The U.S. Court of Appeals for the D.C. Circuit recently issued a significant decision regarding the enforcement of arbitration awards against foreign states and state-owned enterprises.[1] In Hulley Enterprises Ltd. v. Russian Federation, 2025 WL 2216545 (D.C. Cir. Aug. 5, 2025) (“Hulley Enterprises”), the D.C. Circuit held that U.S. courts will not defer to an arbitral tribunal’s factual findings as to jurisdiction when determining whether a foreign sovereign may invoke sovereign immunity to avoid enforcement of an arbitral award rendered against it. Instead, U.S. courts must independently assess the existence of an arbitration agreement that is the basis for an arbitral tribunal’s authority to render an award against a foreign state or state entity that is the subject of enforcement in the U.S.
The decision in Hulley Enterprises is the latest in a decades-long dispute between the controlling shareholders of OAO Yukos Oil Company (“Yukos”) and the Russian Federation (“Russia”), in which the shareholders challenged Russia’s expropriation of Yukos in arbitration in The Netherlands. After securing a $50 billion award, the Yukos shareholders have been seeking to enforce in multiple jurisdictions, including in the U.S. Holding that the federal district court below erred by giving binding effect to the arbitral tribunal’s determination that it had jurisdiction to render an award against Russia arising from the arbitration provision of an international treaty,[2] the D.C. Circuit remanded the case for the district court to independently evaluate the existence of an arbitration agreement that would provide a basis for asserting jurisdiction over Russia in the United States. The appellate court’s holding – that federal courts will not defer to an arbitral tribunal’s findings of jurisdictional facts that form the basis for awards rendered against foreign states and their instrumentalities – raises important implications for enforcement of arbitral awards against foreign states or state-owned enterprises in the U.S.
Background
- Enforcement of Arbitration Awards Under the Foreign Sovereign Immunities Act
The Foreign Sovereign Immunities Act (“FSIA”) of 1976[3] is the “sole basis for obtaining jurisdiction over a foreign state” in U.S. courts.[4] Under the FSIA, foreign states and state-owned enterprises are typically immune from lawsuits in U.S. courts, subject to certain exceptions.[5] Under the arbitration exception, foreign states and state-owned enterprises are subject to the jurisdiction of U.S. courts in actions related to the enforcement of arbitral awards where such awards are governed by international conventions to which the United States is a party, including the New York Convention on the Recognition and Enforcement of Arbitral Awards.[6]
- The Yukos Arbitrations Under the Energy Charter Treaty
OAO Yukos Oil Company (“Yukos”) was Russia’s largest and first fully privatized oil company following the dissolution of the Soviet Union. In 2005, the controlling shareholders of Yukos initiated international arbitration proceedings alleging Russia’s expropriation of Yukos’ most valuable assets during 2003 to 2004 in violation of the Energy Charter Treaty (“ECT”), a multilateral investment treaty that provides investors with covered investments the right to pursue arbitration against any state party to the treaty that has breached its foreign investment protection obligations. Russia signed the ECT in 1994 but did not ratify it.[7] The Yukos shareholders claimed jurisdiction under Article 45(1) of the ECT, which provides for provisional application of the treaty by state signatories: “[e]ach signatory agrees to apply this Treaty provisionally pending its entry into force for such signatory ... to the extent such provisional application is not inconsistent with its constitution, laws or regulations.”[8]
In response, Russia contested the tribunal’s jurisdiction, but this argument was rejected by the tribunal, which considered the issue “in great detail” and held that the ECT in its entirety – including its arbitration provision – applied provisionally to Russia.[9] After the tribunal rendered interim awards finding it had jurisdiction, the Yukos shareholders ultimately secured final arbitration awards totaling over $50 billion in 2014.[10]
Thereafter, Russia began proceedings in the Hague District Court in The Netherlands (the place of arbitration), seeking to set aside the interim and final awards. Eventually, the Dutch Supreme Court held for the shareholders on nearly all issues, including that the tribunal had jurisdiction over the dispute.[11]
- Enforcement of the Yukos Awards in the U.S.
While set-aside proceedings in The Netherlands were ongoing, the Yukos shareholders simultaneously sought to confirm and enforce the award before the D.C. District Court. In response, Russia asserted sovereign immunity under the FSIA and moved to dismiss on the basis that none of the FSIA’s exceptions applied.
In asserting sovereign immunity, Russia repeated its arguments challenging the tribunal’s jurisdiction, including that the ECT did not provisionally apply because it had not been ratified by the Russian Parliament.[12] The district court however dismissed Russia’s motion. Applying a well-established burden-shifting framework, the court first accepted that the Yukos shareholders had satisfied their initial burden by producing prima facie evidence of the existence of an arbitration agreement and arbitral award. The burden then shifted to Russia, and the district court found that Russia failed to rebut the presumption of an agreement to arbitrate under the ECT.[13] In arriving at this conclusion, the district court accepted that the parties had agreed to delegate the question of the existence of an arbitration agreement to the tribunal and therefore treated the tribunal’s determination of the existence of an arbitration agreement, and Russia’s obligation to apply the ECT provisionally, as binding on the court.[14]
The D.C. Court of Appeals Decision
On appeal of the district court’s decision by Russia, the D.C. Circuit vacated and remanded the case back to the U.S. District Court. The D.C. Circuit acknowledged the application of the burden-shifting analysis applicable to evaluating whether jurisdiction over a foreign sovereign has been established,[15] but held that the district court – erred in treating as binding the determinations of the tribunal on the existence of an arbitration agreement. The D.C. Circuit drew a distinction between questions related to the existence of an arbitration agreement – which it characterized as a jurisdictional fact under the FSIA requiring an independent, de novo review – and questions related to the scope of the arbitration agreement (i.e., whether the shareholders are investors within meaning of the arbitration clause), to which deference was to be given to the tribunal’s decision. On that basis, the D.C. Circuit held that Russia’s argument on the provisional application of the ECT was a question of fact related to the “existence of an arbitration agreement,” which the district court was required to independently evaluate.[16]
Implications
Hulley Enterprises clarifies the standard U.S. courts will apply for determination of jurisdictional challenges to the enforcement of arbitration awards against states and state-owned entities under FSIA exceptions. Where a jurisdictional argument relates to the formation or existence of the arbitration agreement, courts must undertake the analysis de novo, with no deference given to the issue even after it has been extensively litigated before, and decided by, an arbitral tribunal (even if the issue had previously been delegated by the parties to the arbitration agreement for determination by an arbitral tribunal). Clients seeking to enforce arbitration awards for breaches of contractual or treaty-based investment protections against sovereigns and state-owned enterprises in U.S. courts should stay abreast of shifts on the application of the arbitration exception under the FSIA. In light of Hulley, there may be additional costs and delays on the path to recognition and enforcement.
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[1] For discussion of a recent Supreme Court decision on a separate issue relating to the intersection of sovereign immunity and enforcement of arbitral awards, see Paul, Weiss Client Alert, “Supreme Court Declines to Heighten Jurisdictional Requirements for Enforcement of Arbitration Awards Against Foreign States And State-Owned Enterprises,” June 17, 2025.
[2] Hulley Enterprises Ltd. v. Russian Fedn., 2023 WL 8005099 (D.D.C. Nov. 17, 2023).
[3] 28 U.S.C. §§ 1330, 1332(a)(2)-(4), 1391(f), 1441(d), 1602-1611.
[4] Argentine Republic v. Amerada Hess Shipping Corp., 488 U. S. 428, 434 (1989).
[5] In 1988, Congress amended the FSIA to include an express exception to sovereign immunity for purposes of confirmation and enforcement of arbitral awards. 28 U.S.C. § 1605(a)(6).
[6] Id.
[7] Russia eventually terminated the ECT in 2009.
[8] Hulley Enterprises Ltd. v. Russian Fedn., 2023 WL 8005099 (D.D.C. Nov. 17, 2023) at *20.
[9] Id. at *20-*21.
[10] Id. at *1.
[11] Hulley Enterprises, 2025 WL 2216545 (D.C. Cir. Aug. 5, 2025) at *2.
[12] Id at *4.
[13] The U.S. District Court cited LLC SPC Stileks v. Republic of Moldova, 985 F.3d 871, 877 (D.C. Cir. 2021) (in turn citing Chevron Corp. v. Ecuador, 795 F.3d 200, 204 (D.C. Cir. 2015)) for the burden-shifting framework: it is the petitioner who bears “a burden of production” to support a claim that the arbitration exception applies by the “straight-forward production of a foreign sovereign’s agreement to arbitrate,” after which the burden then shifts to the foreign sovereign to demonstrate that the “prima facie evidence presented by the petitioner did not constitute a valid arbitration agreement between the parties.” Hulley Enterprises Ltd. v. Russian Fedn., 2023 WL 8005099 (D.D.C. Nov. 17, 2023) at *11.
[14] Hulley Enterprises Ltd. v. Russian Fedn., 2023 WL 8005099 (D.D.C. Nov. 17, 2023).
[15] Despite acknowledging that application of the burden-shifting framework is required under D.C. Circuit caselaw, the circuit court also noted that the United States has repeatedly taken the position that the burden-shifting analysis is incompatible with the FSIA, arguing that a foreign state is presumptively immune from suit and the burden of establishing subject-matter jurisdiction should therefore always rest with the party asserting jurisdiction. See 2025 WL 2216545, at *3 & n.2. Notably, the D.C. Circuit did not engage with the district court’s burden shifting analysis but instead chose to reverse the district court’s determination that the tribunal’s decision on jurisdiction was binding.
[16] The Court of Appeals held that Russia’s alternative argument– that the Yukos shareholders did not fall within the meaning of investor for purposes of the ECT arbitration clause – was an argument on the “scope of the Energy Charter Treaty, not its existence,” and that NextEra Energy Glob. Holdings B.V. v. Kingdom of Spain, 112 F.4th 1088 (D.C. Cir. 2024) (“NextEra”) required the district court to apply a deferential standard to that question. 2025 WL 2216545, at *5. A petition for a writ of certiorari in NextEra is currently pending with the U.S. Supreme Court.
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