wednesday, 3 june of 2020


Supreme Court rules non-signatories can enforce arbitration agréments: US

The US Supreme Court ruled Monday that the New York convention does not conflict with state law doctrines of equitable estoppel which allow non-signatories to an arbitration agreement to compel arbitration.

The case involves an American company (ThyssenKrupp Stainless USA) and a French company (F.L. Industries Inc.), which entered into three contacts, all of which imposed arbitration as the mechanism for dispute resolution between the parties. Per these contracts, F.L. had to build cold rolling mills for ThyssenKrupp’s steel manufacturing plant.

F.L. then signed a subcontractor contract with another French company (GE Energy), whereby GE Energy was to supply F.L. with motors for the cold mills. When GE Energy’s motors failed in 2015, Outokumpu Stainless USA, which had bought Thyssenkrupp’s plant, sued GE Energy.

Although it was not one of the parties who signed the three contracts requiring that disputes be resolved through arbitration, GE Energy tried to compel arbitration. The Spureme Court ruled Monday that GE Energy was allowed to do so even though it was not a signatory to the contracts imposing arbitration.

The court explained that the New York Convention, a treaty that requires countries who have signed it to recognize and enforce arbitral awards issued in other such countries, is silent on whether non-signatories can compel arbitration.

It then held that when the convention is silent on an issue, domestic laws can be used to fill in the gaps left by the convention; and, since the domestic doctrine of equitable estoppel allows non-signatories to compel arbitration in cases like this one, GE Energy can force Outokumpu to resolve their dispute in arbitration.

The case

The case, GE Energy Power Conversion France SAS v. Outokumpu Stainless USA LLC, the two companies that are parties to the dispute are asking the court for different interpretations of an international treaty that enforces private arbitration agreements when one of the parties is from abroad. Outokumpu, from the US, sued the French GE company after work it did under a contract between Outokumpu and another company went awry. GE wants to enforce the arbitration agreement that Outokumpu had with the other company to keep their dispute out of court. At argument on Tuesday, GE’s attorney told the justices that although the New York Convention is silent on whether third parties can enforce arbitration, "other contracting states are close to unanimous" in saying that it doesn’t stop domestic law from doing so. Outokumpu, in response, argued that there is widespread agreement that “extension of an arbitration agreement to non-parties is supposed to be rare" and that finding for GE would problematically mean that "essentially all subcontractors would suddenly be able to arbitrate, even absent a written agreement."

Chief Justice John Roberts sat to hear the arguments in the morning before heading to Capitol Hill for his other ongoing duties presiding over the impeachment trial of President Trump.

(Published by Jurist Org, June 3 2020)

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