September 21, 2020 Top Story

Nonsignatories May Enforce Arbitration Agreement

State equitable principles apply to contract where treaty is silent

By Kelso L. Anderson

The U.S. Supreme Court has held that a company that did not sign an arbitration agreement may nevertheless invoke the doctrine of equitable estoppel to compel arbitration in GE Energy Power Conversion France SAS Corp. v. Outokumpu Stainless USA et al. The case involved an international arbitration governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (Convention). According to ABA Section of Litigation leaders, the Court’s interpretation brings the United States in line with other major jurisdictions allowing nonsignatories to enforce an arbitration agreement, which should make the United States an attractive forum for foreign parties.

The company entered into three contracts for construction of cold rolling mills at ThyssenKrupp's former steel plant

The company entered into three contracts for construction of cold rolling mills at ThyssenKrupp's former steel plant

Credit: Vladimir Zapletin | iStockphoto by Getty Images

Contractual Parties and Procedural Posture

In GE Energy Power, ThyssenKrupp Stainless USA, LLC, entered into three contracts with F.L. Industries, Inc., for construction of cold rolling mills at the former’s steel plant in Alabama. All the contracts had identical arbitration clauses that stated, in part, that “all disputes arising between both parties in connection with or in performance of the Contract . . . shall be submitted to arbitration for settlement.” Subsequently, F.L. Industries entered into a subcontractor agreement with GE Energy—a foreign entity—and then ThyssenKrupp Stainless USA was acquired by Outokumpu Stainless. After motors designed for the mills failed, Outokumpu Stainless sued GE Energy Power in Alabama state court.

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