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The Supreme Court Declines to Address Whether the New York Convention Requires a Signed Agreement

Posted by Megan C. Labgold | Jun 22, 2020 | 0 Comments

There has been a lot of commentary concerning the Supreme Court's decision in GE Energy Power Conversion France SAS v Outokumpu Stainless USA, most of which appears to be focused on the Supreme Court's holding that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention” or “Convention”) allows non-signatories to enforce an arbitration agreement. The problem is, the Court did not actually say that.

So, what exactly did the Supreme Court say and what questions did it leave unresolved? 

The fact pattern is quite convoluted, due in part to the fact that none of the signatories of the relevant contract were parties to the litigation. Briefly, in 2007, ThyssenKrupp Stainless USA, LLC (“ThyssenKrupp”), (now Outokumpu Stainless USA, LLC (“Outokumpu”)) entered into several contracts with F.L. Industries, Inc. (“FLI”), each of which contained an arbitration agreement and defined “Parties” to include “Seller” and “Seller” to include “Sub-contractors.”[1] Those agreements included a list of “mandatory” vendors, one of which was Converteam.[2] Subsequently, FLI entered into a sub-contractor agreement with Converteam (now GE Energy Power Conversion France SAS, Corp., (“GE”)).  A dispute subsequently arose and Outokumpu sued GE in state court. GE removed the case to federal court, where it then successfully moved to dismiss and compel arbitration, relying on the arbitration agreements in each of the contracts between ThyssenKrupp and FLI.[3]

The Eleventh Circuit reversed the District Court's order compelling arbitration holding that (1) the New York Convention includes a “requirement that the parties actually sign an agreement to arbitrate their disputes in order to compel arbitration”; and (2) that GE “could not rely on state-law equitable estoppel doctrines to enforce the arbitration agreement as a nonsignatory because, in the court's view, equitable estoppel conflicts with the Convention's signatory requirement.” [4]

The specific question that Supreme Court addressed was whether equitable estoppel doctrines, permitted under Chapter 1 of the FAA conflict with the New York Convention?[5] The Court held “only that the New York Convention does not conflict with the enforcement of arbitration agreements by nonsignatories under domestic-law equitable estoppel doctrines.”[6]

What the Supreme Court Did Address

  • The Court confirmed that Chapter 1 of the Federal Arbitration Act (“FAA”) permits courts to apply state-law doctrines related to the enforcement of arbitration agreements. This includes, equitable estoppel doctrines.[7]
  • The Court also confirmed that with regard to international arbitrations, Chapter 1 of the FAA applies to the extent that it does not conflict with either Chapter 2 or the New York Convention.[8]
  • The Court rejected the Eleventh Circuit's application of Article II(1) and (2) and explained that the only provision of the New York Convention that addresses the enforcement of arbitration agreements is Article II(3).[9]
  • The Court further explained that because Article II(3) is silent on the issue of non-signatory enforcement, it therefore does not restrict or prohibit the application of domestic law to refer parties to arbitration.[10]
  • Thus, the Court held that equitable estoppel doctrines do not conflict with the New York Convention, and therefore, courts can apply equitable estoppel doctrines to enforce arbitration agreements.[11]

What the Supreme Court Did Not Address

  • In its decision, the Eleventh Circuit held that Article II(1) and (2) include a “requirement that the parties actually sign an agreement to arbitrate their disputes in order to compel arbitration,” and accordingly, because GE was not a signatory to the agreements, it did not satisfy this requirement and could not compel arbitration. [12]Thus, the Court was primed to address whether the Convention had a signatory requirement. The Court expressly declined to do so, however, stating “[w]e do not address whether Article II(2) requires a signed agreement.” [13]
  • While the court acknowledged that Article II(1) and (2) specifically address the recognition of arbitration agreements,[14] the court did not address what is required by these provisions in order to have a recognized arbitration agreement under the New York Convention.
  • Moreover, the Court did not determine whether a non-signatory can actually enforce arbitration clauses under principles of equitable estoppel. Rather, it specifically left that question for the Eleventh Circuit to address on remand.[15]

In light of these unsettled issues, all eyes will be on the Eleventh Circuit to see how it applies the domestic equitable estoppel doctrine, and whether that doctrine actually permits a non-signatory to compel arbitration under the New York Convention.

[1]     See Outokumpu Stainless USA, LLC v. Converteam SAS, 902 F.3d 1316, 1321 (11th Cir. 2018).

[2]     Id

[3]     Id. at 1322.

[4]     GE Energy Power Conversion France SAS, Corp., v. Outokumpu Stainless USA, LLC, et al., 590 U.S. __ (2020), Slip opinion at 3.

[5]     Id. at 6.

[6]     Id. at 12.

[7]     Id. at 3-4.

[8]     Id. at 5-6.

[9]     Id. at 7 and 11.

[10]   Id. at 6-7 and 11.

[11]   Id.

[12]   Id. at 3 and 11.

[13]   Id. at fn. 3.

[14]   Id. at 11.

[15]   Id. at 12. 

About the Author

Megan C. Labgold

Megan C. Labgold is a registered U.S. patent attorney specializing in patent litigation and international commercial arbitration. ...

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