Case 1:10-cv-01618-TFH Document 83 Filed 11/06/12 Page 1 of 12

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA DEVINCCI SALAH HOURANI, et al., Plaintiffs, v. ALEXANDER V. MIRTCHEV, et al., Defendants. ) ) ) ) ) ) ) ) ) )

Case No. 10-cv-01618-TFH (Hon. Thomas F. Hogan)

DEFENDANTS' MOTION FOR LEAVE TO FILE UNDER SEAL ADDENDUM TO MEMORANDUM IN SUPPORT OF DEFENDANTS' MOTION FOR RULE 11 SANCTIONS Defendants Alexander V. Mirtchev ("Dr. Mirtchev") and Krull Corporation ("Krull") (collectively, "Defendants") move the Court (1) to accept for filing under seal an Addendum to Defendants' Motion for Rule 11 Sanctions for Filing Improper Amended Complaint, along with accompanying attachments,1 against Plaintiffs Devincci Hourani ("Devincci") and Issam Hourani ("Issam") (collectively, "Plaintiffs" or "Houranis") and their counsel, and (2) to order unsealing of the Addendum upon determination that no confidentiality order is in effect and that no information in the Addendum and transcripts attached thereto are subject to any confidentiality requirement. The Addendum to the Motion for Sanctions and the transcripts attached thereto contain hearing testimony highly relevant to this matter that at one time was considered confidential in an arbitration brought by Caratube (Claimant), an entity that the Houranis claim to own, against the Republic of Kazakhstan (Respondents) before the International Centre for Settlement of Investment Disputes ("ICSID"), Caratube Int'l Oil Co. LLP v. Republic of Kazakhstan (ICSID Case No. ARB/08/12). On June 5, 2012, the ICSID Tribunal rendered its decision and award,
1

The Addendum is referenced in the Motion for Sanctions as Exhibit 1 thereto.

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thus the Tribunal is no longer competent, and indeed no longer even exists, to grant exceptions from or to enforce confidentiality in effect from the commencement of the arbitral hearing until award.2 Because the Tribunal's confidentiality order is no longer binding and/or enforceable before the ICSID Tribunal, Plaintiffs cannot enforce confidentiality in this action At this time, Defendants respectfully request (1) leave of the Court to file under seal the Addendum and attachments thereto, which contain a redacted exhibit to its Motion for Sanctions, pending the Court's determination of whether these documents should remain under seal and (2) the Court's determination that the Addendum and subject transcripts are not subject to any confidentiality requirements and may be used without restriction in this action. The grounds supporting this motion are set forth in the accompanying memorandum.

The June 5, 2012 decision was submitted to this Court on October 31, 2012 as a supplemental case authority [Docket #81].

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Date: November 6, 2012

Respectfully submitted,

/s/ Richard W. Beckler Richard W. Beckler (DC Bar #262246) LaShon K. Kell (DC Bar #483465) BRACEWELL & GIULIANI LLP 2000 K Street, N.W., Suite 500 Washington, DC 20006 Telephone: (202) 828-5816 Facsimile: (202) 857-4835 E-mail: richard.beckler@bgllp.com lashon.kell@bgllp.com Counsel for Defendants Alexander V. Mirtchev and Krull Corporation and Stephen Sale (DC Bar # 942243) John D. Quinn (DC Bar # 267302) Eugene P. Kopp (DC Bar # 239467) SALE & QUINN, P.C. 910 16th Street, N.W., Fifth Floor Washington, DC 20006 Telephone: (202) 833-4170 Facsimile: (202) 887-5137 E-mail: sscsq@aol.com quinn.j@salequinn.com Counsel for Defendants Alexander V. Mirtchev and Krull Corporation

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CERTIFICATE OF SERVICE I HEREBY CERTIFY that on this 6th day of November 2012, a true and complete copy of the foregoing Defendants' Motion for Leave to File Under Seal Addendum to Memorandum in Support of Defendants' Rule 11 Motion for Sanctions, Memorandum in Support thereof, and proposed Order was served by the Court's electronic filing system on the following registered electronic filing participants:

Stuart H. Newberger, Esquire CROWELL & MORING LLP 1001 Pennsylvania Avenue, N.W. Washington, DC 20004 Counsel for Plaintiffs Devincci S. Hourani and Issam S. Hourani

Timothy L. Foden, Esquire ALLEN & OVERY One Bishops Square London E1 6AD UNITED KINGDOM Counsel for Plaintiffs Devincci S. Hourani and Issam S. Hourani

Howard W. Foster, Esquire Matthew A. Galin, Esquire FOSTER PC 150 N. Wacker Drive Suite 2150 Chicago, IL 60606 Counsel for Plaintiffs Devincci S. Hourani and Issam S. Hourani

/s/ Richard W. Beckler Richard W. Beckler (DC Bar #262246)

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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA DEVINCCI SALAH HOURANI, et al., Plaintiffs, v. ALEXANDER V. MIRTCHEV, et al., Defendants. ) ) ) ) ) ) ) ) ) )

Case No. 10-cv-01618-TFH (Hon. Thomas F. Hogan)

DEFENDANTS' MEMORANDUM IN SUPPORT OF THEIR MOTION FOR LEAVE TO FILE ADDENDUM UNDER SEAL Defendants Alexander V. Mirtchev ("Dr. Mirtchev") and Krull Corporation ("Krull") (collectively, "Defendants") submit this memorandum in support of their motion (1) to accept for filing under seal their Addendum containing transcript testimony and Defendants' explanatory text referenced as Exhibit 1 in their Motion for Rule 11 Sanctions for Filing Improper Amended Complaint (filed on November 6, 2012) ("Motion for Sanctions") against Plaintiffs Devincci Hourani ("Devincci") and Issam Hourani ("Issam") (collectively, "Plaintiffs" or "Houranis") and their counsel, and (2) for an order unsealing the Addendum and subject transcripts upon determination that no confidentiality order is in effect. The Addendum presents to the Court highly relevant information and hearing testimony of Issam and his brother-in-law, former head of Kazakhstan's KGB (now KNB), Major General Rakhat Aliyev, from a related arbitration brought by Caratube (Claimant), an entity that the Houranis claim to own, against the Republic of Kazakhstan (Respondents) before the Tribunal of the International Centre for Settlement of Investment Disputes ("ICSID"), Caratube Int'l Oil Co. LLP v. Republic of Kazakhstan (ICSID Case No. ARB/08/12). Neither Plaintiffs nor Defendants were parties to the Caratube

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arbitration, but the Houranis nonetheless seek to enforce the Tribunal's confidentiality order that expired upon the Tribunal's award. I. Introduction. During the Caratube proceedings before ICSID, the Tribunal ordered the hearing transcripts to remain confidential until such time that a party requested and obtained an exception to the general confidentiality order.3 On June 5, 2012, the ICSID Tribunal issued its decision and award in that arbitration and, as a result, the Tribunal no longer exists or has any competency to grant an exception to the confidentiality order. Thus, the arbitral confidentiality order that existed during the pendency of the arbitration is now moot. For the reasons detailed below, this Court should determine that the arbitral confidentiality order could not have any application here following expiration of the Tribunal's authority and existence at the time of the arbitral award. II. The ICSID Tribunal's Confidentiality Order Permitted Exceptions. Frequent internet leaks from the Caratube arbitration prompted Respondent Republic of Kazakhstan's attorney to request, during the February 2011 arbitral hearing, that the ICSID Tribunal order the arbitration hearing transcripts and audio recordings be kept confidential. After argument by the parties, the ICSID Tribunal granted the request.4 However, in response to the request by Caratube's attorneys, Crowell & Moring, for an exception to the confidentiality order to permit use of the transcripts by General Aliyev to defend himself in a foreign proceeding, the ICSID Tribunal noted that it would entertain exception requests on a case-bycase basis.5 And while Caratube's attorney sought to restrict the exception to Caratube's star, witness General Aliyev, the ICSID Tribunal granted leave for either party to request an

See excerpt of Transcript of the Hearing on Jurisdiction and the Merits, Caratube Int'l Oil Co. v. Republic of Kazakhstan, ICSID Case No. ARB/08/12, ("Hearing Transcript") (Feb. 8, 2011), at 37 and 39, Exhibit A hereto. 4 Id. at 37, lines 9-21. 5 Id. at 38-39.

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exception,6such exception would have been sought by separate application to the Tribunal when the need arose.7 It is improper to suggest, as Plaintiffs' counsel did during the parties' October 23, 2012 meet and confer session, that the Defendants' use of the arbitration transcripts to defend themselves in this casea request that mirrors the request by the Caratube attorney to defend General Aliyevis prohibited by the Tribunal's "strict" confidentiality order for hearing transcripts in the arbitration.8 The general purpose of provisional arbitral orders, such as one relating to confidentiality, is to reduce the exacerbation of the parties' dispute or undue pressure on one party (e.g., such as the perpetual release of arbitration documents on the internet during the pendency of the Caratube arbitration).9 Thus, prohibiting the Defendants' from presenting the transcripts to demonstrate that Plaintiffs' amended complaint lacks any reasonable basis, not only would unnecessarily aggravate and prolong the parties' litigation here, but also would work an injustice upon Defendants and the Court by allowing Plaintiffs to make allegations in their amended complaint that are disproven by their ICSID testimony and that of their brother-in-law, General Aliyev. III. Caratube Counsel Specifically Requested the Exception of Which Defendants Now Request. Plaintiffs' attorneys in this matter also represented Caratube in the ICSID arbitration. Following the Tribunal's entry of the confidentiality order on the record,10 the Caratube attorney

Id. Id. at 39-40. 8 During the October 23, 2012 meet and confer session initiated by Defendants' counsel, Plaintiffs' counsel Stuart Newberger of Crowell & Moring was asked if he still represented Caratube before ICSID; he refused to answer the question. As such, the Houranis' counsel has not shown any standing whatsoever to assert a claim for confidentiality on behalf of Caratube. 9 See Corresponding to Rule 31 of the ICSID Arbitration Rules 2006; see also Biwater Gauff (Tanzania) Limited v. United Republic of Tanzania (ICSID Case No. ARB/05/22), Procedural Order No. 3, 163 lit. b. 10 No confidentiality agreement, order or any writing was executed by any party to the Caratube arbitration, so neither party has any continuing contractual confidentiality obligation beyond the submittal to the
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specifically requested a confidentiality exception for purposes of defending General Aliyev in foreign proceedings: "[T]here needs at least to be an exception for any use of the transcript of the proceeding to defend Dr. Aliyev's interests in a judicial proceeding in the courts of Austria."11 Thus, the Caratube attorney there, who also is the Houranis' attorney here,

specifically asked for an exception to the Tribunal's confidentiality order in order to defend General Aliyev, a non-party to the arbitration, in a foreign proceeding. Defendants here are simply asking for the stated Aliyev exception rationale to apply so that Defendants may fully defend their interests before this Court by demonstrating in their Rule 11 motion that the amended complaint lacks any reasonable basis as shown by Plaintiffs' own evidence in the ICSID case. Given the ICSID Tribunal's broad invitation for the parties' to proffer exception requests and the overlap of Caratube/Hourani parties, witnesses and subject matter in both cases, the Tribunal undoubtedly would have granted Defendants the same exception that formed the basis for a case-by-case exception mechanism that allowed General Aliyev to use evidence from the ICSID transcripts to defend himself elsewhere. Defendants, however, can no longer apply for such an exception since the ICSID Tribunal's existence and competency ended upon issuance of its June 5, 2012 arbitral award. IV. The ICSID Tribunal No Longer Exists to Maintain Confidentiality or Decide an Exception Request. The ICSID Tribunal's competency and very existence expired with the June 4, 2012 issuance of the Caratube arbitral award in favor of the Republic of Kazakhstan. As a result, neither Defendants nor Plaintiffs may apply to the Tribunal for enforcement, vacation or an

now concluded arbitration before the Tribunal. Obviously, as non-parties to the Caratube arbitration, Defendants could not be subject to more stringent confidentiality obligations than parties thereto. 11 Hearing Transcript at 38, lines 4-8.

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exception to the confidentiality order. In its decision, the ICSID Tribunal specifically addressed its jurisdictional responsibilities to the parties: 468. Resulting from the above considerations, the Tribunal concludes that the facts presented and proved by Claimant do not satisfy Claimant's burden of proof to establish jurisdiction of this Tribunal. 469. Accordingly, the Tribunal finds that it does not have jurisdiction over the claims raised in this case. 470. This conclusion also means that the Tribunal does not have to consider the further arguments of the Parties regarding admissibility and regarding the merits of the dispute because they are moot.12 Thus, the Defendants have no forum to seek exception to the arbitration confidentiality order under the case-by-case exception mechanism sought by the Caratube/Hourani attorney to defend General Aliyev in foreign proceedings. V. ICSID Rules Do Not Impose a Duty of Confidentiality on the Parties. The ICSID Convention and Arbitration Rules do not impose confidentiality on the arbitral parties or the ICSID proceedings: [T]he Tribunal deems that the ICSID Convention and Arbitration Rules do not comprehensively cover the question of the confidentiality/transparency of the proceedings. Thus, in accordance with Article 44 of the ICSID Convention and Rule 19 of the ICSID Arbitration Rules, unless there exist an agreement of the Parties on the issue of confidentiality/transparency, the Tribunal shall decide on the matter on a case by case basis and, instead of tending towards imposing a general rule in favour or against confidentiality, try to achieve a solution that balances the general interest for transparency with specific interests for confidentiality of certain information and/or documents.13 While the Tribunal adopted, following argument of the arbitral parties, a narrow confidentiality ordercovering only transcripts and audio recordingssubject to exception requests during the

Caratube Int'l Oil Co. v. Republic of Kazakhstan, ICSID Case No. ARB/08/12 (June 5, 2012), page 112. Available at http://www.italaw.com/sites/default/files/case-documents/italaw1100.pdf (last visited Oct. 25, 2012). 13 Giovanna A. Beccara and Others v. The Argentine Republic, Procedural Order No. 3 (Confidentiality Order), Jan. 27, 2010. Available at http://ita.law.uvic.ca/documents/BeccaraConfidentialityOrder.pdf (last visited Oct. 25, 2012).

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pendency of the arbitration, the parties never agreed to maintain that confidentiality in perpetuity and the ICSID rules do not in any way support such a conclusion.14 VI. Defendants' Request is Based on Fairness and Transparency. Defendants should not be denied the use of the arbitral transcripts upon which Caratube/Hourani counsel premised his own exception request for General Aliyev simply because that arbitration has ended and no arbitral forum exists for Defendants to request an exception. Moreover, the June 5, 2012 ICSID decision dismissing Caratube's claims, which the Houranis realleged in this Court, has been publicly released and makes repeated reference to the hearing transcripts.15 Thus, the transcripts are integral to informing the Court (and eventually the public) as to the overlapping facts and the Plaintiffs' stark, divergent factual allegations and legal arguments in each action. Fairness and transparency dictate that the Defendants be afforded the same defense privileges made available to General Aliyev by the ICSID Tribunal. General Aliyevwho is technically a non-party in the arbitration and this matteris nonetheless the central figure and witness in both actions and sought, through Caratube/Hourani counsel, to use the arbitral transcripts for his defense in Austrian proceedings. Defendants ask for no more than was granted General Aliyev. To prohibit Defendants' defense of themselves here by use of the transcripts containing sworn statements by the Houranis and General Aliyev, would be patently unjust.

14 15

In this Court, the parties have not sought, argued or agreed to any type of confidentiality agreement. See supra note 10 and Notice of Supplemental Authority [Docket # 81], filed Oct. 31, 2012, at 33 and

69.

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VII.

Conclusion.

The arbitral confidentiality order was mooted upon issuance of the ICSID Tribunal's June 5, 2012 decision. Given the absence of the arbitral forum, any currently effective

confidentiality requirement, any effective confidentiality agreement by the parties here or before ICSID, or any applicable ICSID rule, Defendants must ask this Court to consider and to grant their request to use the Caratube arbitration transcripts to defend themselves in this matter and further to inform the Court of the relevant and overlapping facts and divergent legal arguments put forth by Plaintiffs in both matters. Defendants respectfully request (1) leave of the Court to file under seal the Addendum and hearing transcripts attached thereto and referenced in the Motion for Sanctions as Exhibit 1, pending the Court's determination of whether these documents should remain under seal and (2) the Court's determination that the subject transcripts, and the Addendum, are not subject to any confidentiality requirements and may be used without restriction in this action.

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Date: November 6, 2012

Respectfully submitted,

/s/ Richard W. Beckler Richard W. Beckler (DC Bar #262246) LaShon K. Kell (DC Bar #483465) BRACEWELL & GIULIANI LLP 2000 K Street, N.W., Suite 500 Washington, DC 20006 Telephone: (202) 828-5816 Facsimile: (202) 857-4835 E-mail: richard.beckler@bgllp.com lashon.kell@bgllp.com Counsel for Defendants Alexander V. Mirtchev and Krull Corporation and Stephen Sale (DC Bar # 942243) John D. Quinn (DC Bar # 267302) Eugene P. Kopp (DC Bar # 239467) SALE & QUINN, P.C. 910 16th Street, N.W., Fifth Floor Washington, DC 20006 Telephone: (202) 833-4170 Facsimile: (202) 887-5137 E-mail: sscsq@aol.com quinn.j@salequinn.com Counsel for Defendants Alexander V. Mirtchev and Krull Corporation

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