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TRANSCRIPT
4849-0633-5994 v.2
James L. Bromley
SULLIVAN & CROMWELL LLP
125 Broad Street
New York, NY 10004-2498
Telephone: (212) 558-4000
Facsimile: (212) 558-3588
Counsel to the Debtors
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
____________________________________________
In re
Kumtor Gold Company CJSC and Kumtor Operating
Company CJSC,1
Debtors.
____________________________________________
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Chapter 11
Case No. 21-11051 (LGB)
Jointly Administered
DEBTORS’ REPLY IN SUPPORT OF THE DEBTORS’ MOTION
FOR AN ORDER (I) ENFORCING THE AUTOMATIC
STAY AGAINST THE KYRGYZ GOVERNMENT AND
(II) FOR SANCTIONS FOR SUCH CONTINUED VIOLATIONS
1 The Debtors’ corporate headquarters is located at 24 Ibraimova Street, 720001, Bishkek, the Kyrgyz Republic.
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TABLE OF CONTENTS
Preliminary Statement ..................................................................................................................... 1
Reply ............................................................................................................................................... 2
The Kyrgyz Republic’s Leave for Appeal Does Not Divest this Court of Jurisdiction. ...... 2
The Bankruptcy Court Can Enforce the Stay Against the Kyrgyz Republic. ................... 3
A. Sovereign Immunity Is Not a Shield With Respect to Automatic Stay Violations........ 3
B. The Bankruptcy Court Has Personal Jurisdiction over the Kyrgyz Republic. ............... 6
The Kyrgyz Republic’s Actions Are Clear Violations of the Automatic Stay. ................. 9
A. The Debtors Have Satisfied Their Burden of Proof. ...................................................... 9
B. The Kyrgyz Republic’s Willful Violations Fall Squarely Within Section 362 of the
Bankruptcy Code. ......................................................................................................... 11
C. The Act of State Doctrine Does Not Prohibit the Court from Enforcing the Automatic
Stay Against the Kyrgyz Republic. .............................................................................. 14
The Requested Sanctions Are Appropriate. .................................................................... 15
Conclusion .................................................................................................................................... 16
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TABLE OF AUTHORITIES
Cases
Allied Bank Int’l v. Banco Credito Agricola de Cartago,
757 F.2d 516 (2d Cir. 1985).............................................................................14, 15
Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964) ...........................................14
Barot v. Embassy of the Republic of Zambia, 785 F.3d 26 (D.C. Cir. 2015) ......................8
City of Chicago v. Fulton, 141 S. Ct. 585 (2021) ..............................................................11
E.E.O.C. v. Int’l Ass’n of Bridge Structural & Ornamental Ironworkers Local 580,
No. 71 Civ. 2877 (LAK) (MHD), 2011 WL 1219261 (S.D.N.Y. Mar. 11, 2011) .10
In re Bernard L. Madoff Inv. Sec. LLC, 2021 WL 3854761 (2d Cir. Aug. 30, 2021) .........5
In re EAL (Delaware) Corp., 1994 WL 828320 (D. Del. Aug. 3, 1994) .............................3
In re Marvel Entm’t Grp., Inc., 209 B.R. 832 (D. Del. 1997) ...........................................12
In re Residential Capital, LLC, 571 B.R. 581 (Bankr. S.D.N.Y. 2017) ..............................9
In re RMS Titanic, Inc., 569 B.R. 825 (Bankr. M.D. Fla. 2017) .....................................4, 6
In re Sabine Oil & Gas Corp., 548 B.R. 674 (Bankr. S.D.N.Y. 2016) ...............................3
In re SS Body Armor I, Inc., 527 B.R. 597 (Bankr. D. Del. 2015) ....................................12
In re Tuli, 172 F.3d 707 (9th Cir. 1999) ..............................................................................4
In re Whispering Pines Ests., Inc., 369 B.R. 752 (B.A.P. 1st Cir. 2007) ........................2, 3
New York Ex Rel. Boardman v. Nat’l R.R. Passenger Corp.,
233 F.R.D. 259 (N.D.N.Y. 2006) ..........................................................................11
Optopics Lab’ys Corp. v. Savannah Bank of Nigeria, Ltd.,
816 F. Supp. 898 (S.D.N.Y. 1993) ........................................................................14
Perez-Guzman v. Lynch, 835 F.3d 1066 (9th Cir. 2016) .....................................................5
Spadaro v. United States Customs & Border Prot., 978 F.3d 34 (2d Cir. 2020) ................5
Thomas v. City of Knoxville, 179 B.R. 523 (Bankr. E.D. Tenn. 1995) .............................13
Town of Putnam Valley v. Kaspar (In re Kaspar), No. 20-CV-393 (KMK),
2021 WL 1226586 (S.D.N.Y. Mar. 31, 2021) .......................................................13
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W.S. Kirkpatrick & Co. v. Env’t Tectonics Corp., Int’l, 493 U.S. 400 (1990) ..................15
Zino Davidoff SA v. CVS Corp., No. 06 Civ. 15332(RJS),
2008 WL 1775410 (S.D.N.Y. Apr. 17, 2008)........................................................10
Statutes
11 U.S.C. § 106 ........................................................................................................3, 4, 5, 6
11 U.S.C. § 362 ..................................................................................................7, 11, 12, 13
28 U.S.C. § 1330 ..............................................................................................................6, 7
28 U.S.C. § 1604 ..............................................................................................................4, 5
28 U.S.C. § 1605. .........................................................................................................4, 6, 7
Foreign Assistance Act of 1961, 22 U.S.C.A. § 2370(e)(2) ..............................................15
Other Authorities
United Nations Convention on Jurisdictional Immunities of States
and Their Property (2004) ...................................................................................5, 6
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Kumtor Gold Company CJSC and Kumtor Operating Company CJSC
(collectively, the “Debtors”) hereby file this reply (the “Reply”) in further support of the
Debtors’ sanctions motion [D.I. 163] (the “Motion”)1 and in response to the Kyrgyz Republic’s
opposition to the Motion [D.I. 180] (the “Opposition”). The Debtors also filed the declaration of
James L. Bromley (the “Bromley Declaration”) in support of the Motion. The Opposition is
without merit and should be overruled. The Motion should be granted.
Preliminary Statement
1. The Kyrgyz Republic spend a whopping 35 pages challenging the
Debtors’ assertions that its actions violate the automatic stay. Yet, nowhere in these 35 pages
does the Kyrgyz Republic deny any of the Debtors’ assertions. This is because they cannot.
Instead, the Opposition rests on arguments regarding this Court’s jurisdiction, the FSIA, the
Kyrgyz Republic’s purported police powers and other technicalities—each of which fails.
2. Continuing its pattern of obfuscation, the Kyrgyz Republic harps on the
issue of service completely ignoring its refusal to accept, and its affirmative efforts to frustrate,
service. This is nothing other than Orwellian doublespeak. Counsel to the Kyrgyz Republic
refuses to accept service for its client, yet fully participates in these chapter 11 proceedings
implementing its client’s instructions. The Kyrgyz Republic complains that it has not been
properly served, yet it instructs armed guards at Ministry of Foreign Affairs of the Kyrgyz
Republic (the “Kyrgyz Ministry”) in Bishkek to turn away Federal Express (“FedEx”) and sign
for nothing. The irrefutable fact is that Kyrgyz Republic is fully aware of everything happening
in these Chapter 11 Cases. It is instructing its counsel and is instructing its agents to thwart all
attempts at service of process. Any arguments that this Court does not have personal jurisdiction
1 Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Motion.
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over the Kyrgyz Republic as a result of the failure to serve the Kyrgyz Republic are ludicrous.
3. The Kyrgyz Republic has no sensible arguments that it is purporting to
discern the “true purpose of these bankruptcy cases.” (Opp. at 1.) The Debtors did not file these
Chapter 11 Cases “to police the day-to-day governmental functions of the Kyrgyz Republic.”
(Id.) Nothing could be further from the truth. The Debtors commenced these cases as a direct
result of the Kyrgyz Republic’s blatant theft of the Kumtor Mine. Since then, the Debtors have
been administering these cases and pursuing a reorganization of the Debtors’ estates despite the
Kyrgyz Republic’s best efforts to obstruct these efforts at every step. The Opposition is yet
another tone deaf attempt to deflect attention from the Kyrgyz Republic’s persistent flouting of
the automatic stay. It should be rejected and the Motion granted.
Reply
The Kyrgyz Republic’s Leave for Appeal Does Not Divest this Court of Jurisdiction.
4. The Kyrgyz Republic wrongly argues that this Court is divested from
jurisdiction to hear the Motion because the Kyrgyz Republic has appealed this Court’s July 19,
2021 Stay Violation Order. (Opp. at 6–7.) The Kyrgyz Republic has only moved for leave to
appeal [Adv. Pro. No. 21-01175, D.I. 12]. The Kyrgyz Republic contends that the Stay Violation
Order implicates the collateral order doctrine and moves for leave to appeal as an alternative
basis. The Debtors have opposed the application of the collateral order doctrine and the Kyrgyz
Republic’s request for leave [Adv. Pro. No. 21-01175, D.I. 21]. No decision has been issued.
5. The Kyrgyz Republic also oversimplifies the divestiture doctrine. If the
Kyrgyz Republic was correct that because of its purported commencement of an appeal that this
Court cannot adjudicate any matter that hints at the Kyrgyz Republic’s sovereign immunity, then
the Kyrgyz Republic need only raise the issue of sovereign immunity in opposition to every
Debtor action in order to grind these Chapter 11 Cases to a screeching halt. See In re Whispering
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Pines Ests., Inc., 369 B.R. 752, 758 (B.A.P. 1st Cir. 2007) (“a broad rule that a bankruptcy court
may not consider any request filed while an appeal is pending has the potential to severely
hamper a bankruptcy court’s ability to administer its cases in a timely manner”). Simply put, the
Kyrgyz Republic wants carte blanche to disregard the automatic stay without consequence. This
Court, in In re Sabine Oil & Gas Corp. (cited by the Kyrgyz Republic) agreed:
If the divestiture doctrine were to be applied in a way that divests
bankruptcy courts of jurisdiction over all issues . . . on which the
court has previously ruled and are the subject of a pending appeal,
this would lead to an absurd result . . . . Moreover, it would
effectively cede control of the conduct of a chapter 11 case to
disappointed litigants. This cannot be, and is not, the law. 548
B.R. 674, 680 (Bankr. S.D.N.Y. 2016) (emphasis added).
Here, the Kyrgyz Republic seeks an absurd result. It is not the law.
The Bankruptcy Court Can Enforce the Stay Against the Kyrgyz Republic.
A. Sovereign Immunity Is Not a Shield With Respect to Automatic Stay Violations.
6. The Kyrgyz Republic does not dispute that section 106 of the Bankruptcy
Code states “sovereign immunity is abrogated as to a governmental unit,” with regard to the
enumerated provisions of the Bankruptcy Code, and that the definition of a “governmental unit”
includes “foreign sovereigns.” (Opp. at 8–9.) The Kyrgyz Republic does not cite a single case
interpreting section 106 that casts any doubt on the statute’s plain meaning.
7. The only case that the Kyrgyz Republic cites in support of its position, In
re EAL (Delaware) Corp., 1994 WL 828320, at *12 (D. Del. Aug. 3, 1994), is entirely irrelevant.
EAL does not deal with the section 106 that is the law today, but rather interprets an entirely
different earlier version of section 106. And, contrary to the Kyrgyz Republic’s assertion that
outdated section 106 was “materially similar to the current Section 106,” (Opp. at 9), this is
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simply not true. The two versions are clearly and unequivocally different.2
8. By contrast, the only cases that interpret the current version of section 106
unanimously hold that its plain meaning—the meaning ascribed by the Debtors—controls. See
In re Tuli, 172 F.3d 707, 711 (9th Cir. 1999) (“[F]oreign states can no longer assert sovereign
immunity from liability for certain actions under the Bankruptcy Code . . . .”); In re RMS
Titanic, Inc., 569 B.R. 825, 834 (Bankr. M.D. Fla. 2017) (“With respect to specified actions
under the Bankruptcy Code, a foreign state’s sovereign immunity is statutorily waived or
abrogated by § 106(a) of the Bankruptcy Code.”).
9. Without citing to any authority whatsoever, the Kyrgyz Republic tries to
manufacture a statutory conflict where one does not exist, claiming that section 106 “directly
conflicts with section 1604 of the FSIA. . . .” (Opp. at 9.) Section 1604 of the FSIA provides
that foreign states shall be immune from suit “except as provided in sections 1605 to 1607. . . .”
28 U.S.C. § 1604. Section 1605(a)(1) of the FSIA provides that sovereign immunity does not
apply in any case “in which the foreign state has waived its immunity either explicitly or by
implication. . . .” 28 U.S.C. § 1605. Section 106 effectuates a waiver of sovereign immunity
with respect to enumerated provisions of the Bankruptcy Code, and provides that the court may
hear and adjudicate issues arising from the application of these sections. 11 U.S.C. §
106(a)(1)(2). Accordingly, with respect to enumerated matters, including the automatic stay,
subject matter jurisdiction exists over foreign states because there has been a waiver of sovereign
immunity by statute for the purposes of section 1605(a).
2 That prior version of section 106 stated: “(a) A governmental unit is deemed to have waived sovereign
immunity with respect to any claim against such governmental unit that is property of the estate and that arose
out of the same transaction or occurrence out of which such governmental unit’s claim arose.” 92 Stat. 2555–56
(1978). The current version of section 106 states: “(a) . . . sovereign immunity is abrogated as to a
governmental unit to the extent set forth in this section with respect to . . . Sections 105 . . . 362 of this title.”
[cite]. Section 106 goes on to state that the bankruptcy court “(2) may hear and determine any issue with
respect to the application of such sections to governmental units.” 1994 WL 828320, at *12.
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10. Undeterred by the plain language of the statute, the Kyrgyz Republic turns
to statutory canons, but this likewise fails. (Opp. at 10). Courts “rely upon canons of
construction only if the language of the statute is ambiguous, which is not the situation here.”
Spadaro v. United States Customs & Border Prot., 978 F.3d 34, 47 (2d Cir. 2020). Section 106
unambiguously provides that the sovereign immunity of foreign states is abrogated in bankruptcy
actions. Even if there were ambiguity here, the inclusion of foreign states in section 106 cannot
simply be read out of the statute by appeal to the principle that the specific controls the general.
Moreover, section 1604 of the FSIA is in fact far broader than section 106. Section 1604
purports to apply to any claim against a foreign state involving “the jurisdiction of the courts of
the United States and of the States,” whereas section 106 by its terms applies only to enumerated
sections of the Bankruptcy Code, and only empowers court to “hear and determine” issues
“arising with respect to the application of such sections.” 11 U.S.C. § 106(a)(2) (emphasis
added). Indeed, contrary to the Kyrgyz Republic’s assertion that “[i]t does not matter that
section 106 was enacted after section 1604” (Opp. at 10), “when the scope of the earlier statute is
broad but the subsequent statute[ ] more specifically address[es] the topic at hand, there is even
greater reason to assume the later statute controls.” In re Bernard L. Madoff Inv. Sec. LLC, 2021
WL 3854761, at *13 (2d Cir. Aug. 30, 2021). Finally, even if the Court were to accept the
Kyrgyz Republic’s assertion that section 106 is broader, “the general-specific canon does not
help to clearly discern Congress’s intent” when “each [statute] is specific in certain respects and
general in others.” Perez-Guzman v. Lynch, 835 F.3d 1066, 1075–76 (9th Cir. 2016).
11. The Kyrgyz Republic’s appeal to the Charming Betsy canon similarly
fails. (Opp. at 12.) While the Kyrgyz Republic claims that the United Nations Convention on
Jurisdictional Immunities of States and Their Property shows that the default rule in international
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law is that a court may not assert jurisdiction over a foreign sovereign in bankruptcy
proceedings, the only court to address this issue instead determined the exact opposite: that the
existence of the Convention indicated that “the principle that Courts should have the authority to
administer insolvent estates that are brought before them . . . appears to possess international
recognition.” RMS Titanic, 569 B.R. at 834.3
12. The Kyrgyz Republic’s resort to legislative history is also unavailing and
in no way supports the view that the term “governmental units” as used in section 106 does not
include foreign governments. (Opp. at 11.) Rather, Congress simply clarified the previously
ambiguous scope of section 106 by enumerating the provisions of the Bankruptcy Code to which
sovereign immunity is abrogated and the scope of that abrogation, while leaving the definition of
“governmental unit” unaltered. The clarity of section 106 is as high definition as the law gets.
B. The Bankruptcy Court Has Personal Jurisdiction over the Kyrgyz Republic.
13. The Kyrgyz Republic’s nonsensical argument that personal jurisdiction
would not exist over it even if the waiver of sovereign immunity in section 106 vests this Court
with subject matter jurisdiction also fails. While the Kyrgyz Republic asserts that “no one
disputes that Section 106 is not an exception to immunity . . . under sections 1605–1607 of Title
28” (Opp. at 15), in fact, as described above, the relevant case law examining the issue has
determined that section 106 functions as a waiver of sovereign immunity under § 1605(a) of the
FSIA.4 Therefore, under section 1330(a), the courts have jurisdiction over the motion to enforce
3 Further, the text of the Convention indicates that its provisions take “into account developments in State
practice with regard to the jurisdictional immunities of States and their property.” United Nations Convention
on Jurisdictional Immunities of States and Their Property, at 2 (2004) available at
https://legal.un.org/ilc/texts/instruments/english/conventions/4_1_2004.pdf.
4 As the RMS Titanic court aptly stated: “In summary, § 1330 of title 28 provides for original jurisdiction of any
action against a foreign state in which the foreign state is not entitled to sovereign immunity. Section 1605(a) of
the FSIA provides an exception to a foreign state’s sovereign immunity in cases where the immunity is
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the automatic stay as a claim “with respect to which the foreign state is not entitled to immunity .
. . under section[] 1605.” 28 U.S.C. § 1330(a). Section 1330(b) in turn grants personal
jurisdiction “as to every claim for relief over which the district courts have jurisdiction under
subsection (a) where service has been made under section 1608 of this title.” § 1330(b).
14. The Kyrgyz Republic’s claim that this Court cannot exercise jurisdiction
because service has not been properly effected under section 1608 (Opp. at 15) is yet another
attempt to side step the automatic stay, occasioned by the Kyrgyz Republic’s bad faith efforts to
avoid service of process. At the hearing where the Court granted the Stay Violation Order, the
Court ruled that the Kyrgyz Republic violated the automatic stay and imposed sanctions. On the
issue of service, the Court only noted that the sanctions would not be effective until the Kyrgyz
Republic was served with the Stay Violation Order. (See July 19, 2021 Hr’g Tr. 92:10-15.) This
makes perfect sense because the stay imposed by section 362 is, by its clear terms, automatic and
worldwide, taking effect immediately upon the filing of the chapter 11 petition, without the need
for service on or even notice to any party anywhere. This automatic stay is the cornerstone of
the entire U.S. bankruptcy system.
15. As a result of the Kyrgyz Republic’s continued refusal to allow its counsel
to accept service on behalf of its clients, the Debtors have attempted other avenues to serve the
Kyrgyz Republic. The Debtors, with the assistance of this Court, have attempted to serve the
Kyrgyz Republic in connection with the pending adversary proceeding and the July 19 Stay
Violation Order. (Bromley Decl. ¶¶ 16–21.) On September 2, 2021, a courier from FedEx
expressly or impliedly waived. 28 U.S.C. § 1605(a). With respect to specified actions under the Bankruptcy
Code, a foreign state’s sovereign immunity is statutorily waived or abrogated by § 106(a) of the Bankruptcy
Code.” 569 B.R. at 834.
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attempted to deliver the package to the Kyrgyz Ministry, but was denied entrance. (Id. ¶ 21.) On
September 3, 2021, a courier from FedEx attempted to deliver the package again but was stopped
by a security guard at the Kyrgyz Ministry who both denied the courier entry and refused to sign
for the package. (Id.)
16. Although strict adherence to the terms of section 1608(a) is generally
required to effect service upon a foreign sovereign, courts retain discretion to determine to what
extent such “strict adherence” is required. See, e.g., Barot v. Embassy of the Republic of
Zambia, 785 F.3d 26, 29 (D.C. Cir. 2015) (holding that dismissal for failure to adhere to service
terms of 1608(a) was unwarranted in light of plaintiff’s good faith efforts to serve foreign
sovereign). Given that the Kyrgyz Republic is present in this Court, represented by renowned
counsel acting under the direction of the Kyrgyz Republic, where such counsel filed a “Notice of
Appearance and Request for Service of Notices and Papers” [D.I. 13], and in light of the clear
and unambiguous repeated efforts of the Kyrgyz Republic to evade effective service of process,
the Court should find here that strict adherence is not required. To do otherwise would reward a
litigant that is repeatedly engaging in undeniably sanctionable behavior.
17. The Kyrgyz Republic is keenly aware of these Chapter 11 Cases and the
Debtors’ reorganization efforts. It is simply instructing its agents and counsel to refuse to accept
service of process so it can continue to argue that this Court lacks personal jurisdiction over it.
The Kyrgyz Republic tries to justify its behavior by arguing that it is only appearing before this
Court to contest its jurisdiction. (Opp. at 16.) This is false and this Court should not condone
this behavior. The Kyrgyz Republic has attempted to thwart every action taken by the Debtors in
these Chapter 11 Cases and not solely on the basis of this Court’s lack of jurisdiction—it
objected to the Debtors’ first day relief as premature, it objected to the Debtors’ proposed
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retention of counsel because of conflicts, it objected to the Debtors’ request to lift the automatic
stay to allow the arbitration to proceed and sought its own expansion of the automatic stay, it is
opposing the establishment of a bar date, it is opposing the ability of the Debtors to return goods
to vendors and it is currently seeking discovery against the Debtors in connection with its motion
to dismiss. In fact, the Kyrgyz Republic’s objections to the Motion are not solely on the basis of
this Court’s jurisdiction. The charade must end. The Kyrgyz Republic cannot be allowed to
continue to use its refusal to accept service as a sword to attack the Debtors’ actions and a shield
against its repeated violations of the automatic stay.
The Kyrgyz Republic’s Actions Are Clear Violations of the Automatic Stay.
A. The Debtors Have Satisfied Their Burden of Proof.
18. Despite a 35-page brief, the Kyrgyz Republic spends a scant few
paragraphs on its flimsy claims that the Debtors do not have any evidence to support their
assertions. The Kyrgyz Republic does not seriously contest the Debtors’ assertions, and in fact,
the Kyrgyz Republic never states that the facts underlying the Motion are untrue. To the
contrary, it concedes the Debtors’ factual assertions by arguing that “the Debtors improperly
attribute actions to the Kyrgyz Republic that were undertaken by independent branches of the
government.” (Opp. at 19.) This is yet more doublespeak from a litigant well versed in the use
of memory holes.
19. Simultaneous to the filing of this Reply, the Debtors filed the Bromley
Declaration in support of the Motion. It substantiates the underlying facts and attaches copies of
multiple local Kyrgyz published news articles regarding the Kyrgyz Republic’s actions. The
Kyrgyz Republic’s actions violate the automatic stay, and the Debtors have demonstrated “a
reasonable certainty that a violation occurred.” In re Residential Capital, LLC, 571 B.R. 581,
585 (Bankr. S.D.N.Y. 2017). The Kyrgyz Republic does not dispute that the mandate of the
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purported temporary manager was extended and that the SNSC publicly declared that it initiated
the process of denunciation of the Debtor agreements. The Debtors’ statements are not
“sweeping, conclusory allegations” as the Kyrgyz Republic alleges. (Opp. at 18) They are
uncontradicted admissions against interest reported in the domestic Kyrgyz press. (See Bromley
Decl. ¶¶ 6–8, 14–15.)5
20. With respect to the continuation of the Kyrgyz Proceedings, as the Kyrgyz
Republic acknowledges (Opp. at 21), the action has continued despite the Court’s July 19 Stay
Violation Order. It is undisputed that the Leninsky Court held hearings and entered a final
judgment on September 8, 2021 after the entry of the Stay Violation Order. Whether or not the
Leninsky Court is part of or within the control of the Kyrgyz Republic, the Kyrgyz Republic
commenced the Kyrgyz Proceedings and sought the relief granted in the final judgment. It had
ample opportunity to comply with the Stay Violation Order and the automatic stay by requesting,
at the very least, a stay of the Kyrgyz Proceedings pending the adjudication of its Motion to
Dismiss and motion for leave of appeal of the Stay Violation Order. The Kyrgyz Republic
cannot plead ignorance and argue that the Leninsky Court’s actions are beyond its control.6
Counsel for the Kyrgyz Republic’s notice of appearance in these Chapter 11 Cases is “on behalf
of the Kyrgyz Republic”—not the “executive branch” or any other limited branch or agency.
[D.I. 13] The Kyrgyz Republic cannot now attempt to limit its appearance to an ever shrinking
5 The Kyrgyz Republic also should not compare the Debtors’ asserted facts with the movant’s personal
employment diary in E.E.O.C. v. Int’l Ass’n of Bridge Structural & Ornamental Ironworkers Local 580 that
was “illegible” and “too sporadically and sparsely described to offer persuasive proof.” No. 71 Civ. 2877
(LAK) (MHD), 2011 WL 1219261, at *12–13 (S.D.N.Y. Mar. 11, 2011).
6 In contrast to Zino Davidoff SA v. CVS Corp., upon which the Kyrgyz Republic relies, the Kyrgyz Republic did
not make any “reasonably diligent” attempts to comply with the Court’s order and avoid a finding of contempt.
No. 06 Civ. 15332(RJS), 2008 WL 1775410, at *8 (S.D.N.Y. Apr. 17, 2008).
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sliver of its government just because it is more convenient for it to do so.7 That ship has sailed.
21. Regardless, it was the executive branch of the Kyrgyz Republic that
commenced the Kyrgyz Proceedings and the executive branch of the Kyrgyz Republic that
appointed the purported temporary manager. The purported temporary manager reports only to
the Kyrgyz Cabinet and serves at its pleasure, and the SNSC is a branch of the government of the
Kyrgyz Republic as set out by presidential decree. It beggars belief for the Kyrgyz Republic to
now claim that it has no control over the proceedings in the Leninsky Court.
B. The Kyrgyz Republic’s Willful Violations Fall Squarely Within Section 362 of
the Bankruptcy Code.
22. Contrary to the Kyrgyz Republic’s claims, each of its actions described in
the Motion are “new affirmative action[s]” that violate the automatic stay and are simply not
“immaterial, non-substantive judicial functions” that “do not in any way affect the Debtors.”
(Opp. at 20–21.) The Kyrgyz Republic is trying to: (i) nullify the Debtors’ corporate authority
to commence these cases, (ii) extend the illegal takeover of the Debtors’ operations,
(iii) denounce Debtor agreements and (iv) lay the groundwork for the conversion of its
unfounded and inflated claims against the Debtors into equity of the Debtors.
23. First, there is nothing “status quo” about the extension of the purported
temporary manager. (Opp. at 21.) The Debtors dispute the purported temporary manager’s role
and the Kyrgyz Republic’s illegal expropriation of the Debtors’ assets.8 Simply because the
7 The Kyrgyz Republic’s reliance on New York Ex Rel. Boardman v. Nat’l R.R. Passenger Corp., 233 F.R.D. 259
(N.D.N.Y. 2006), is also misplaced. (Opp. at 20.) A court’s interpretation of whether a non-party state agency
can be subject to Rule 34 discovery has no bearing on whether a court can hold a government accountable for
its own actions. Further, the Boardman court felt that subjecting non-parties to Rule 34 discovery would be
“outside the spirit of the Federal Rules.” Boardman, 233 F.R.D. at 266. Here, to the contrary, it is entirely
within the spirit of the Bankruptcy Code and the Bankruptcy Rules to grant the requested relief.
8 In City of Chicago v. Fulton, the city impounded the debtor’s vehicle for failure to pay fines before the petition
date, and the court held that the city’s mere retention of the vehicle postpetition does not violate section
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Kyrgyz Republic unlawfully took the Debtors’ assets before the filing does not mean that the
theft is somehow transformed into a legitimate acquisition. While it is undisputed that the
Debtors are not currently operating the Kumtor Mine, the Debtors have never conceded that they
are not the rightful owner and operator. Moreover, the purported temporary manager is
operating the Kumtor Mine, and based on public news sources, has started to prepare for
underground mining operations.9 (Bromley Decl. ¶ 7.) There is nothing status quo about
fundamentally altering mine operations.
24. Second, once the New Emergency Law is formally enacted, the Kyrgyz
Republic would purportedly be able to convert its illegitimate claims into equity of the Debtors
to the point of complete dilution of the Debtors’ current shareholder. (Id. ¶ 13.) The Kyrgyz
Republic dismisses the Debtors’ concerns by asserting that this “would not affect the property of
the Debtors.” (Opp. at 22.) It is time to call balls and strikes. This is no coincidence. The only
reason for the new law is to wipe out Centerra and allow the Kyrgyz Republic to argue that it is
entitled to exercise complete corporate control of the Debtors—including, among other things,
amending their charters and replacing the Debtors’ boards of directors and management.10 It
would also give the Kyrgyz Republic the ability to enter into contracts on behalf of the Debtors,
operate the Kumtor Mine and, if it desired, sell the Kumtor Mine and reap the profits for itself—
362(a)(3). 141 S. Ct. 585, 589–92 (2021). The Kyrgyz Republic’s postpetition actions are far beyond “mere
retention of estate property.”
9 Moreover, the Debtors understand from public statements made by Centerra there is a significant amount of
water at the bottom of the Kumtor central pit and that this has put the mine and its workers at risk of potentially
catastrophic events, including real harm to the environment. (Bromley Decl. ¶ 8.)
10 The Kyrgyz Republic’s argument that its actions do not violate the automatic stay because the automatic stay
does not apply to corporate governance actions (Opp. at 20) is a red herring. The cited cases stand for the
proposition that “the right of shareholders to compel a shareholders’ meeting for the purpose of electing a new
board of directors subsists during reorganization proceedings.” In re Marvel Entm’t Grp., Inc., 209 B.R. 832,
838 (D. Del. 1997); In re SS Body Armor I, Inc., 527 B.R. 597, 605 (Bankr. D. Del. 2015). But Centerra is the
shareholder of the Debtors’—not the Kyrgyz Republic. The Temporary Management Law did not change this.
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all acts that affect the Debtors’ property. The Kyrgyz Republic is trying to change the
underlying facts of these proceedings and, in particular, its own motion to dismiss. This cannot
be allowed to succeed.
25. Third, none of the section 362(b) exceptions apply. By its very language,
section 362(b)(1) only exempts “criminal action or proceeding against the debtor” from the
automatic stay. 11 U.S.C. § 362(b)(1); see also Thomas v. City of Knoxville, 179 B.R. 523, 528
(Bankr. E.D. Tenn. 1995) (holding that postpetition forfeiture proceedings against the Debtors
are not exempt from the stay pursuant to section 362(b)(1)). The SNSC’s actions, by the Kyrgyz
Republic’s own admissions, are investigations “into Debtors’ contracts and related public
declarations.” (Opp. at 24.) Accordingly, any attempts to renounce or alter Debtor contracts are
not legitimate criminal actions under the exception. No other actions the Debtors allege violate
the automatic stay implicate any criminal relief. It cannot be the case that simply slapping a
“criminal investigation” label on the Kyrgyz Republic’s own blatant criminal activity provides
protection against an automatic stay violation.
26. The Kyrgyz Republic’s reliance on section 362(b)(4) similarly fails. By
its own terms, the section 362(b)(4) police powers exception to the automatic stay applies only to
“commencement or continuation of an action or proceeding by a government unit . . . to enforce
such governmental unit’s . . . police and regulatory power.” 11 U.S.C. § 362(b)(4). The only
Kyrgyz action alleged by the Debtors that is a proceeding is the Kyrgyz Proceedings and this
Court has already determined that the police and regulatory exception was not implicated by
such proceedings. (July 19, 2021 Hr’g Tr. 79:8–15).11
11 Moreover, the Debtors actually agree that Town of Putnam Valley v. Kaspar (In re Kaspar), No. 20-CV-393
(KMK), 2021 WL 1226586 (S.D.N.Y. Mar. 31, 2021), cited by the Kyrgyz Republic, would be instructive.
There, the town moved to lift the automatic stay before it commenced any proceeding. Further, the town sought
to sell the property and use the proceeds to remediate the property; it did not illegally seize the property.
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C. The Act of State Doctrine Does Not Prohibit the Court from Enforcing the
Automatic Stay Against the Kyrgyz Republic.
27. “A prerequisite for the application of the act of state doctrine is that the act
in question is one which takes effect entirely within the boundaries of the sovereign nation.”
Optopics Lab’ys Corp. v. Savannah Bank of Nigeria, Ltd., 816 F. Supp. 898, 906 (S.D.N.Y.
1993) (emphasis added). Here, the relief requested does not require the invalidation of actions
taken by the Kyrgyz Republic entirely within its own borders. Rather, the relief sought is to stay
further enforcement of the Kyrgyz Injunction which purports to have the extraterritorial effect of
preventing counsel from taking any action in furtherance of these cases before this Court and
nullify the contractual rights of these Debtors, rights under New York law, that are to be
adjudicated in an arbitration to take place in Sweden. “Acts of foreign governments purporting
to have extraterritorial effect—and consequently, by definition, falling outside the scope of the
act of state doctrine—should be recognized by the courts only if they are consistent with the law
and policy of the United States.” Allied Bank Int’l v. Banco Credito Agricola de Cartago, 757
F.2d 516, 522 (2d Cir. 1985). The Kyrgyz Republic’s transparent attempt to torpedo these
proceedings in the United States is clearly inconsistent with this Court’s broad authority, and
thus cannot be recognized by this Court.
28. Similarly, the extension of the Temporary Management Law and the
proposed enactment of the New Emergency Law, even if they constitute legitimate acts of the
Kyrgyz Republic, nevertheless are clearly intended to have the extraterritorial effect of depriving
Debtors of their right to resort to the U.S. courts. It is important to note that the text of the U.S.
Constitution does not require the act of state doctrine. See Banco Nacional de Cuba v.
Sabbatino, 376 U.S. 398, 423 (1964). Rather, “the doctrine demands a case-by-case analysis of
the extent to which in the context of a particular dispute separation of powers concerns are
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implicated.” Allied Bank Int’l, 757 F.2d at 521. The Supreme Court has “suggest[ed] . . . that
the policies underlying the act of state doctrine should be considered in deciding whether, despite
the doctrine’s technical availability, it should nonetheless not be invoked.” W.S. Kirkpatrick &
Co. v. Env’t Tectonics Corp., Int’l, 493 U.S. 400, 409 (1990). Here, where the challenged ex
post actions of the Kyrgyz Republic are clearly designed to frustrate the jurisdiction of this
Court, the concerns surrounding international comity which animate the act of state doctrine
clearly do not favor its application.12
29. Even if the doctrine could be found applicable, the Hickenlooper
Amendment to the Foreign Assistance Act of 1961, 22 U.S.C.A. § 2370(e)(2), provides that the
act of state doctrine is not a defense to “a case in which a claim of title or other right to property
is asserted by any party . . . based upon (or traced through) a confiscation or other taking . . . by
an act of that state in violation of the principles of international law.” The Kyrgyz Republic’s
acts are designed to further cement the expropriation of the Kumtor Mine at the expense of the
Debtors without any appropriate compensation in clear violation of international law.
The Requested Sanctions Are Appropriate.
30. Monetary fines in the amount of US $1 million per day and entry of an
order staying the Motion to Dismiss are both warranted and appropriate. First, the Kyrgyz
Republic’s actions are flagrant and a complete disregard for the Bankruptcy Code and this
Court’s orders. The Motion is the second request necessitated by the Kyrgyz Republic’s actions
in less than three months in chapter 11, and only slightly over a month after this Court issued the
Stay Violation Order. The requested sanctions are not intended to be punitive but to be
sufficiently severe and meaningful to incentivize the Kyrgyz Republic to comply with the
12 The Kyrgyz Republic does not argue that the Court lacks the power to stay the pending Motion to Dismiss
under the act of state doctrine. Accordingly, the Debtors do not address that proposed relief in detail here.
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Bankruptcy Code and the Court’s orders. Absent these sanctions, based on its existing actions,
the Kyrgyz Republic will continue to ignore the Bankruptcy Code and this Court’s directions.
31. Second, while the Debtors are sympathetic to the litany of statistics
included in the Kyrgyz Republic’s Opposition regarding the average annual income of a Kyrgyz
household and the annual gross domestic product of the Kyrgyz Republic, these are misplaced.
The Kyrgyz Republic does not have to pay any of the requested sanctions if it would simply
follow this Court’s orders and not violate the automatic stay. It is entirely within the Kyrgyz
Republic’s control to protect its own people and its economy by complying with the rules.
32. Likewise, contrary to the Kyrgyz Republic’s assertions, staying the
Motion to Dismiss does not “turn these proceedings on their head.” (Opp. at 34.) Again, the
Debtors are merely asking the Kyrgyz Republic to respect and follow the Bankruptcy Code and
Rules. If it would like its Motion to Dismiss adjudicated before the Bankruptcy Court, then it
must abide by the Bankruptcy Code and Rules and this Court’s orders. It cannot exercise self-
help remedies that have the effect of changing all of the underlying facts on the very motion
before the Court has an opportunity to adjudicate it.
Conclusion
WHEREFORE, for the reasons set forth herein, the Debtors respectfully request
the Court overrule the Kyrgyz Republic’s Opposition and grant the relief requested in the
Motion.
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Dated: September 14, 2021
New York, NY
/s/ James L. Bromley
James L. Bromley
SULLIVAN & CROMWELL LLP
125 Broad Street
New York, NY 10004
Telephone: (212) 558-4000
Facsimile: (212) 558-3588
E-mail: [email protected]
Counsel to the Debtors
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