 24), the effect of which the parties dispute.
By 1976, Gulf became uncomfortable with its position with respect to the Republic, and began to withhold certain funds from the Republic. The Republic responded by threatening expropriation of Gulfs Napo Consortium assets. Fearing that it would lose its stake in the Consortium without receiving any compensation, Gulf negotiated an agreement, finalized on May 27, 1977, by which Gulfs remaining 37.5% stake in the Consortium was transferred to CEPE (which Plaintiffs assert was again acting as one party with the Republic). This agreement (the “1977 Contract”) contained clauses addressing CEPE’s lack of obligation for certain claims of or against Gulf, the effect of which the parties again dispute.
From 1977 to 1990, the Napo Concession or Consortium continued to operate with TexPet and CEPE/Petroecuador as the only partners and TexPet as the Operator. On January 22, 1985, however, TexPet and CEPE entered into an agreement providing for CEPE to take over as Operator on one year’s notice (the “1985 Agreement”).
On July 1, 1990, pursuant to an agreement signed by representatives of Petroe-cuador and TexPet the previous day (the “1990 Agreement”), Petroamazonas, a subsidiary of Petroecuador, replaced TexPet as the Operator of the Napo Concession. On March 25, 1991, Petroecuador, TexPet, and Petroamazonas entered into an “Operating Agreement” for the “Petroecuador-Texaco Consortium” (the “1991 Agreement”), which agreement specified that it would “be effective [retroactively] as of the first day of July 1990 and remain in effect until the termination of the [1973] Contract.” (Supplementary Kolis Decl. Ex. 1.)
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The -expiration date of the Napo Concession as provided in the 1973 Contract was June 6,1992.
B.
Aguinda v. Texaco,
the 1995 Settlement, and the Lago Agrio Action
In 1993, an action captioned
Aguinda v. Texaco
was brought in the United States District Court for the Southern District of New York by a group of residents of the Oriente region of Ecuador (the “Aguinda Plaintiffs”), against Texaco, Inc., which has since become a wholly owned subsidiary of defendant ChevronTexaco by merger. The Aguinda Plaintiffs “alleged that between 1964 and 1992 Texaco’s oil operation activities polluted the rain forests and rivers in Ecuador.... ”
Aguinda v. Texaco, Inc.,
303 F.3d 470, 473 (2d Cir.2002). They “sought money damages under theories of negligence, public and private nuisance, strict liability, medical monitoring, trespass, civil conspiracy, and violations of the Alien Tort Claims Act,” as well as
extensive equitable relief to redress contamination of the water supplies and environment, including: financing for environmental cleanup to create access to potable water and hunting and fishing grounds; renovating or closing - the Trans-Ecuadorian Pipeline; creation of an environmental monitoring fund; establishing standards to govern future Texaco oil development; creation of a medical monitoring fund; an injunction restraining Texaco from entering into activities that risk environmental or human injuries, and restitution.
Id.
at 473-474 .
The procedural history of the
Aguinda
litigation is outlined in detail in
Aguinda v. Texaco, Inc.,
303 F.3d 470 (2d Cir.2002), and
Jota v. Texaco, Inc.,
157 F.3d 153 (2d Cir.1998). Although it would be duplica-tive to recite that entire history here,. a brief summary is appropriate. In November 1996, on Texaco’s motion, the case was dismissed by the district court (Rakoff,
J.)
on grounds of forum non conveniens, international comity, and failure to'join indispensable parties, specifically Ecuador and Petroecuador, whose presence was held to be necessary to effectuate the extensive equitable relief requested, but impossible to obtain in light of them sovereign immunity. Aquinda
7
v. Texaco, Inc.,
945 F.Supp. 625 (S.D.N.Y.1996). The Second Circuit in 1998 vacated the dismissal and remanded the ease for reconsideration,
Jota,
157 F.3d at 163 , holding that a forum non conveniens dismissal was inappropriate absent a requirement that Texaco consent to Ecuadorian jurisdiction,
id.
at 159 ; that the comity determination had potentially been undermined by Ecuador’s change from opposing litigation of the issue in a United States court to supporting that litigation,
id.
at 160-161 ; and that the indispensable-party theory, while perhaps correct as to some of the relief requested, was insufficient to support dismissal of the entire complaint,
id.
at 162 . On remand, Texaco having consented to jurisdiction in Ecuador, the district court again dismissed the case on grounds of forum non conve-niens.
Aguinda v. Texaco, Inc.,
142 F.Supp.2d 534 (S.D.N.Y.2001). The Second Circuit affirmed.
Aguinda v. Texaco, Inc.,
303 F.3d 470 (2d Cir.2002).
During the pendency of the
Aguinda
litigation, TexPet, Ecuador and Petroecua-dor entered into several agreements regarding environmental remediation. Following a December 1994 Memorandum of Understanding, those parties in May 1995 signed a contract the name of which has
*342
been translated as “Contract For Implementing Of Environmental Remedial Work and Release From Obligations, Liability and Claims” (hereinafter referred to as the “1995 Settlement”). In the 1995 Settlement, TexPet agreed to perform specified environmental remedial work in exchange for a release of claims by the Government of Ecuador and Petroecuador. This release, granted to TexPet, Texaco, Inc., and other related companies, encompassed by its terms “all the Government’s and Pe-troecuador’s claims against the Releasees for Environmental Impact arising from the Operations of the Consortium, except for those related to the obligations contracted” under the 1995 Settlement itself, which were to be “released as the Environmental Remedial Work is performed to the satisfaction of the Government and Petroecua-dor.” (Veiga Aff. Ex. B at 9.) By a “Final Document” dated September 30, 1998 (the “1998 Final Release”), the 1995 Settlement was declared to be “fully performed and concluded,” and the Government and Pe-troecuador “proeeed[ed] to release, absolve, and discharge” TexPet and related companies “from any liability and claims by the Government of the Republic of Ecuador, PETROECUADOR and its Affiliates, for items related to the obligations assumed by TEXPET in” the 1995 Settlement. (Veiga Aff. Ex. D at Part IV.)
In May 2003, following the final dismissal of the
Aguinda
litigation, a group of individuals that Plaintiffs allege included “a substantial number of the Aguinda Plaintiffs” filed claims against Chevron-Texaco in Lago Agrio, Ecuador. One of the laws upon which the plaintiffs in this Lago Agrio litigation based their claims, although not the only law, was an Ecuadorian environmental law enacted in 1999. Defendants contend that this law in effect allows the plaintiffs in the Lago Agrio litigation to assert, as private attorneys general, claims that belonged to Ecuador but were released by the 1995 Settlement and 1998 Final Release.
C. Procedural History of This Litigation
On June 11, 2004, ChevronTexaeo and TexPet commenced an arbitration proceeding against Petroecuador before the AAA, claiming a right to indemnification for their costs and expenses in connection with the Lago Agrio litigation. They sought a monetary award for breach of contract, specifically breach of the 1965 JOA, which they alleged “require[d] Petroecuador to indemnify Chevron Texaco and TexPet for Petroecuador’s share of all claims arising out of TexPet’s role as Operator of the Napo Concession.” (Kolis Decl. Additional Docs. Ex. 1 ¶ 54.) This award was to be in the amount of “the total value of their costs, fees, and any adverse judgment rendered in the Lago Agrio lawsuit, plus interest.”
(Id.
¶ 59.) ChevronTexaeo and TexPet further sought “injunctive relief requiring Petroecuador to pay all fees, costs, and expenses associated with the Lago Agrio litigation that may be incurred in the future, including the amount of any potential adverse final judgment rendered against ChevronTexaeo in the Lago Agrio litigation.”
(Id.
¶ 62.) TexPet, although purportedly not ChevronTexaeo, further sought “a declaratory judgment that the [1965] JOA’s indemnity provision is valid and binding, and that Petroecuador is responsible to indemnify and hold harmless TexPet and ChevronTexaeo ... for ... all fees, costs and expenses relating to the Ecuadorian lawsuit, including any final judgment that may be rendered against ChevronTexaeo in Ecuador.”
(Id.
¶ 66.)
On October 15, 2004, Plaintiffs commenced an action in New York State Supreme Court, New York County, against Defendants and the AAA, seeking an order and judgment staying the arbitration pro
*343
ceeding that had been brought by Defendants against Petroecuador. Proceeding by petition under section 7503 of the New York Civil Practice Law and Rules (CPLR) and “the exception to.. CPLR § 7503(c) that was established by the New York Court of Appeals in
Matarasso v. Continental Casualty Company,
56 N.Y.2d 264 , 451 N.Y.S.2d 703 , 436 N.E.2d 1305 (1982),” they asserted as the basis for their petition that “the Petitioners never agreed to arbitrate.” (Notice of Removal Ex. 3 ¶ 25.) Defendants removed the action to this Court by notice of removal filed on October 22, 2004.
Following, removal, Defendants Chev-ronTexaco and TexPet responded to the petition by filing first a Memorandum of Law in Opposition to Motion for Preliminary Injunction (Defendants having interpreted Plaintiffs’ actions in state court as a request for such a preliminary injunction), and then an Answer. The AAA responded by filing a motion to dismiss the petition pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. In a Memorandum and Order dated December 7, 2004, this Court granted the AAA’s motion and dismissed the action insofar as it named the AAA as a party defendant, finding the AAA to be neither a necessary or proper party under the well-established legal principle of arbitral immunity.
Plaintiffs then moved for leave to amend their complaint,
see
Fed. R. Civ. Pro. 15(a), and leave to file an amended complaint was granted without opposition. Plaintiffs’ Amended Complaint, filed on December 8, 2004, restates their demand for a permanent stay of arbitration proceedings, and asserts several additional claims for relief as well. At oral argument, Plaintiffs’ counsel represented that these additional claims are contingent, such that the Court need address them only if it concludes that the arbitration should not be dismissed; the Amended Complaint, however, does not explicitly make the additional claims contingent upon failure of the arbitration claim. ■
The additional claims for relief all focus on alleged inconsistencies' between positions purportedly taken by Defendants in demanding arbitration and positions taken by Texaco during the
Aguinda
litigation. First, Plaintiffs claim that collateral estop-pel precludes relitigation of the issue of “the Republic of Ecuador and Petroecua-dor’s sovereign immunity in this matter,” because this issue “was actually litigated and determined in the District Court’s 1996
Aguinda v. Texaco
decision” and “[t]he District Court’s 1996 holding that the Republic of Ecuador and Petroecuador enjoyed sovereign immunity in the United States was essential to the District Court’s ultimate dismissal of the case under the doctrine of
forum non conveniens
and the affirmance of that decision by the Second Circuit.” (Am.Compl.lffl 64-67.) Second, Plaintiffs claim that the doctrine of judicial estoppel prevents Defendants from asserting that Petroecuador agreed to arbitration, because this assertion is inconsistent with the position taken by Texaco in the
Aguinda
litigation regarding the sovereign immunity of Ecuador and Petroecuador. Third, Plaintiffs claim that Texaco’s failure to seek arbitration against Petroecuador during the pendency of the
Aguinda
litigation constituted a waiver of the right to arbitrate.
The prayer for relief in Plaintiffs’ Amended Complaint
8
requests both “a
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permanent and final injunction, staying the arbitration proceedings ... before the AAA” (Am. Compl. Prayer for Relief ¶ (C)), and other injunctive and declaratory relief with respect to various aspects of Plaintiffs’ claims. Plaintiffs request a ten-part declaratory judgment, the substance of which can be understood as comprising six parts: (1) that their collateral estoppel, judicial estoppel, and waiver theories are meritorious; (2) that “[njeither ... Ecuador nor Petroecuador has ever agreed to arbitrate any disputes with Texaco
9
in any American forum” and “there are no valid grounds upon which Texaco may demand arbitration against ... Ecuador or Petroe-cuador”
(id.
¶¶ (A)(i)-(A)(j)); (3) that the 1973 Contract and not the 1965 JOA controls the contractual relationship between Plaintiffs and Defendants; (4) that Plaintiffs are “a single party for the purposes of their contractual relationship with Texaco”
(id.
¶ (A)(0); (5) that neither Ecuador nor Petroecuador has waived sovereign immunity in the United States in this matter; and (6) that
“Aguinda v. Texaco
involved the same claims, brought by many of the same plaintiffs, as the case currently pending in Lago Agrio, Ecuador on which Texaco seeks indemnification from Petroecuador in this matter”
(id.
¶ (A)(c)). Plaintiffs further request that the Court “[ijssue ... permanent and final injunction^], estopping Texaco from denying that the Republic of Ecuador and Pe-troecuador enjoy sovereign immunity in the United States in this matter .... [and] barring Texaco from asserting a right to indemnification against the Republic of Ecuador and Petroecuador in this matter.”
(Id.
¶ (B)-(C).)
In response to this Amended Complaint, Defendants, on January 10, 2005, filed an Answer containing several counterclaims. The counterclaims brought against Petroe-cuador are explicitly conditional, in the sense that Defendants commit not to litigate them in this Court unless “the arbi-trability question raised by the Amended Complaint is decided in favor of Petroecua-dor.” (Countered 5.) The counterclaims against the Republic of Ecuador are not conditional.
The first counterclaim, asserted against Petroecuador only, is for “indemnification of [an] implied agent.” (Countercls.lffl 65-70.) Petroecuador, Defendants allege, is bound to indemnify ChevronTexaco and TexPet for their costs and expenses in the Lago Agrio litigation, and any final judgment therein, because after Petroecuador’s entry into the Napo Consortium “TexPet ... operated the Consortium as Petroe-cuador’s agent” and “[t]he litigation expenses and costs of any judgment in the Lago Agrio litigation have been and will be incurred within the scope of the agency relationship.” (Countercls.lffl 66-67.)
The second and third counterclaims are asserted against both Ecuador and Pe-troecuador, and concern alleged breaches of the 1995 Settlement and 1998 Final Release. Specifically, Ecuador and Petroe-cuador are said to have breached those agreements by “allowing the Lago Agrio lawsuit to proceed as a private-attorney-general action,” by “refusing to inform the court in Lago Agrio that they owned and released all rights to environmental remediation or restoration by TexPet in the concession area,” and by not “indemnifying ChevronTexaco and TexPet for any of their costs” in the Lago Agrio litigation. (Countercls.f 75.) Defendants seek damages for costs that they have incurred in the Lago Agrio litigation or that they will incur in the future, and an injunction “requiring the Republic of Ec
*345
uador and Petroecuador to pay all fees, costs and expenses associated with the Lago Agrio litigation that .may be incurred in the future, including the amount of any potential adverse final judgment rendered against ChevronTexaco in the Lago Agrio litigation” (CounterclsV 81).
In Defendants’ fourth counterclaim, they seek a declaratory judgment addressing the same subject matter as the first three counterclaims. The judgment that they request would declare
that Petroecuador is in breach of its obligations to indemnify TexPet for Consortium operations, that the Republic of Ecuador and Petroecuador are in breach of their obligations under the 1995 Settlement and 1998 Final Release ... and that the Republic of Ecuador and Pe-troecuador are obligated to intervene in the Lago Agrio litigation and inform the Ecuadorian court that they owned and released all rights to environmental remediation or restoration by TexPet in the concession area, and to indemnify and hold harmless TexPet and Chevron-Texaco for any and all fees, costs and expenses relating to the Ecuadorian lawsuit, including any final judgment that may be rendered against ChevronTexa-co in Ecuador.
(CounterclsJ 84.) That is, the judgment requested by Defendants would declare the correctness of Defendants’ positions with respect to both the implied-agency claim against Petroecuador and the settlement-based claims against Ecuador and Petroecuador.
Plaintiffs responded to the counterclaims, as has already been mentioned, not by answer but by motion to dismiss pursuant to Rule 12(b), asserting both lack of subject-matter jurisdiction and failure to state a claim. Shortly after filing this motion on January 31, 2005, they filed, on February 7, the motion for summary judgment that is now before the Court. On February 28, Plaintiffs filed an additional motion to stay discovery pending resolution of the two dispositive motions. Defendants also having filed their responses to the two dispositive motions on February 28, Plaintiffs then filed, on March 1, a motion to strike Defendants’ responses as untimely, or, in the alternative, for a preliminary injunction and additional time to reply. Following a telephone conference on March 2, the Court ordered all proceedings in the arbitration stayed until the pending motions for permanent stay of arbitration proceedings were decided or until further order of this Court. The subsequent briefing on both dispositive motions led to a motion by Defendants for permission to file sur-replies in opposition, in response to which Plaintiffs moved for permission to file a response to the sur-replies. Oral argument was then held, and the Court reserved decision.
II. Jurisdiction and Venue
A. Subject Matter Jurisdiction Over Plaintiffs’ Claims
Although no party has disputed that this Court has subject-matter jurisdiction over plaintiffs’ claims, the Court must nevertheless determine whether such jurisdiction exists.
Da Silva v. Kinsho Int’l Corp.,
229 F.3d 358, 361 (2d Cir.2000). Plaintiffs have alleged two sources of federal subject-matter jurisdiction for the claims contained in their Amended Complaint: diversity jurisdiction under 28 U.S.C. § 1332 , and federal-question jurisdiction pursuant to 28 U.S.C. § 1331 and 9 U.S.C. §§ 201 -OS, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Defendants initially removed the action pursuant to the same claimed sources of jurisdiction, as well as two others: federal-question jurisdiction pursuant to the Inter-American Convention on International Commercial Arbitration, specifically 9 U.S.C. § 302 , and general federal-question
*346
jurisdiction due to the applicability of the federal substantive law of arbitration. Because the source of the Court’s jurisdiction may determine the appropriate choice of governing law,
see Smith/Enron Cogeneration Ltd. P’ship v. Smith Cogeneration Int’l, Inc.,
198 F.3d 88 , 95 (2d Cir.1999), and Part III.B.l.a
infra,
it is prudent to examine all of the potential sources.
1. Diversity Jurisdiction
The Court has diversity jurisdiction over the subject matter of Plaintiffs’ claims pursuant to 28 U.S.C. § 1332 (a)(4), which allows such jurisdiction “where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between ... a foreign state, defined in section 1603(a) of this title, as plaintiff and citizens of a state or different states.” 28 U.S.C.A. § 1332 (a) (West 2005). Plaintiffs and Defendants agree that the amount in controversy exceeds the value of $75,000 (Not. of Removal ¶ 2(e); Am. Compl. ¶ 14; Ans. ¶ 14), and this appears to be so. Defendants, both corporations incorporated in Delaware and with principal places of business in California, are “citizens of a state or of different States” for diversity purposes. And whatever the outcome of the dispute between Plaintiffs and Defendants regarding whether Petroecuador is legally distinct from the Republic, the foreign-state-as-plaintiff condition of § 1332(a)(4) jurisdiction is also met.
Plaintiffs are foreign states as that term is defined in 28 U.S.C. § 1603 (a), whether or not Petroecuador has a legal identity independent from the Republic. Ecuador is a foreign state in the simplest meaning of that term. On Plaintiffs’ view, Petroe-cuador is a kind of doing-business-as name for Ecuador. On Defendants’ view, Pe-troecuador is “a separate legal person ... a majority of whose ... ownership interest is owned by a foreign state ... and ... which is neither a citizen of a State of the United States ... nor created under the laws of any third country,” 28 U.S.C.A. § 1603 (b), and thus is “an agency or instrumentality of a foreign state as that term is defined in [ 28 U.S.C. § 1603 ](b),” 28 U.S.C.A. § 1603 (a). In either case, Pe-troecuador, like the Republic of Ecuador, is covered by § 1332(a)(4).
Furthermore, while § 1332(a)(4) only speaks of an action in which “a foreign state” is plaintiff, not an action in which two foreign states are plaintiffs, it would nevertheless apply even if Petroecuador were considered to be a legal entity distinct from the Republic. The Second Circuit’s statement that in the § 1603(a) context “agencies and instrumentalities ... are subsumed within the ‘foreign state’ .... [and] deemed
part of
the foreign state,”
Filler v. Hanvit Bank,
378 F.3d 213, 219 (2d Cir.2004) (emphasis in original), strongly suggests that Petroecuador would be deemed part of the single “foreign state” of Ecuador for purposes of § 1332(a)(4) despite any independent legal identity it might have. Even assuming
ar-guendo
that Petroecuador did qualify as a § 1603(a) “foreign state” separate from Ecuador, § 1332(a)(4) would still apply because of the rule that “[i]n determining the meaning of any Act of Congress, unless the context indicates otherwise ... words importing the singular include and apply to several persons, parties, or things.” 1 USCS § 1 (2005). There is no apparent contextual reason why a suit should not be subject to diversity jurisdiction simply because it is brought by both a foreign state and an instrumentality of that same foreign state.
10
Thus, all of the conditions for § 1332(a)(4) jurisdiction are satisfied here.
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2. Federal-Question Jurisdiction
The Court would have federal-question jurisdiction over the subject matter of this action if the action were governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958 (“the New York Convention”
11
), 21 U.S.T. 2517, 330 U.N.T.S. 38, reprinted at 9 U.S.C.A. § 201 note (West 2004), or the Inter-American Convention on International Commercial Arbitration of January 30, 1975 (“the Inter-American Convention”), O.A.S.T.S. No. 42, reprinted at 9 U.S.C.A. § '301 note. Chapter Two of the Federal Arbitration Act (FAA), implementing the New York Convention, provides that “[a]n action or proceeding falling under the Convention shall be deemed to arise under the laws and treaties of the United States ... [and][t]he district courts of the United States ... shall have original jurisdiction over such action or proceeding, regardless of the amount in controversy,” 9 U.S.C.A. § 203 , and also provides for removal to federal court “[wjhere the subject matter of an action or proceeding pending in a state court relates to an arbitration agreement or award falling under the Convention,” 9 U.S.C.A. § 205 . Chapter Three of the FAA, implementing the Inter-American Convention, makes the original-jurisdiction and removal provisions of Chapter Two applicable to that Convention as well. 9 U.S.C.A. § 302 (stating that 9 U.S.C. §§ 202-205 , and § 207, “shall apply to this chapter as if specifically set forth herein, except that for purposes of this chapter ‘the Convention’ shall mean the Inter-American Convention”).
Defendants’ suggestion that the mere applicability of the 'federal substantive law of arbitration would be sufficient to provide federal-question jurisdiction under 28 U.S.C. § 1331 is incorrect, however. The original FAA, now Chapter One of that statute, “creates a body of federal substantive law establishing and regulating the duty to honor an agreement to arbitrate, yet ... does not create any independent federal-question jurisdiction under 28 U.S.C. § 1331 ... or otherwise.”
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp.,
460 U.S. 1, 26 , 103 S.Ct. 927 , 74 L.Ed.2d 765 (1983). Thus, whether federal-question jurisdiction exists depends upon whether either the New York Convention or the Inter-American Convention (collectively “the Conventions”) applies.
As a general matter, the Conventions are enforceable in United States courts where, as here, a written agreement purportedly exists that provides for arbitration in the United States (or another signatory nation), and the legal relationship out of which the alleged arbitration agreement arises is a commercial one with a significant connection to a foreign country.
See
9 U.S.C.A. §§ 201-202 , 301-302;
Smith/Enron Cogeneration Ltd. P’ship v. Smith Cogeneration Int'l, Inc.,
198 F.3d 88 , 92 (2d Cir.1999);
Productos Mercan-
*348
tiles E Industriales, S.A. v. Faberge USA,
23 F.3d 41 , 44—15 (2d Cir.1994). It is immaterial that the alleged arbitration agreement, comprised of the 1965 JOA and Petroecuador’s purported accession thereto in the early 1970s, partially predates the New York Convention (which entered into force in the United States in 1970,
see
9 U.S.C.A. § 201 note), and completely predates the Inter-American Convention (which began its existence in 1975 and did not enter into force in the United States until 1990,
see
9 U.S.C.A. § 301 note). The Second Circuit has observed with respect to the New York Convention that “the Convention contains no prospective language and should be applied retroactively to existing arbitration agreements and awards.”
Fotochrome, Inc. v. Copal Co.,
517 F.2d 512 , 515 n. 3 (2d Cir.1975). The Inter-American Convention contains no “prospective language” not present in the New York Convention, and the Second Circuit has stated that “[t]he legislative history of the Inter-American Convention’s implementing statute ... clearly demonstrates that Congress intended the Inter-American Convention to reach the same results as those reached under the New York Convention,”
Productos Mercantiles,
23 F.3d at 45.
12
Thus,
Fotochrome’s
retroactivity holding should apply to the Inter-American Convention as well. The fact that “the United States acceded to the Convention[s] after the contract in suit was signed,”
Fotochrome,
517 F.2d at 515 n. 3, therefore does not alter the general applicability of either of the Conventions to the legal relationship at issue here.
The more difficult question is whether either or both of the Conventions are applicable to provide jurisdiction over this particular action. Article II of the New York Convention provides for recognition of an “agreement in writing” to submit to arbitration, and further provides that a court having before it “an action in a matter in respect to which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless the said agreement is null and void, inoperative or incapable of being performed.” 9 U.S.C.A. § 201 note (West 2004). In this action, however, Plaintiffs do not request the Court to refer the parties to arbitration, but rather ask the Court to
prevent
arbitration, and to grant them other injunctive and declaratory relief as well. It is not at all clear that an action seeking such relief “fall[s] under the [New York] Convention” within the meaning of 9 U.S.C. § 203 , so as to provide this Court with original jurisdiction. The Inter-American Convention says still less about judicial intervention before the stage at which an arbitration award exists, stating only that “[a]n agreement in which the parties undertake to submit to arbitral decision any differences that may arise or
*349
have arisen between them with respect to a commercial transaction is valid,” 9 U.S.C.A § 301 note,
13
so it would seem If anything less likely to provide jurisdiction (under § 203 as incorporated by § 302) for a petition to stay arbitration. That the implementing law for both the New York Convention and the Inter-American Convention incorporates chapter one of the FAA to the extent it is not inconsistent with them, 9 U.S.C.A. §§ 208 , 307, does not change this result, as “the FAA does not provide for petitions (such as [Plaintiffs’] ) brought by the party seeking to stay arbitration.”
Bensadoun v. Jobe-Riat,
316 F.3d 171, 175 (2d Cir.2003).
The Second Circuit has suggested that “the [New York] Convention [is] inapplicable ... [where] the party invoking its provisions did not seek either to compel arbitration or to enforce an arbitral award.”
International Shipping Co., S.A. v. Hydra Offshore, Inc.,
875 F.2d 388 , 391 n. 5 (2d Cir.1989). This suggestion would preclude invocation of the New York Convention— and presumably the Inter-American Convention as well,
see Productos Mercantiles,
23 F.3d at 45 — by a party simply seeking to stay arbitration, let alone one also seeking to obtain broader declaratory and in-junctive relief. In
Borden v. Meiji Milk Products Co.,
919 F.2d 822, 826 (2d Cir.1990), the Second Circuit expanded the category of parties allowed to invoke the New York Convention somewhat when it “h[e]ld that entertaining an application for a preliminary injunction in aid of arbitration is consistent with the court’s powers pursuant to [the Convention].” This holding, however, was coupled with an emphasis on the fact that “far from trying to bypass arbitration, Borden sought to have the court
compel
arbitration.” 919 F.2d at 826 . There appears to be little or no basis in Second Circuit case law for invocation of the New York Convention or the Inter-American Convention by a party seeking to
avoid
arbitration, rather than compel or aid it. ■
In this case, however, the parties who initially sought the exercise of federal jurisdiction were Defendants, under the removal provision applicable to the Conventions. That provision, 9 U.S.C. § 205 (made applicable to the Inter-American Convention by 9 U.S.C. § 302 ), allows removal “[w]here the subject matter of an action or proceeding pending in state court relates to an arbitration agreement or award falling under the Convention,” whether or not this relationship “appear[s] on the face of the complaint.” 9 U.S.C.A. § 205 . The logic of
Borden
suggests that this aspect of Convention jurisdiction was available to Defendants: they were seeking to allow arbitration to continue, while Plaintiffs were the ones who sought to “bypass” it by their application for a stay of arbitration pursuant to Article 75 of the CPLR.
The fact that Plaintiffs dispute the existence. of any “arbitration agreement” between the. parties is irrelevant to the question, of subject matter jurisdiction under the Conventions. In
Sarhank Group v. Oracle Corp.,
404 F.3d 657, 660 (2d Cir.2005), the Second Circuit rejected the argument that “the district court lacked subject matter jurisdiction in the absence of a signed written arbitration agreement between the parties,” where the dispute before the court concerned whether respondent Oracle Corp. was legally bound to arbitrate by a contract entered into between petitioner Sarhank and a
subsidiary
of Oracle. According to
Sarhank,
“[w]hen a party challenges the court’s subject mat
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ter jurisdiction based upon the merits of the case,” such as by disputing whether it is bound by an arbitration agreement it did not itself sign, “that party is merely arguing that the adversary has failed to state a claim ... [and][t]he court has and must assume subject matter jurisdiction and hear the merits of the case.” 404 F.3d at 660 . Thus, this Court had federal-question removal jurisdiction, pursuant to 9 U.S.C. § 205 , over Plaintiffs’ application to stay the arbitration.
Plaintiffs’ decision to file an amended complaint after removal should not alter the jurisdictional situation with regard to their application for a stay of arbitration. The amended complaint still contains the same application for a stay under Article 75 of the CPLR (specifically CPLR § 7503), a New York procedural rule that the Court is requested to “borrow” as an alternative to issuing a stay under the FAA and the All Writs Act. (Am. Comply 13.) That Plaintiffs have chosen to add other claims for relief and other proposed sources of jurisdiction,
in addition
to what was present in the removed action, should not operate to deprive the Court of any federal-question jurisdiction it had upon removal. This is so both as a matter of logic,
14
and because it would be incompatible with the basic purpose of a removal provision for the addition of other claims to deprive Defendants of any protection granted them by the existence of federal-question jurisdiction under 9 U.S.C. § 205 .
With respect to Plaintiffs’ requests for broader injunctive and declaratory relief pertaining to their waiver and estoppel theories, however, federal-question jurisdiction is lacking. Those claims for relief were not part of the removed action, do not fall within 9 U.S.C. § 203 as interpreted in
International Shipping
and
Borden ,
and do not raise a jurisdiction-bestowing federal question in any other respect. The Court’s jurisdiction over those claims for relief must therefore stem solely from 28 U.S.C. § 1332 , or perhaps from 28 U.S.C. § 1367 (a) (supplemental jurisdiction). This implies that New York choice of law rules apply to those claims.
Klaxon Co. v. Stentor Electric Mfg. Co.,
313 U.S. 487, 496 , 61 S.Ct. 1020 , 85 L.Ed. 1477 (1941);
Rogers v. Grimaldi,
875 F.2d 994, 1002 (2d Cir.1989).
B. Subject Matter Jurisdiction Over Defendants’ Counterclaims
Unlike the existence of subject-matter jurisdiction over Plaintiffs’ claims, the existence of subject-matter jurisdiction over Defendants’ counterclaims is vehemently contested: Plaintiffs have moved pursuant to Rule 12(b) of the Federal Rules of Civil Procedure to dismiss Defendants’ counterclaims for,
inter alia,
lack of such jurisdiction. Because the issue has been raised by a distinct motion so briefed by the parties, and because deferring consideration of it is more analytically appropriate in other respects, the question of jurisdiction over the counterclaims will be addressed in a subsequent portion of this Opinion and Order.
See infra
Part IV. A.
C. Personal Jurisdiction and Venue
Defendants do not dispute the existence of personal jurisdiction, any objection with respect to which is therefore waived. Defendants also do not dispute the appropriateness of venue in the Southern District of New York, any objection to which is also waived. Plaintiffs, too, do not raise, and
*351
therefore waive, any objection as to personal jurisdiction or venue with respect to Defendants’ counterclaims.-
III. Plaintiffs’ Motion for Summary Judgment
A. Legal Standard
The standard under which Rule 56 motions for summary judgment are evaluated is a familiar one. “Summary judgment is appropriate only where ... the record shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.”
Carroll v. United States,
339 F.3d 61, 67 (2d Cir.2003);
Steel Partners II, L.P. v. Bell Indus., Inc.,
315 F.3d 120, 123 (2d Cir.2002) (internal quotations omitted). “In assessing the record, all ambiguities and reasonable inferences are viewed in a light most favorable to the nonmoving party.”
Vona v. County of Niagara,
119 F.3d 201, 206 (2d Cir.1997). “The party seeking summary judgment has the burden to demonstrate that no genuine issue of material fact exists.”
Marvel Characters v. Simon,
310 F.3d 280, 286 (2d Cir.2002).
While “[t]he mere existence of a scintilla of evidence in support of the [nonmovants’] position will be insufficient” to defeat a motion for summary judgment,
Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 252 , 106 S.Ct. 2505 , 91 L.Ed.2d 202 (1986), “[s]ummary judgment is improper if there is any evidence in the record that could reasonably support
a ....
verdict for the non-moving party,”
Marvel Characters,
310 F.3d at 286 . “On a motion for summary judgment, the court is not to weigh the evidence, or assess the credibility of the witnesses, or resolve issues of fact, but only to determine whether there are issues to be tried.”
United States v. Rem,
38 F.3d 634, 644 (2d Cir.1994).
B. Analysis
Plaintiffs raise three distinct arguments in support of their contention that no genuine issue of material fact precludes the determination that Defendants’ dispute with Petroecuador is not arbitrable. Their primary argument is that Petroecuador never agreed to arbitrate disputes such as the one at issue. Plaintiffs also assert that the doctrine of waiver, and the act of state doctrine as applied to the 1973 Contract, provide independent grounds on which to find that Defendants are barred from seeking arbitration against Petroecuador, even if an otherwise-valid arbitration agreement exists.
1. Agreement to Arbitrate
“In considering whether ‘a particular dispute is arbitrable,’ a court must first decide ‘whether the parties agreed to arbitrate.”’
Smith/Enron Cogeneration Ltd. P’ship v. Smith Cogeneration Int’l, Inc.,
198 F.3d 88 , 95 (2d Cir.1999) (quoting
Chelsea Square Textiles, Inc. v. Bombay Dyeing & Mfg. Co.,
189 F.3d 289, 294 (2d Cir.1999)). The Second Circuit “ha[s] held that whether an entity is a party to the arbitration agreement also is included within the broader issue of whether the parties agreed to arbitrate.”
Id.
At issue here is whether Petroecuador is, or was,, a party to an arbitration agreement covering the dispute in question.
It is common ground between the parties that Petroecuador “never signed an arbitration agreement with [either defendant], the customary implementation of an agreement to arbitrate,”
Sarhank Group v. Oracle Corp.,
404 F.3d 657, 662 (2d Cir.2005). Defendants contend, however, that Petroecuador became a party to the 1965 JO A, which contained an arbitration clause, when Petroecuador acquired its stake in the Napo Consortium. As they explain it, the 1973 Contract that accom
*352
panied Petroecuador’s entry into the Consortium replaced the 1964 concession agreement between Ecuador and the concessionaires, but did not affect the 1965 JOA, which continued to govern relations among the members of the Consortium (one of which, after 1973, was Petroecua-dor). Even though Petroecuador did not sign the 1965 JOA, Defendants assert, it knowingly accepted benefits from the 1965 JOA and proceeded as if the 1965 JOA controlled its relationship with TexPet. Thus, Defendants conclude, Petroecuador is bound by the arbitration clause within the 1965 JOA.
Plaintiffs, in contrast, assert that the 1973 Contract was a novation that replaced the 1965 JOA, and that the 1973, 1974 and 1977 Contracts — none of which contain an arbitration clause — governed Petroecua-dor’s relationship with the other members of the Napo Consortium. According to Plaintiffs, the notion that the 1965 JOA and the arbitration clause within it apply to Petroecuador is “purely a recent invention of Chevron[T]exaco’s lawyers.” (Oral Ar. Tr. at 3.) The 1965 JOA and the arbitration clause within it, Plaintiffs contend, do not in any way bind Petroecuador.
a. Governing Law
To decide whether sufficient issues of material fact exist to preclude the grant of summary judgment on the theory that Petroecuador never agreed to arbitrate, it is necessary to ascertain what law governs this Court’s determination of whether Pe-troecuador became bound by the 1965 JOA and the arbitration clause within it. “We first look to the substantive law of the action to determine which facts are material,”
Golden Pac. Bancorp v. FDIC,
375 F.3d 196, 200 (2d Cir.2004), and to do so, we must know to what substantive law we shall look. Specifically, we must determine whether New York law, federal common law, or Ecuadorian law should govern the question of whether Petroecuador is bound by an agreement to arbitrate.
15
Several recent Second Circuit cases support the application of state law to the question of whether a party is bound by a purported agreement to arbitrate.
Bell v. Cendant Corp.,
293 F.3d 563 (2d Cir.2002), held that “[bjecause an agreement to arbitrate is- a creature of contract ... the ultimate question of whether the parties agreed to arbitrate is determined by state law,” and applied Connecticut law to ascertain if the parties had agreed to allow the arbitrator to determine arbitrability. 293 F.3d at 566 .
Bell
cited the Supreme Court’s statement in
First Options v. Kaplan,
514 U.S. 938, 944 , 115 S.Ct. 1920 , 131 L.Ed.2d 985 (1995), that “when deciding whether the parties agreed to arbitrate a
*353
certain matter (including arbitrability), courts generally ... should apply ordinary state-law principles that govern the formation of contracts.”
Shaw Group, Inc. v. Triplefine Int’l Corp.,
322 F.3d 115 , (2d Cir.2003), in turn cited
Bell
and
First Options
for the proposition- that “[wjhether parties have obligated themselves to’ arbitrate certain issues, including the question of arbitrability, is determined by state law.” 322 F.3d at 120. Similarly,
Chelsea Square Textiles, Inc. v. Bombay Dyeing & Mfg. Co.,
189 F.3d 289, 294 (2d Cir.1999), described “the determination that parties have contractually bound themselves to arbitrate disputes” as “a determination involving interpretation of state law.”
Accord Progressive Casualty Ins. Co. v. C.A. Reaseguradora Nacional De Venezuela,
991 F.2d 42, 45-46 (2d Cir.1993) (citing
Perry v. Thomas,
482 U.S. 483 , 492 n. 9, 107 S.Ct. 2520 , 96 L.Ed.2d 426 (1987)). Following these cases here could result in the application of New York substantive law, or possibly the application of Ecuadorian substantive law under New York or federal choice of law rules, Ecuador being a “state” with a significant connection to the relevant contracts.
There is also, however, a line of Second Circuit authority supporting the application of federal common law to questions such as the one at issue here, particularly in cases arising under the New York Convention.
Genesco, Inc. v. T. Kakiuchi & Co.,
815 F.2d 840, 845 (2d Cir.1987), held, with respect to a motion under the FAA and New York Convention to stay an action pending arbitration, that whether a party was “bound by the arbitration clause of ... sales confirmation forms [including some it did not sign] is determined under federal law, which comprises generally accepted principles of contract law.” In
Thomson-CSF, S.A. v. American Arbitration Association,
64 F.3d 773, 776 (2d Cir.1995), the Second Circuit stated that “[the] theories under which nonsignatories may be bound to the arbitration agreements of others'..: arise out of common law principles of contract and agency law.”
16
Smith/Enron Cogeneration Ltd. P’ship v. Smith Cogeneration Int’l, Inc.,
198 F.3d 88 , 96-98 (2d Cir.1999), followed
Thom-sorir-CSF’ s
common law principles in a New York Convention case after holding that “[w]hen we exercise jurisdiction under Chapter Two of the FAA, we have compelling reasons to apply federal law, which is already well-developed, to the question of whether an agreement to arbitrate is enforceable.” 198 F.3d at 96. “Where there is little connection to the forum and the Agreements between the parties state an intention to be governed by the FAA,”
Smith/Enron
explains, “proceeding otherwise would introduce a degree of parochialism and uncertainty into international arbitration that would subvert the goal of simplifying and unifying international arbitration law.”
Id.
Quite recently, citing
Smith/Enron,
the Second Circuit reaffirmed that “[i]t is American federal arbitration law that controls” the question of whether an American nonsignatory can be bound to arbitrate in a New York Convention case, because “[t]o hold otherwise would defeat the ordinary and customary expectations of experienced business persons.”
Sarhank Group v. Oracle Corp.,
404 F.3d 657, 661-662 (2d Cir.2005).
Strictly speaking, this is probably not a case covered by the New York Convention. The United States and Ecuador are both members of the Organization of American States and parties to the Inter-American
*354
Convention,
see
9 U.S.C.A. § 301 note, so that “a majority of the parties are citizens of a State or States that have ratified or acceded to the Inter-American Convention and are member States of the Organization of American States,” 9 U.S.C.A. § 305 , and thus that Convention rather than the New York Convention appears to apply. This does not alter the choice of law analysis, however. Given Congress’s expectation “that courts in the United States would achieve a general uniformity of results under the two conventions,”
Productos Mercantiles E Industriales, S.A. v. Faberge USA
23 F.3d 41 , 45 (2d Cir.1994) (quoting H.R.Rep. No. 501, 101st Cong., 2d Sess. 4 (1990), reprinted in 1990 U.S.C.C.A.N. 675, 678), and given that the policy concerns motivating the rule in
Smith/Enron
and
Sarhank
apply to Inter-American Convention cases as much as to New York Convention cases,
Smith/Enron
and
Sarhank
strongly suggest that, federal common law should govern arbitrability issues in an Inter-American Convention case as well.
If the .rule of
Smith/Enron
and
Sarhank
were settled with regard to Convention cases, it would be appropriate to follow it here even though this action comes to the Court under
both
Convention jurisdiction
and
diversity jurisdiction,
see supra
Part II.A.1. “[T]he goal of simplifying and unifying international arbitration law,”
Smith/Enron,
198 F.3d at 96, would not be any less relevant simply because the parties could also get into court another way. There appears at first glance to be tension between different Second Circuit authorities regarding whether federal common law governs the validity of a party’s purported agreemént to arbitrate where, as here, the case arises under one of the Conventions and the contract manifesting the purported agreement contains a choice-of-law clause:
Sarhank
held that such a choice-of-law clause was to be ignored in favor of federal common law, while
Motorola Credit Corp. v. Uzan,
388 F.3d 39 (2d Cir.2004), held that the choice-of-law clause- governed.
Sarhank
and
Motorola
can, however, be reconciled.
The appellee in
Sarhank,
proceeding under the district court’s 9 U.S.C. § 203 jurisdiction pursuant to the New York Convention, had successfully petitioned for confirmation of “a commercial arbitration award rendered jointly and severally against Oracle [Corporation] and its wholly owned subsidiary Oracle . Systems, Inc. (‘Systems’),” despite the fact that Oracle was not a signatory to either the agreement under which arbitration had been demanded or any other agreement to arbitrate with the petitioner-appellee. 404 F.3d at 658 . The arbitration agreement at issue, “a bilateral executory contract” between petitioner-appellee Sarhank and Systems,
id.,
contained a choice-of-law law clause stating that “[t]his agreement shall be construed and governed in 'all respects in accordánce with the laws of the Republic of Egypt'and the parties hereto hereby agree to submit to the jurisdiction of the Courts of Cairo.” 404 F.3d at 661 . The arbitrators had concluded, based on Egyptian contract law, that Oracle was bound by its subsidiary’s signature,'
id.
at 662 . Notwithstanding the Egyptian choice-of-law clause, the Court of Appeals held that “[i]t is American federal' arbitration law that controls” and that “[a]n American nonsignatory cannot be bound to arbitrate in the absence of a full showing of facts supporting an articulable theory based on American contract law or American agency law.”
Id.
The case was remanded to the district court “to find as a fact whether Oracle agreed to arbitrate, by its actions or inaction ... or on any other basis recognized by American contract law or the law of agency.”
Id.
at 662-63 .
The defendants in
Motorola
“sought to
*355
compel arbitration under 9 U.S.C. § 206
17
pursuant to agreements that had been signed by plaintiffs and by certain companies controlled by the defendants’ family, but to which the defendants themselves were not parties. 388 F.3d at 42-43, 49 . The agreements in question contained Swiss choice-of-law clauses, and the Court of Appeals held that “if defendants wish to invoke the arbitration clauses in the agreements at issue, they must also accept the ... choice-of-law clauses that govern those agreements.” Concluding “that under Swiss law.... defendants, as nonsignato-ries, have no right to invoke those agreements,” the Court of Appeals “affirm[ed] the District Court’s denial of defendants’ motion to compel arbitration.” 388 F.3d at 53 .
The most reasonable way to reconcile
Motorola
and
Sarhank
is to conclude that a choice-of-law clause will govern where a nonsignatory to a particular arbitration agreement seeks to enforce that agreement against a signatory, but not where a signatory seeks to enforce the agreement against a nonsignatory. In the former case, exemplified by
Motorola,
the party seeking arbitration must implicitly accept that the contract under which arbitration is sought is valid and binding on it, and the party opposing arbitration has signed the contract, so both parties can reasonably be bound by the choice-of-law clause. In the latter case, exemplified by
Sar-hank,
the nonsignatory party opposing arbitration is in essence contending that it is not subject to the contract at all; thus, applying the choice-of-law clause from that contract to determine the issue would beg the question in a manner potentially unfair to the nonsignatory.
Cf. Thomson-CSF,
64 F.3d at 779 (stating that while “the circuits have been willing to estop a
signatory
from avoiding arbitration with a nonsignatory when the issues the nonsignatory is seeking to resolve in arbitration are intertwined with the agreement that the estopped party has signed,” this doe's not logically imply that a signatory can compel a nonsignato-ry in similar fashion, inasmuch as holdings that “the parties were estopped from avoiding arbitration because they had entered into written arbitration agreements, albeit with the affiliates of those parties asserting the arbitration and not the parties themselves” cannot be extended to “estop[] [a nonsignatory] from denying the existence' of an arbitration clause to which it is a signatory because no such clause exists.”) Here, TexPet, signatory to the 1965 JOA, seeks arbitration, and nonsignatory Petroecuador opposes arbitration. Thus,
Sarhank
rather than
Motorola
controls, and the federal common law of arbitration agreements applies.
One might argue that the holding of
Sarhank
is inapplicable to this case because that holding dealt with the circumstances under which “an American nonsig-natory [could] be bound to arbitrate,” 404 F.2d at 662, and this' case deals with whether a
foreign
nonsignatory can be bound to arbitrate.
Motorola,
in contrast, dealt with whether a foreign signatory could be bound to arbitrate. If the difference between "an American party and a foreign party were more significant than the difference between a signatory and a nonsignatory, therefore, the
Motorola
choice-of-law rule would be applicable here. A reconciliation of
Sarhank
and
Motorola
that would have the choice of governing law in a Convention ease depend on the nationality of the party sought to be forced into arbitration, however, is not consistent with the
Smith/Enron
principle that “parochialism” in international arbi
*356
tration should be avoided in furtherance of “the goal of simplifying and unifying international arbitration law,” 198 F.3d at 96. Nothing in either of the Conventions suggests that the validity of an alleged arbitration-agreement involving citizens of nations that are signatories to the convention should depend on which signatory nation’s citizens resist arbitration. The Second Circuit has attached great weight to the distinction between signatories and nonsig-natories,
see, e.g., Merrill Lynch Inv. Managers v. Optibase, Ltd.,
337 F.3d 125, 131 (2d Cir.2003). (declaring the distinction to be “decisive” and stating that “it matters whether the party resisting arbitration is a signatory or not”);
Thomson-CSF,
64 F.3d at 779 , and a reconciliation of
Sarhank
and
Motorola
based on this distinction is significantly more consistent with the
Smith/Enron
anti-parochialism principle. Therefore, we will follow
Sar-hank
and apply federal common law to the question of whether Petroecuador is bound by the arbitration clause in the 1965 JOA.
b. Evidence for Agreement to Arbitrate Under Federal Common Law
Under federal common law, the Second Circuit “ha[s] recognized five theories for binding nonsignatories to arbitration agreements: 1) incorporation by reference; 2) assumption; 3) agency; 4) veil-piercing/alter ego; and 5) estoppel.”
Thomson-CSF,
64 F.3d at 776 . “[A] willing signatory (such as [TexPet]) seeking to arbitrate with a non-signatory that is unwilling (such as [Petroecuador]) must establish at least one of the five theories described in
Thomson-CSF.
”
Merrill Lynch Inv. Managers,
337 F.3d at 131 .
Of the five
Thomson-CSF
theories, the most likely to apply in this case is estoppel. “A party is estopped from denying its obligation to arbitrate when it receives a ‘direct benefit’ from a contract containing an arbitration clause.”
American Bureau of Shipping v. Tencara Shipyard S.P.A.,
170 F.3d 349, 353 (2d Cir.1999) (citing
Thomson-CSF,
64 F.3d at 778-79 ). Direct benefits are those “flowing directly from the agreement,” while “the benefit derived from an agreement is indirect where the nonsignatory exploits the contractual relation of parties to an agreement, but does' not exploit (and thereby assume) the agreement itself.”
MAG Portfolio Consultant, GMBH, v. Merlin Biomed Group LLC,
268 F.3d 58, 61 (2d Cir.2001). “To prevail, then, [Defendants] must show’ that [Petroecuador] ‘knowingly exploited’ the ... contract and thereby received a direct benefit from the contract.”
Id.
at 62 (quoting
Thomson-CSF,
64 F.3d at 778 ).
If Defendants’ view of the events surrounding the entry of CEPE/Petroecuador into the Napo Consortium were accepted, it would be reasonable to conclude that Petroecuador knowingly received “direct benefits” from the 1965 JOA, and thereby became estopped from denying agreement to arbitrate under it. As Defendants describe the situation, it was only within the framework' of the 1965 JOA that TexPet acted as “Operator” of the Napo Consortium. That is, when TexPet took the lead role in extracting oil from the land covered by the Napo Concession, this action was— on Defendants’ account — taken under and because of the 1965 JOA, which all parties understood to govern. On this view, Pe-troecuador received oil extracted by Tex-Pet, at cost, and had control over various aspects of the extraction of that oil, only because of the 1965 JOA, and knew that it received those benefits because of the 1965 JOA. It was thus analogous to the shipowners in
American Bureau of Shipping ,
who received lower insurance rates and registration under the French flag only because of an agreement containing an arbitration clause, and were therefore bound to that arbitration clause despite
*357
not being a signatory to the agreement. 170 F.3d at 353 .
If one were to accept Plaintiffs’ version of the facts, on the other hand, there would be no basis for subjecting Petroe-cuador to arbitration. If the 1973 Contract was a novation intended by the parties to replace the 1965 JOA, and the subsequent relationship among the Napo Consortium parties was understood to be “quasi-eontractual, governed by an ambiguous amalgam of prevailing ‘standards and procedures’ ” (PI. Reply in Supp. of Mot. for Summ. J. at 4), then there was no extant contract containing an arbitration clause from which Petroecuador could be said to have derived a direct benefit. Nor would any of the other
Thomson-CSF
theories be applicable, if, as Plaintiffs contend, the 1965 JOA and its arbitration clause have been dead and buried for forty years.
The question, then, is whether there is sufficient evidence in the record supporting Defendants’ version of events to raise a genuine issue of material fact regarding whether Petroecuador became bound by the arbitration clause in the 1965 JOA. We answer this question in the affirmative. In so doing, we address only those portions of the record necessary to demonstrate clearly that genuine issues of material fact do exist, and do not attempt an exhaustive description of the voluminous evidence submitted by the parties.
i. Pareja Affidavit
The first significant piece of evidence that the 1965 JOA was understood to govern the operations of the Napo Consortium after Petroecuador entered it, and that Petroecuador derived significant benefits from the 1965 JOA, is the affidavit of Jorge Pareja Cucalón submitted by Defendants. Mr. Pareja, according to his affidavit, was an employee of Gulf involved in the Texaco-Gulf Consortium from 1969 to 1970, the General Manager of CEPE from 1981 to 1982, and the President of Petroe-cuador in 1999. He has also served at various times as Chairman of the Petroleum Policy Commission in the Ecuadorian Ministry of Energy, Ecuador’s Ambassador to Austria, Ecuador’s representative to OPEC, and Ecuador’s Minister of Energy and Mines.
Mr. Pareja avers that because of his duties at Gulf from 1969 to 1970, he “knew about the Napo Joint Operating Agreement entered into by subsidiaries of Texaco and Gulf in 1965 (“Napo JOA”).” (Pa-reja Aff. ¶ 4.) He further avers that “[tjhere was no question that, when CEPE became an interest holder in the Napo Concession, CEPE also became a party to the [1965] Napo JOA, as that contract controlled the relationship and operations of the parties to the concession” and that he “always understood, as did CEPE, that the [1965] Napo JOA was the agreement that governed the relationship between TexPet and CEPE regarding oil exploration and production in the Napo Concession.” (Pareja Aff. ¶9.) The 1965 JOA, according to Mr. Pareja, “delineated the joint rights of CEPE and TexPet, with respect to each other.” (Pareja Aff. ¶ 9.)
The Pareja Affidavit also details benefits that CEPE is asserted to have received from the 1965 JOA. The 1965 JOA, Mr. Pareja says, not only “enabled CEPE ... to enjoy its share of the oil produced in the Napo Concession by the Operator, TexPet, but also allowed CEPE, through its representatives, to have significant input into the exploration and production efforts by the Operator.” (Pareja Aff. ¶ 9.) According to Mr. Pareja, CEPE was able to approve all “annual work plans and budgets” and to “approve (or not) significant contractual relationships that the Operator wished to enter into with various contractors.”
(Id.)
It could thereby “have a voice
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in the petroleum exploration and production plans and activities” and “address its own budgetary concerns by being able to seek limits on the programs that the Operator wanted to pursue.” (Pareja Aff. ¶ 10.)
ii. Other Affidavits
Although Mr. Pareja is perhaps the most compelling of Defendants’ affiants insofar as he worked for CEPE/Petroecua-dor during a portion of the relevant time period, other affidavits have also been provided in support of Defendants’ contention that the Consortium of which CEPE became a part was understood to operate under the 1965 JOA. It would serve little purpose at this stage to reiterate in detail the averments of former Consortium Operations Manager René Buearam, former TexPet Chief Counsel Rodrigo Pérez Pal-lares, or the former manager of'TexPet’s separate (non-Consortium) office, Donald Sawyer.. For summary judgment purposes, it is sufficient to note that they tend to corroborate the statements made by Mr. Pareja.
Defendants have also offered affidavits from proposed expert witnesses Norman N. Anderson and Owen L. Anderson. These affiants address usual practice in the oil industry, and conclude that the Napo JOA was a typical joint operating agreement, and that such operating agreements are generally considered essential where more than one oil-extraction company shares rights under a concession from a host government. They further conclude that pursuant to usual practice in the oil industry, Petroecuador would have been understood to enter the Napo Concession subject to the existing JOA.
iii. Lack of Explicit Abrogation of 1965 JOA in 1973 Contract
Another piece of evidence that the 1973 Contract was not, as Plaintiffs claim, a novation replacing the 1965 JOA is that the 1973 Contract explicitly replaced several other contracts, but did not mention the 1965 JOA. Paragraph 53.1 of the 1973 Contract stated in relevant part that “the contract executed on August 26, 1961 in its applicable portion, and the contracts executed on March 5, 1964 and June 27, 1969 are completely substituted by the present contract. Consequently, the parties shall hereinafter be governed only by the stipulations set forth in this public instrument.” (Perez Aff. Ex, E.) While Plaintiffs focus on the latter sentence, Defendants focus on the former, and the fact that it mentions previous concession contracts between Ecuador and the concessionaires but does not mention the 1965 JOA. Particularly in light of the fact that the 1965 JOA contained a provision declaring itself “binding on the successors and assigns of the Parties” (Perez Aff. Ex..C. ¶26.1), this omission of any reference to the 1965 JOA makes it at least ambiguous whether the 1973 Contract was intended to render the 1965 JOA inoperative. And on summary judgment, “all ambiguities ... are viewed in a light most favorable to the nonmoving party.”
Vona,
119 F.3d at 206 .
Plaintiffs contend that “the underlying intent behind the 1973 Contract was that all disputes involving the Napo Consortium be resolved in Ecuador” (PI. Mem. in Supp. of Mot. for Summ-. J. at 8), so that at least the arbitration provision of the 1965 JOA must have been abrogated even if some other portions of the 1965 JOA survived. They cite in support of this contention paragraph 50.1 of the 1973 Contract, which states that “[t]he contractors shall submit to the laws, courts, and judges of Ecuador, to summary verbal proceeding, and expressly waive any claim through diplomatic channels.” (Pl.Ex.' C. ¶ 50.1.) “The general rule in cases containing forum selection clauses,” however, “is that ‘when only jurisdiction is specified the clause will generally not be enforced without some further language indicating the
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parties’ intent to 'make jurisdiction exclusive.’ ”
John Bouton & Son, Wines & Spirits, S.A. v. Attiki Importers & Distributors Inc.,
22 F.3d 51, 52 (2d Cir.1994) (quoting
Docksider, Ltd. v. Sea Technology, Ltd.,
875 F.2d 762, 764 (9th Cir.1989)). In particular, a clause stating that the parties “submit to the jurisdiction of’ a particular state’s courts will not be read as exclusive,
Keaty v. Freeport Indonesia, Inc.,
503 F.2d 955, 956 (5th Cir.1974); one stating that the parties “submit to the ... courts[ ] and judges” of a particular forum would seem to be closely analogous. Moreover, the inclusion of this clause referring to submission of “the contractors” to Ecuadorian courts, in a model contract promulgated by the Ecuadorian government and alleged by Defendants to have been in essence a
concession
contract, could be construed as requiring only that the concessionaires submit to Ecuadorian jurisdiction and laws if disputes arose in their relationship with Ecuador. The clause is not sufficiently clear to preclude the possibility that CEPE/Petroecuador could be estopped from denying the applicability of the 1965 JOA’s arbitration clause if CEPE and TexPet had in fact proceeded on the assumption that the 1965 JOA governed their relationship.
The effect of paragraph 43.2 of the 1973 Contract, also cited by Plaintiffs to support their contention that the intent behind that Contract was for all disputes to be resolved in Ecuador, is similarly unclear. It states that “indemnities to be paid by the contractors for the damages caused on lands, crops, buildings or other properties due to the exploration, exploitation or any other phase of the oil industry, shall be determined by experts designated by the parties” and that “[i]n ca'se of disagreement, the Ministry concerned shall appoint a third expert, whose verdict shall be unappealable.” (Pl.Ex. C. ¶43.2.) This paragraph immediately follows, and is contained within the same “Clause” as, one concerning “[expropriation of lands, buildings, and other properties,” which it is provided “shall be effected by the Ministry concerned.” (Pl.Ex. C. ¶ 43.1) Viewed in context, therefore, paragraph 43.2 appears to regulate the legal relationship between the concessionaires and the Republic on the one hand, and the local population on the other. It might have been relevant to the question whether the Aguinda Plaintiffs could sue Texaco in the United States, but it does not unambiguously bear on the question whether the 1965 JOA governs the relationship between Petroecuador and TexPet.
iv. Conflicting and Ambiguous References to 1973 Contract and 1965 JOA in Subsequent Agreements Between the Parties
If the subsequent written agreements entered into by the parties unambiguously clarified that the relationship between CEPE/Petroecuador and TexPet after 1973 was not governed or thought to be governed by the 1965 JOA, then it might be doubtful whether Defendants could survive summary judgment by pointing to their contrary evidence. While some of the subsequent agreements tend to indicate that the 1973 Contract and not the 1965 JOA controlled,, however, the overall picture is not so clear as to justify summary judgment in the face of the evidence offered by Defendants.
(a.) 1974 Contract
The 1974 Contract contains a passing reference to the 1973 Contract, but does not state that the 1973 Contract regulates the relationship between CEPE and the other concessionaires of the Napo Concession. Rather, the 1974 Contract, as translated by Plaintiffs, states that “[t]he totality of the activities that will develop in the Joint Operation will be regulated by an
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operating agreement entered into by the parts [sic].” (Pl.Ex. Q ¶ 8.) Plaintiffs cite this clause and assert that “neither the Republic nor CEPE/Petroecuador ever entered into such a formal operating agreement with Texaco and/or Gulf.” (PI. Mem. in Supp. of Mot. for Summ J. at 8.)
The lack of mention of the 1965 JOA in the 1974 Contract may tend to suggest that the 1965 JOA was not understood to continue in effect. The 1974 Contract’s implication that an operating agreement separate from the 1973 and. 1974 Contracts would be required, however, tends to support Defendants’ argument that the 1973 Contract did not itself function as an operating agreement, and that industry convention would require one. The 1974 Contract does not address the question of what contract or other legal. framework would govern “the activities that will develop in the Joint Operation” in the period before the parties entered into the future operating agreement to which the 1974 Contract refers. It thus does not decisively resolve the conflict between Defendants’ contention that the 1965 JOA was understood to apply in the interim, and Plaintiffs’ assertion that the interim relationship was “quasi-eontractual, governed by an ambiguous amalgam of prevailing ‘standards and procedures’ ” (PI. Reply in Supp. of Mot. for Summ. J. at 4).
(b.) 1977 Contract
The 1977 Contract by which CEPE bought out Gulfs remaining portion of the Napo Concession tends to support Plaintiffs’ position in this case, but not so definitively as to permit summary judgment in the face of Defendants’ contrary evidence. Most favorable to Plaintiffs is paragraph 2.13, which states: •
With respect to any obligations Gulf may have to third parties and which do not appear in its. accounts, neither the Ecuadorian government nor CEPE shall assume any responsibility whatsoever, and these must be taken care of by Gulf. Therefore CEPE shall assume only those obligations that are in accordance with this agreement.
(Pl.Ex. 0 ¶ 2.13.) The arbitration clause of the 1965 JOA could be described as an obligation Gulf had to TexPet, and there has been no showing that it appeared in Gulfs accounts. And although TexPet was not a signatory to the 1977 Contract, paragraph 2.13 could still serve as evidence that CEPE/Petroecuador believed the 1965 JOA to be inapplicable and thus did not “knowingly exploit[ ]” it,
MAG Portfolio Consultant,
268 F.3d at 62 (quoting
Thomson-CSF,
64 F.3d at 778 ).
By the time of the 1977 Contract, however, CEPE had been part of the Napo Concession/Consortium for several years. If the parties understood the obligations of the 1965 JOA to have attached to CEPE, those obligations would have been in place before the 1977 Contract entered the picture. Furthermore, it is not clear that an operating agreement is the sort of “obligation” that would be expected to “appear in [Gulfs] accounts”; it is likely that this wording was meant to refer to monetary liabilities.
(c.) 1985 Agreement
The 1985 Agreement also tends to support Plaintiffs’ position that the 1973 Contract and not the 1965 JOA was seen as controlling the relationship between members of the Napo Consortium. The background section of the 1985 Agreement mentions only the 1973 Contract and not the 1965 JOA, although it does not specifically state, that the 1973 Contract controlled the relationship between Consortium members or abrogated the 1965 JOA. Even more suggestive are clauses 3.3.1 and 3.3.2 of the 1985 Agreement, which provide respectively that “[t]he
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parties shall within 30 days commence negotiations for a final Joint Operations Agreement to continue the Consortium’s operations” and that “[u]ntil the Joint Operations Agreement becomes effective, the Consortium’s operations shall be carried out according to the standards and procedures that have been in force up to now.” (Perez Aff. Ex. L, at 5.) Taken together, these clauses seem most consistent with Plaintiffs’ view that no Joint Operations Agreement was in force in 1985 — which would explain why one had to be negotiated — and that the relationship of the Consortium parties was instead “quasi-contractual, governed by an ambiguous amalgam of prevailing ‘standards and procedures’ ” (PI. Reply in Supp. of Mot. for Summ. J. at 4).
It is also possible, how'ever, to read clauses 3.3.1 and 3.3.2 as indicating dissatisfaction by the parties with the then-governing legal regime, and a desire to replace it, while leaving open the question of what the then-governing legal regime actually
was.
The 1985 Agreement does not specify whether the “standards and procedures that have been in place” were quasi-contractual, or contractual and derived from the 1973 Contract, or contractual and derived from the 1965 JOA. One can imagine a scenario in which Mr. Pareja is correct that during his time as the General Manager of CEPE from 1981 to 1982 the parties believed the 1965 JOA to govern the operations of the Consortium, and yet by the time of drafting of the 1985 Contract, there was sufficient uncertainty in the mind of the drafter regarding what contract or other legal framework governed the Consortium that language was chosen to avoid the question entirely. The 1985 Agreement tends to suggest that thé 1965 JOA was not understood to govern the relationship of the parties to the Consortium, but it does not establish that proposition so conclusively as to justify disregarding contrary evidence on a motion for summary judgment.
(d.) 1991 Agreement
Perhaps most favorable to Plaintiffs’ position is the 1991 Agreement. The 1991 Agreement does not reference the 1965 JOA at all, or contain any reference to arbitration. It defines the “Contract” as the 1973 Contract, and states that “ ‘Consortium’ ... means the de facto company made up of Petroecuador and Texaco, for the exploration and exploitation of the oil fields assigned hereto by the State, in accordance with the Contract.” (Suppl. Kolis Decl. Ex. 1 ¶¶ 1.1-1.2.) It further provides that “[i]f disputes arise between the Parties with respect to the application and/or interpretation of this Agreement, such disputes shall be heard in the Special Court
[Juzgado Especial],
in accordance with Section 10 of the Hydrocarbons Act” and that “this Agreement and the operations contemplated shall be subject to the laws of Ecuador, and the rules, regulations, contracts and other agreements signed by the parties.” (Suppl. Kolis Decl. Ex. 1 ¶¶ 13.1-13.2 (alterations in original).)
This language certainly, as Plaintiffs contend, tends to suggest that their version of events is the correct one. It is conceivable, however, that “the de facto company made up of Petroecuador and Texaco, for the exploration, and exploitation of the oil fields assigned hereto by the State, in accordance with the Contract” might refer to the de facto company for the exploration of oil fields that were “assigned by the State ... in accordance with the [1973] . Contract” — consistent with Defendants’ argument that the 1973 Contract was understood to be a concession contract only — rather than to a “de facto company made up of Petroecuador and Texaco ... in accordance with the 1973 Contract.”
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And while the forum selection clause is helpful to Plaintiffs, particularly because it is “mandatory rather than permissive,”
John Boutari & Son,
22 F.3d at 53 , and “[t]he Supreme Court ... has, indicated that forum selection ... clauses are presumptively valid where the underlying transaction is fundamentally international in character,”
Roby v. Corporation of Lloyd’s,
996 F.2d 1353, 1362-63 (2d Cir.1993) (citing
The Bremen v. Zapata Off-Shore Co.,
407 U.S. 1, 15 , 92 S.Ct. 1907 , 32 L.Ed.2d 513 (1972)), the temporal extent of the clause is not so clear as to necessarily wipe out any right of arbitration that Tex-Pet might previously have acquired by es-toppel. The 1991 Agreement states that it “shall be effective as of the first day of July 1990.” (Suppl. Kolis Decl. Ex. 1 ¶ 3.) Disputes among the parties with respect to their relations before that date therefore may not qualify as “disputes ... between the Parties with respect to the application and/or interpretation of th[e] [1991] Agreement” (Suppl. Kolis Decl. Ex. 1 ¶ 13.1).
(e.) 1995 Settlement
■ • Unlike the 1985 Agreement and the 1991 Agreement, the 1995 Settlement, signed by representatives of Petroecuador, TexPet and Ecuador, tends to suggest that Petroe-cuador and TexPet understood their relationship as members of the Consortium to have been based on the 1965 JOA. The 1995 Settlement recites that “Compañía Texaco de Petróleos del Ecuador, C.A., and Gulf [Ecuador], which were ultimately succeeded by. Texpet and Petroecuador (hereinafter referred to as the' ‘Consortium’), signed á Joint Operating Agreement with Texpet on January 1, 1965, covering the operation of the Consortium’s facilities (hereinafter referred to as the ‘Napo Agreement’).” (Veiga Aff. Ex. B at 2.) It further recites that “Petroecuador exercised its rights, under the Napo Agreement, and replaced Texpet as the operator of the Consortium on July 1, 1990.” (Vei-ga Aff. Ex. B at 3.) The reference to Petroecuador as one of the successors of the 1965 JOA’s signatories, and the reference to Petroecuador exercising rights under the 1965 JOA in 1990, both support Defendants’ contention that the 1965 JOA was understood-to survive with Petroecua-dor as a party.
v. Letter From Marco Herrera Balarezo
The 1995 Settlement is not the only post-1973 writing that implies a belief on the part of CEPE/Petroeeuador that the 1965 JOA continued to govern. Another such writing, attached as Exhibit F to the affidavit of René Bucaram, is a letter sent to Mr. Bucaram by Marco Herréra Balare-zo, “CEPE GENERAL AUDITOR,” in November of 1986. In relevant part, the letter, as translated, first complains that
Operator TEXACO failed to observe Article 8 section (8) of the Napo Joint Operating Agreement, give[n] that cash calls to CEPE were not made “... in writing at least 30 days in advance of the start of the month to which the budget relates ...” but rather generally complied [sic] in the second two weeks of the previous month.
The letter goes on to allege “significant shortages between the amounts in sucres provided by TEXACO and those spent in [various months] ... in which CEPE, on the contrary, had surpluses,” and to state that “[i]t has become essential to rationalize cash calls pursuant to Article 8 of the Napo Agreement.”
Article 8, section 8 of the 1965 JOA did pertain to the timing of requests for funds by the Operator, and did require such requests to be made 30 days in advance. The wording of article 8, section 8 as quoted in Mr. Herrera’s letter does not correspond precisely to the wording of the 1965
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JOA, which states in relevant part that “[t]he Operator shall make written requests at least 30 days in advance of due date” (Perez Aff. Ex. C at ¶ 8.8), but it is possible that the difference is a result of translation from English to Spanish and back to English. In the absence of any other “Napo Agreement” in the record that contains an article 8, section 8, applicable to requests for funds, it is a reasonable inference that the Napo Agreement quoted is the 1965 JOA.
Plaintiffs have suggested, in the course of disputing the significance of a different portion of Defendants’ evidence, that “there were actually
two
‘Napo Agreements’ — the 1965 Joint Operating Agreement (“JOA”) between Texaco and ... Gulf ... and
another agreement
executed years later.” (PI. Reply Mem. in Supp. of Mot. for Summ. J. at 2.) Their evidence for this proposition is a statement in a 1974 letter sent by a TexPet manager to the then General Manager of CEPE, that has been translated as follows:
As you know, some years ago our Companies reached an agreement on operations that we call the “Napo Operating Agreement.” Later on, the Companies prepared a new draft Operating Agreement, which included the experience obtained during that time. Copies of both texts have been sent to you for your review.
(Perez Aff. Ex. G at 1.) The reference to a “new draft Operating Agreement,” however, could well refer to an agreement that had not yet been executed by the parties, and there is no evidence in the record that such a new operating agreement was in fact executed until 1991. At the summary judgment stage, where “all ambiguities ... are viewed in a light most favorable to the nonmoving party,”
Vona,
119 F.3d at 206 , the 1974 letter therefore cannot be read to indicate the existence of another Napo Agreement that was binding on the parties during the 1970s and 1980s.. It is more significant insofar as it implies that CEPE was provided with a copy of the 1965 JOA, as Mr. Perez states in his affidavit (Perez Aff. ¶ 36).'
At this stage, therefore, the November 1986 letter from Mr. Herrera must be read to suggest that CEPE’s auditor believed that the 1965 JOA had survived the 1973 Contract and continued to bind the parties, and believed that CEPE was entitled to benefits under the 1965 JOA. Admittedly, as Plaintiffs point out, the letter made no specific reference to the arbitration clause of the 1965 JOA. But on an estoppel theory, the test is whether CEPE/Petroecua-dor “ ‘knowingly exploited’ the ... contract and thereby received a direct benefit from the contract,”
MAG Portfolio Consultant,
268 F.3d at 62 (quoting
Thomson-CSF,
64 F.3d at 778 ), not whether it explicitly acknowledged the existence of the contract’s arbitration clause.
2. Doctrine of Waiver
Plaintiffs assert that even if Petroecuador did at some point agree to arbitration, “Texaco” has waived its right to arbitrate by its conduct during the
Aguinda
litigation. Even leaving aside any potential complications arising from the different identities of the parties to which Plaintiffs collectively refer as “Texaco” in the context of the instant case, the
Aguinda
litigation, and the Lago Agrio litigation, the evidence viewed in the light most favorable to ChevronTexaco and TexPet does not demonstrate a waiver sufficiently clearly to preclude arbitration under the relevant legal standard.
a. Governing Law
As previously discussed,
see supra
Parts II.A.2 and III.B.l.a, the contract under which arbitration is sought in this case is subject to either the New York Convention
*364
or the Inter-American Convention, both of which have been incorporated into the FAA and both of which explicitly incorporate Chapter One of the FAA to the extent that it is not “in conflict” with their more specific provisions, 9 U.S.C.A. §§ 208 , 307 (West 2005). The Second Circuit “ha[s] long held that ‘once a dispute is covered by the [FAA], federal law applies to all questions of interpretation, construction, validity, revocability, and enforceability.’ ”
Gutfreund v. Weiner (In re Salomon Inc. Shareholders Derivative Litig.),
68 F.3d 554, 559 (2d Cir.1995) (quoting
Coenen v. R.W. Pressprich & Co.,
453 F.2d 1209, 1211 (2d Cir.1972)) (alteration in original). Nothing in the specific provisions of either of the Conventions is in conflict with the
Coenen
rule, which therefore applies here.
The question of whether a right to arbitrate has been waived goes to the continued “enforceability” of the arbitration contract. Therefore, under
Coenen ,
it is governed by federal law. In applying that law,
the Supreme Court has instructed that ‘any doubts concerning the scope of ar-bitrable issues should be resolved in favor of arbitration, whether the problem at hand is the' construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbi-trability.’
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp.,
460 U.S. 1, 24-25 , 103 S.Ct. 927 , 74 L.Ed.2d 765 (1983). This bias in favor of arbitration, ‘is even stronger in the context of international transactions.’
Deloitte Noraudit A/S v. Deloitte Haskins & Sells, U.S.,
9 F.3d 1060, 1063 (2d Cir.1993).
Chelsea Square Textiles, Inc. v. Bombay Dyeing & Mfg. Co.,
189 F.3d 289 (2d Cir.1999).
b. Merits
Plaintiffs’ waiver argument is not strong enough to overcome the bias in favor of arbitration established by
Moses H. Cone, Deloitte Noraudit,
and
Chelsea Square Textiles.
Plaintiffs contend that Texaco should have moved in
Aguinda
to compel arbitration against Petroecuador. Unfair prejudice resulted, Plaintiffs say, when Texaco instead relied on the fact that the Republic and Petroecuador could not be impleaded in the United States as a ground for transfer of the case to Ecuador, and then reversed its position on the sovereign immunity of Ecuador and Petroe-cuador after they had spent eleven years basing their litigation strategy on its former position. Although this argument is superficially attractive, its logic does not survive close scrutiny.
Sovereign immunity for purposes of arbitration, and sovereign immunity for other purposes, do not necessarily go hand in hand. An FSIA provision cited by Plaintiffs abrogates sovereign immunity where
the action is brought ... to enforce an agreement made by the foreign state with ... a private party to submit to arbitration ... any differences ... which may arise between the parties vpth respect to a defined legal relationship ... concerning a subject matter capable of settlement by arbitration under the laws of the United States, or to confirm an award made pursuant to such an agreement to arbitrate, if (A) the arbitration ... is intended to take place in the United States, [or] (B) the agreement ... is or may be governed by a treaty or other international agreement in force for the United States calling for the recognition and enforcement of arbi-tral awards....
28 U.S.C.A. § 1605 (a)(6)(A) (West 2005). By its terms, however, this abrogation applies only to an action brought to enforce the arbitration agreement or confirm the arbitration award. It is perfectly consistent to say that a foreign state is immune from jurisdiction in a context
other than
a
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petition to enforce an arbitration agreement or confirm an arbitration award, but may nevertheless be compelled to arbitrate under § 1605(a)(6)(A).
That being the case, Plaintiffs are left to argue that Texaco should have responded to the
Aguinda
lawsuit by seeking to compel arbitration against Petroecuador. As Defendants do not claim a right to arbitration against the Republic of Ecuador, however, they can reasonably answer that such arbitration would not have solved the problems created in
Aguinda
by the inability to implead Ecuador itself,
see Aguinda v. Texaco, Inc.,
142 F.Supp.2d 534, 542 (S.D.N.Y.2001). Moreover, such arbitration would not even have enabled the Aguinda Plaintiffs, or Texaco, to implead Petroecuador in the
Aguinda
litigation, because Petroecuador would have been subject to jurisdiction under 28 U.S.C. § 1605 (a)(6)(A)
only
with respect to the arbitration. Thus, the
Aguinda
court’s perceived inability to order effective equitable relief,
see
142 F.Supp.2d at 542 , likely would not have been significantly altered.
While it might have been possible for Texaco to somehow have invoked its purported right to arbitration on behalf of the Aguinda Plaintiffs and brought their claims into the arbitration, the legal feasibility of such an action is unclear at best. It is also unclear whether, even if this could have been done, Texaco would have had any obligation to assist the Aguinda Plaintiffs in joining parties that the Aguin-da Plaintiffs could not themselves join, so as to enable litigation in a forum that Texaco opposed; litigants do not generally have an obligation to provide procedural aid to their adversaries. Texaco’s failure to attempt such a maneuver is therefore insufficient basis for a finding of waiver.
Plaintiffs also suggest that Defendants have also waived any right to arbitrate through their conduct in this litigation, by asserting counterclaims seeking indemnification, rather than immediately moving to compel arbitration. The counterclaims against Petroecuador, however, are explicitly conditional: Defendants state in their Answer that they “will not seek to litigate these counterclaims against Petroecuador in this Court unless the arbitrability question raised by the Amended Complaint is decided in favor of Petroecuador.” (Coun-tercls^ 5.) In a procedural system that explicitly permits pleading in the alternative,
see
Fed. R. Civ, Pro. 8(e)(2), such conditional claims do not constitute a waiver of rights that will exist if the condition is not met. Plaintiffs would likely argue that the (unconditional) counterclaims against the Republic of Ecuador are also, in reality, counterclaims against Petroe-cuador, because on their view the two parties are legally the same. But Defendants have provided sufficient evidence in opposition to this proposition that it does not make sense to find a waiver based upon their refusal to accept it without question. On Defendants’ reasonably supported view of the situation, they have sought arbitration while bringing a conditional counterclaim against the party involved in the arbitration, in case arbitrability is found lacking, and a related unconditional counterclaim against a party not involved in the arbitration. This is not sufficient to create a waiver, given the governing law’s strong bias in favor of arbitration.
To the extent that Plaintiffs complain of Texaco’s failure, during the pendency of the
Aguinda
litigation, to initiate arbitration against Petroecuador simply seeking indemnification for Texaco’s costs in defending that litigation, they do not state the sort of waiver claim that this Court may properly evaluate. “Ordinarily a defense of waiver brought in opposition to a motion to compel arbitration ... is a matter to be decided by the arbitrator.”
Bell v. Cendant Corp.,
293 F.3d 563, 564 (2d Cir.2002);
S & R Co. of Kingston v. Latona
*366
Trucking, Inc.,
159 F.3d 80, 82-83 (2d Cir.1998). This rule does not apply where “the party seeking arbitration ha[s] already participated in litigation on the dispute” that it seeks to arbitrate.
Bell,
293 F.3d at 564 ;
S & R Co.,
159 F.3d at 83 . Here, however, where litigation enters the picture purely as the subject of a claim for indemnification from a third party, it cannot be said that “the party seeking arbitration ha[s] already participated in litigation on the dispute” that it seeks to arbitrate,
Bell,
293 F.3d at 564 ;
S & R Co.,
159 F.3d at 83 . Such an ordinary waiver claim is therefore “a matter to be decided by the arbitrator.”
Bell,
293 F.3d at 564 ;
S & R Co.,
159 F.3d at 83 .
3. Act of State Doctrine Applied to 1973 Contract
Plaintiffs’ final argument for summary judgment is that allowing arbitration would contravene the 1973 Contract, and that because the 1973 Contract was “an official act of the Ecuadorian State implementing its oil policy” (PL Mem. in Supp. of Mot. for Summ. J. at 15), the act of state doctrine compels that it must be followed as a rule of decision. The 1973 Contract, Plaintiffs contend, requires that all disputes related to the Napo Consortium be resolved in Ecuador. Thus, to allow arbitration in the United States, according to Plaintiffs, would be to treat the 1973 Contract as invalid, which would violate the act of state doctrine given the 1973 Contract’s official status.
The act of state doctrine, however, does not apply here. The FAA explicitly provides that “[ejnforcement of arbitration agreements ... shall not be refused on the basis of the Act' of State doctrine.” 9 U.S.C.A. § 15 (West 2005). Although this provision is .located -in Chapter One of the FAA rather than in the Convention-implementing Chapters Two and Three, Chapter One of the FAA applies to actions brought under the New York and ,Inter-American Conventions unless it is “in conflict” with Chapters Two or Three or the Conventions as ratified. 9 U.S.C.A. §§ 208 , 307. No reason is apparent why 9 U.S.C. § 15 would be in conflict with either of the Conventions or either of the FAA Chapters that implemented .them. Thus,. 9 U.S.C. § 15 applies here, and enforcement of the arbitration agreement at issue, if otherwise appropriate, “shall not be refused on the basis of the Act of State doctrine.” Plaintiffs’ third and final argument in favor of summary judgment therefore fails, and their motion, for summary judgment must be denied.
IV. Plaintiffs’ Motion to Dismiss Counterclaims Under Rule 12(b)
Although Plaintiffs have styled their motion to dismiss the counterclaims under Rule 12(b) as a single motion, it is in substance two conceptually distinct motions, the first seeking to dismiss the counterclaims for lack of subject matter jurisdiction, pursuant to Rule 12(b)(1), and the second seeking to dismiss the counterclaims for failure to state a claim, pursuant to Rule 12(b)(6). Plaintiffs’ success with regard to lack of subject matter jurisdiction would moot the portion of their motion to dismiss that asserts failure to state a claim: if this Court lacked subject-matter jurisdiction over Defendants’ counterclaims, it would have no authority to determine whether or not they state claims for which relief can be granted.
See Steel Co. v. Citizens for a Better Env’t,
523 U.S. 83, 94-95 , 118 S.Ct. 1003 , 140 L.Ed.2d 210 (1998). Thus, the portion of Plaintiffs’ motion claiming lack of subject matter jurisdiction will be addressed first.
A. Motion to Dismiss for Lack of Subject Matter Jurisdiction
1. Legal Standard
“A case is properly dismissed for lack of subject matter jurisdiction under Rule
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12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it.”
Makarova v. United States,
201 F.3d 110, 113 (2d Cir.2000). As a general matter, “[t]he burden of proving jurisdiction is on the party asserting it.”
Robinson v. Overseas Military Sales Corp.,
21 F.3d 502, 507 (2d Cir.1994). “Jurisdiction must be shown affirmatively, and that showing is not made by drawing from the pleadings inferences favorable to the party asserting it.”
APWU v. Potter,
343 F.3d 619, 623 (2d Cir.2003);
Shipping Fin. Services Corp v. Drakos,
140 F.3d 129, 131 (2d Cir.1998).
“When ... a jurisdictional challenge under Fed.R.Civ.P. 12(b)(1) is addressed to the complaint, a court accepts as true all the factual allegations in the complaint and must draw all reasonable inferences in favor of the plaintiff.”
Lunney v. United States,
319 F.3d 550, 554 (2d Cir.2003). “Where jurisdictional facts are placed in dispute,” however, “the court has the power and obligation to decide issues of fact by reference to evidence outside the pleadings, such as affidavits'.”
APWU,
343 F.3d at 627 ;
LeBlanc v. Cleveland,
198 F.3d 353, 356 (2d Cir.1999). Plaintiffs’ motion to dismiss the counterclaims under Rule 12(b) comes at the initial pleading stage, but both parties have submitted affidavits in connection with the motion. Thus, the Court will assume unchallenged allegations to be true but will not automatically assume the truth of any disputed jurisdictional facts.
2. Analysis
The Foreign Sovereign Immunities Act (FSIA), which establishes a background rule of sovereign immunity accompanied by a specifically enumerated list of exceptions, “provides the sole basis for obtaining [subject matter] jurisdiction over a foreign sovereign in the United States.”
Virtual Countries, Inc. v. Republic of South Africa,
300 F.3d 230, 236 (2d Cir.2002) (alteration in original) (quoting
Republic of Argentina v. Weltover, Inc.,
504 U.S. 607, 611 , 112 S.Ct. 2160 , 119 L.Ed.2d 394 (1992)). There is no dispute that Ecuador and Petroecuador both qualify as foreign states for FSIA purposes. (Am. Compl. ¶¶ 16-17; Ans. ¶¶ 16-17; Countered ¶ l.
18
) Thus, the FSIA governs the presence or absence of subject-matter jurisdiction here.
The FSIA bestows upon district courts original jurisdiction without regard to amount in controversy of any nonjury civil action against a foreign state as defined in [ 28 USC § 1603 (a) ] as to any claim for relief in personam with . respect to which the foreign state is not entitled to immunity either under . [ 28 USC §§ 1605-1607 ] or under any applicable international agreement.
28, U.S.C.A. § 1330 (a) (West 2005). The general rule, however, is that “[s]ubject to ... international agreements [predating the FSIA] ... a foreign state shall be immune from the jurisdiction of the courts of the United States except as provided in [28 U.S.C. §- ] 1605 to [28 U.S.C. § ] 1607.” 28 U.S.C.A. § 1604 . Thus, this Court has
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subject matter jurisdiction if, and only if, plaintiffs Ecuador and Petroecuador are stripped of immunity under 28 U.S.C. §§ 1605-1607 , or an applicable international agreement, with respect to Defendants’ counterclaims — that is, if and only if one of the FSIA’s enumerated exceptions applies. ChevronTexaco and TexPet, as counterclaim plaintiffs, “have the burden of going forward with evidence showing that, under exceptions to the FSIA, immunity should not be granted, although the ultimate burden of persuasion remains with the alleged [here conceded] foreign sovereign[s].”
Cabiri v. Government of the Republic of Ghana,
165 F.3d 193, 196 (2d Cir.1999);
Cargill Int’l S.A. v. M/T Pavel Dybenko,
991 F.2d 1012, 1016 (2d Cir.1993).
The sole exception claimed by Defendants to be applicable to this case is 28 U.S.C. § 1607 (b), known as “the counterclaim exception to the FSIA,”
Cabiri,
165 F.3d at 196 . That section provides in relevant part that “[i]n any action brought by a foreign state ... in a court of the United States ... the foreign state shall not be accorded immunity with respect to any counterclaim ... arising out of the transaction or occurrence that is the subject matter of the claim of the foreign state.” 28 U.S.C.S. § 1607 (b) (2005).
In construing the “transaction or occurrence” test of § 1607(b), the Second Circuit has “look[ed] for guidance” to the identically worded test for compulsory counterclaims under Fed. R. Civ. Pro. 13(a).
Cabiri,
165 F.3d at 197 . The Rule 13(a) test is “construed ... liberally,” as “ ‘not requiring an absolute identity of factual backgrounds ... but only a logical relationship between them.’ ”
Cabiri,
165 F.3d at 197 (quoting
United States v. Aquavella,
615 F.2d 12, 22 (2d Cir.1979)). “The transaction or occurrence standard .... ‘looks to the logical relationship between the claim and the counterclaim, and attempts to determine whether the essential facts of the various claims are so logically connected that considerations of judicial economy and fairness dictate that all the issues be resolved in one lawsuit.’ ”
Cabiri,
165 F.3d at 197 (quoting
Aquavella,
615 F.2d at 22 ).
To apply the
Cabiri
test, we must first determine the nature and “essential facts” of Plaintiffs’ claims. The contents of the Amended Complaint are foreshadowed in its first paragraph, where Plaintiffs are described as
seeking] injunctive and declaratory relief against Defendants ChevronTexaco Corporation and Texaco Petroleum Company (collectively “Texaco”) for making a meritless arbitration demand against ... Petroecuador before the American Arbitration Association (“AAA”); for asserting a position before this ... Court that directly contradicts the position upon which Texaco prevailed in
Aguinda v. Texaco ...
and for making a claim for indemnification against ... Petroecuador which Texaco waived through its conduct in the
Aguinda
case.
(Am.Compl^ 1.) That is, the first paragraph of the Amended Complaint indicates that three things are at issue: an allegedly meritless arbitration demand, an alleged inconsistency between Defendants’ positions in this case and Texaco’s positions in the
Aguinda
litigation, and a waiver of any claim Defendants might otherwise have had for indemnification against Petroecua-dor that Texaco allegedly effected by its conduct in the
Aguinda
litigation.
In accordance with this introduction, essentially all of the allegations that follow the first paragraph of the Amended Complaint fall into one of two categories. The first set of allegations pertains to the contractual relationship among CEPE/Petroe-cuador, TexPet, Gulf, and the other related companies involved in the exploitation of the Napo Concession, or between those
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companies and the Republic of Ecuador. This set of allegations is offered to establish the lack of an arbitration agreement binding Petroeeuador. The second set of allegations recounts the history of the
Aguinda
litigation and related post-1993 events such as the 1995 Settlement, the 1998 Final Release, and the Lago Agrio litigation. This set of allegations forms the basis for Plaintiffs’ claims of waiver and inconsistency.
These two categories of allegations correspond to the two categories of claims for relief that Plaintiffs put forward. Recall that according to the Claims for Relief section of the Amended Complaint, Plaintiffs purport to state four claims. The first three, for collateral estoppel, judicial estoppel, and waiver, assert that Texaco’s conduct in the
Aguinda
litigation has caused the Defendants to lose certain rights against Plaintiffs that Defendants might otherwise have had. The fourth claim asserts that Defendants have no valid grounds upon which to demand arbitration against Plaintiffs in the United States, and that Plaintiffs are entitled to a permanent stay of arbitration. That is, the fourth claim corresponds approximately to what we have described as the first set of allegations (pertaining to lack of a contractual obligation to arbitrate), and the first three claims correspond approximately to what we have described as the second set of allegations (pertaining to Texaco’s conduct in the
Aguinda
litigation and related post-1993 events).
The Prayer for Relief in Plaintiffs’ Amended Complaint, while extensive, is not inconsistent with this view of their claims and allegations. The first two prongs of their requested ten-part declaratory judgment address their collateral es-toppel and judicial estoppel claims, both based on Plaintiffs’ view of Texaco’s conduct in the
Aguinda
litigation. The third prong states that'
Aguinda
“involved the same claims, brought by many of the same plaintiffs, as the case currently pending in Lago Agrio, Ecuador on which Texaco seeks indemnification in this matter,” which is a logical element of Plaintiffs waiver argument based on the
Aguinda
litigation and related post-1993 events, and the fourth prong states specifically that “Texaco waived any right it may have had to seek indemnification” from Ecuador or Petroeeuador in a U.S. forum “[tjhrough its conduct in the
Aguinda
case.” (Am. Compl. Prayer for Relief ¶¶ (A)(c)-(A)(d).) The fifth prong states that the 1973 Contract “controls the contractual relationship between the Plaintiffs and the Defendants”
(id.
¶ (A)(e)), and the seventh prong that “[njeither the Republic of Ecuador nor Petroeeuador has ever become a party to the October 22, 1965 Joint Operating Agreement between the Texaco Petroleum Company and the Ecuadorian Gulf Company”
(id.
¶ (A)(g)). These two statements embody key elements of Plaintiffs’ argument that no arbitration agreement binding on Petroecua-dor exists, an argument that the Court is requested to explicitly confirm by declaring further in the ninth prong that “[n]either the Republic of Ecuador nor Petroe-cuador has ever agreed to arbitrate any disputes with Texaco in any American forum” and in the tenth prong that “[ujnder either the Federal Arbitration Act or Article 75 of the New York Civil Practice Law and Rules, there are no valid grounds upon which Texaco may demand arbitration against the Republic of Ecuador or Petroe-cuador in this matter.”
(Id.
¶¶ (A)(i)(A)(j).) The two prongs of the requested declaratory judgment least obviously related to the waiver argument and the argument against arbitration are the sixth, demanding judgment that “[t]he Republic of Ecuador and Petroeeuador are a single party for the purposes of their contractual relationship with Texaco”
(id.
¶ (A)(f)),
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and the eighth, demanding judgment that “[n]either the Republic of Ecuador nor Petroecuador has ever made a clear statement waiving its sovereign immunity in the United States in this matter, and there are no- grounds upon which to find such a waiver by implication”
(id.
¶ (A)(h)). Even these, however, both seek to establish portions, if somewhat tangential portions, of the arguments Plaintiffs have put forward in support of their claims that Petroecuador has no obligation to arbitrate and that Defendants have waived or otherwise forfeited any claim to indemnification from Petroecuador. Thus, all portions of the requested declaratory judgment can be understood as related to those two sets of claims and allegations.
The three injunctions requested by the Prayer for Relief in Plaintiffs’ Amended Complaint have a similar relationship with those same two sets of claims and allegations. The request for a permanent injunction staying the arbitration proceedings clearly relates to the claim that arbitration is inappropriate. The request for an injunction “barring Texaco from asserting a right to indemnification against the Republic of Ecuador and Petroecua-dor in this matter”
(id.
¶ C), broad as it is, can be understood in the context of the Amended Complaint as stemming from the claim that any such right was lost because of Texaco’s conduct in the
Aguinda
litigation. The request for an injunction “estopping Texaco from denying that the Republic of Ecuador and Pe-troecuador enjoy sovereign immunity in the United States in this matter”
(id.
¶ B) adds little to the corresponding declaratory-judgment request discussed above.
Having ascertained “the essential facts of [Plaintiffs’] claims,” we can now determine whether they “are so logically connected” with the essential facts of the counterclaims “that considerations of judicial economy and fairness dictate that all the issues be resolved in one lawsuit.”
Cabiri,
165 F.3d at 197 . Following the example of the Second Circuit- in
Cabiri ,
this determination shall be made separately with respect to each substantively distinct counterclaim. 165 F.3d at 198 (stating that “[w]e analyze the applicability of the counterclaim exception to each of the claims separately”). Where nominally distinct claims are based “essentially on the same allegations,” however, they may be treated together in determining the applicability of the counterclaim exception to the FSIA.
Id.
Here, although Defendants nominally bring four counterclaims, there are in substance two sets of counterclaims. Defendants’ first counterclaim, and a portion of Defendants’ fourth counterclaim for declaratory judgment, allege that Petroecua-dor is obligated to indemnify Defendants for litigation expenses, costs, and any final judgment in the Lago Agrio litigation because of an implied agency relationship between TexPet and Petroecuador with respect to TexPet’s operation of the Napo Consortium. Defendants’ second and third counterclaims, as well as the remaining portion of the fourth counterclaim for declaratory judgment, are based on alleged breaches by Ecuador and Petroecua-dor of the 1995 Settlement and 1998 Final Release. The implied-agency counterclaims are based “essentially on the same allegations” as one another,
Cabiri,
165 F.3d at 198 , and the same can be said of the settlement-based counterclaims. Thus, only two separate determinations are necessary regarding the applicability of the counterclaim exception to the FSIA.
a. Counterclaims Based on an Implied Agency Relationship Between Petroecuador and TexPet
In analyzing whether subject matter jurisdiction is present as to the coun
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terclaims based on an implied agency relationship between Petroecuador and TexPet, it is important to note that because those counterclaims run against Petroecuador only, they have explicitly been made conditional on the Court’s finding for Plaintiffs with respect to the arbitrability issue. Thus, the implied-agency counterclaims would only be litigated in the event that the arbitration petition filed by Defendants was determined to lack merit. In analyzing the presence or absence of jurisdiction over the implied-agency counterclaims, we may therefore assume that the initial arbitration petition was meritless. If this is determined not to be the case, then the implied-agency counterclaims ' will vanish of their own accord and our analysis will be moot.
Proceeding on that assumption, the Court is unwilling to conclude that the FSIA permits what would be colloquially referred to as “sandbagging.” Defendants are ultimately responsible for the initiation of this litigation, in that it would not have occurred had Defendants not commenced arbitration proceedings against Petroecua-dor. If those arbitration proceedings were meritless, then finding Plaintiffs’ reaction to them to have created jurisdiction over counterclaims going to the merits of the underlying dispute would result in a significant and unreasonable gap in the wall of sovereign immunity established by the FSIA. Such a result is not compelled by the text of the FSIA or by a proper application of the
Cabiri
standard..-
To find counterclaim jurisdiction here would be to say that a would-be plaintiff who wishes to sue an entity possessing sovereign immunity may simply take the following steps. First, file a meritless arbitration petition against that entity in the United States, and wait for that entity to go to court in an effort to stop the groundless arbitration. Second, if the immune entity chooses to sue in state court to stop the arbitration, remove to federal court, either on the basis of diversity, or on the basis that you have alleged- the existence of “an arbitration agreement ... falling under-the [New York or-Inter-American] Convention,” 9 U.S.C.A. §§ 205 , 302 (West 2005);
see Sarhank Group v. Oracle Corp.,
404 F.3d 657, 660 (2d Cir.2005) (holding that a challenge to the existence of any binding arbitration agreement does not defeat subject matter jurisdiction under the New York Convention). Third, utilize the counterclaim exception to the FSIA to bring an action against the otherwise immune entity. On the theory implied by Defendants’ position, this counterclaim will be within the district court’s jurisdiction, so long as it is logically related to the reasons why the arbitration petition lacked merit in the first instance. By alleging that an arbitration agreement existed with respect to any particular contractual relationship, for example, one could utilize this maneuver to obtain federal-court jurisdiction over the merits of a dispute regarding that relationship.
It seems apparent that, the policy underlying the FSIA would be frustrated if such a maneuver were allowed to succeed, which suggests that a foreign state lured into the United States courts by .a merit-less arbitration proceeding should not be stripped of its immunity by the counterclaim exception with respect to counterclaims going beyond the issue of arbitra-bility. The text of § 1607(b) and the standard enunciated by the Second Circuit in
Cabiri
lead to the same conclusion. Where, a foreign state has been lured into court by a meritless arbitration proceeding that it seeks to halt, the “transaction or occurrence that is the subject matter of the claim of the foreign state,” 28 U.S.C.A. § 1607 (b) (West 2005), is really the meritless arbitration proceeding itself, as distinct from the underlying dispute
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with respect to which the meritless arbitration proceeding was brought. Therefore, any counterclaims going to the merits of a dispute rather than to arbitrability are not counterclaims “arising out of the transaction or occurrence that is the subject matter of the claim of the foreign state,”
id.,
and “considerations of ... fairness” do not “dictate that all the issues be resolved in one lawsuit,”
Cabiri,
165 F.3d at 197 . The entrapped foreign state thus does not lose its sovereign immunity in such a case.
With respect to the counterclaims based on an implied agency relationship between TexPet and Petroecuador, this must be considered as such a case. Although we do not hold that the arbitration demand in this case was meritless, the conditional implied-agency counterclaims against Petroecuador will become effective only if we eventually so hold. Thus, the jurisdictional viability of those counterclaims must be analyzed on the assumption that we
will
so hold, because that is the only circumstance under which those counterclaims are actually asserted.
Admittedly, even on the assumption that the arbitration 'demand in this case lacked' merit, Defendants can be held responsible for the initiation of this litigation only insofar as it seeks to enjoin the arbitration, and not insofar as Plaintiffs have chosen to state broader claims. To the extent that Plaintiffs have freely chosen to avail themselves of this Court’s jurisdiction with regard to matters other than the (possibly meritless) petition for arbitration, and have thereby created jurisdiction over counterclaims, they have only themselves to blame. Defendants’ arguments in favor of finding a logical relationship between Plaintiffs’ claims and the implied-agency counterclaims, however, are not significantly stronger because of Plaintiffs’ broader claims for relief than they would have been if Plaintiffs had restricted themselves to requesting a permanent stay of arbitration.
As discussed above, Plaintiffs’ allegation and claims-for relief fall into two substantive categories: tho

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/2469261. Public record. Not legal advice.