21-11051-lgb doc 189 filed 09/14/21 entered 09/14/21 11:46

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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.

21-11051-lgb Doc 189 Filed 09/14/21 Entered 09/14/21 11:46:04 Main Document Pg 1 of 21

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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


https://www.law.cornell.edu/definitions/uscode.php?width=840&height=800&iframe=true&def_id=28-USC-2032517217-1056148291&term_occur=999&term_src=title:28:part:IV:chapter:97:section:1605

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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


21-11051-lgb doc 189 filed 09/14/21 entered 09/14/21 11:46

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