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September 18, 2019 Practice Points

Cert. Granted in International Arbitration Case Involving Non-Signatory

We shall soon learn how the U.S. Supreme Court believes non-signatories fit into the commercial arbitration universe.

By Mark Kantor

On June 28, 2019, the U.S. Supreme Court granted certiorari and agreed to hear in its next term the international arbitration case of GE Energy Power Conversion France SAS v. Outokumpu Stainless USA LLC, Docket No. 18-1048. The dispute addresses whether, under the New York Convention, a non-signatory can compel arbitration. The question presented is whether the convention on the recognition and enforcement of foreign arbitral awards permits a non-signatory to an arbitration agreement to compel arbitration based on the doctrine of equitable estoppel.

As described in GE’s petition for cert,

Sometimes, a signatory to a contract may sue a non-signatory for claims that arise out of the contract. When that happens, is the signatory bound by the arbitration clause it agreed to in the contract? For domestic arbitration agreements, the answer is yes: Equitable estoppel allows the non-signatory to enforce the arbitration clause. But the Eleventh Circuit [Court of Appeals] held that a non-signatory cannot compel arbitration if one of the parties is a foreign entity. That erroneous holding deepens a 2-to-2 circuit split and warrants this Court’s review.

Readers will note that GE’s quoted description of the issue speaks confusingly about both (1) a signatory compelling arbitration with a non-signatory and (2) a non-signatory compelling arbitration with a signatory. It will be interesting to see if the Court determines that distinction to be relevant to resolving the question, and if so, how it distinguishes between the two different situations. The Eleventh Circuit decision declining to compel arbitration rested in part on the non-U.S. nature of one of the parties.

We shall learn within the next year how the Court believes non-signatories fit into the commercial arbitration universe.

Mark Kantor is a member of the College of Commercial Arbitrators in Washington, D.C.

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