As discussed in our post from last year, on August 30, 2018, the Eleventh Circuit Court of Appeals reversed a lower court decision to compel arbitration between an Alabama steel plant owner, Outokumpu Stainless USA, LLC (“OS”), and a French division of General Electric Co, GE Energy Power Coversion France SAS (formerly Coverteam SAS). In so ruling, the Eleventh Circuit held that a non-signatory to a contract could not compel arbitration under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), as incorporated in Chapter 2 of the Federal Arbitration Act (“FAA”), through the doctrine of equitable estoppel. Dissatisfied with the Eleventh Circuit’s decision, on February 7, 2019, GE filed a petition for a writ of certiorari with the Supreme Court of the United States to review the Eleventh Circuit’s decision and on June 28, 2019, the Court granted the GE’s petition. In the field of international construction arbitration, where multi-party disputes between owners, contractors, and subcontractors are common and where the rights of non-signatories to compel arbitration are regularly debated, the Supreme Court is slated to provide important guidance.

OS operates a steel plant in Calver, Alabama that contains three cold rolling mills. In 2007, OS entered into three separate agreements with an entity known as Fives for the purchase of the mills. The Agreements each contained an arbitration clause which required all disputes be resolved via arbitration in Germany under the Rules of Arbitration of the ICC. The Agreements also provided that Fives, and all of its subcontractors, would be treated as one and the same under the contracts. Fives later subcontracted with GE to produce motors for the mills. The motors were installed between 2011 and 2012, and by June 2014 the motors began to fail.

OS sued GE in Alabama state court. GE removed the case to federal court and moved to dismiss and compel arbitration. OS opposed and moved to remand to state court. The district court denied OS’s motion and granted GE’s motion to compel arbitration and dismiss.

On appeal, while the Eleventh Circuit held that the lower court’s decision to deny OS’s motion to remand the case to state court was correct under the FAA, it separately concluded that the lower court’s decision to compel arbitration was inconsistent the New York Convention’s requirement that, inter alia, an agreement to arbitrate be “signed by the parties.” According to the Court of Appeals, because GE had not specifically signed the arbitration agreement between OS and Fives, GE had no ground to seek to compel arbitration notwithstanding the fact that the OS-Fives agreement called for Fives and its subcontractors, including GE, to be treated as one and the same. As the Eleventh Circuit explained “[p]rivate parties cannot contract around the requirement that the parties actually sign an agreement to arbitrate their disputes in order to compel arbitration.”

In doing so, the Eleventh Circuit expressly rejected GE’s argument that OS should be compelled to arbitrate the dispute under the doctrine of equitable estoppel. The Eleventh Circuit explained that “[a]lthough parties can compel arbitration through estoppel under Chapter 1 of the FAA, estoppel is only available under Chapter 1 because Chapter 1 does not expressly restrict arbitration to the specific parties to an agreement . . . But the [New York] Convention imposes precisely such a restriction.” In other words, the Eleventh Circuit held that while equitable estoppel was a viable basis to compel arbitration in domestic arbitrations governed by Chapter 1 of the FAA, it was not a viable basis to compel arbitration in international arbitrations governed by Chapter 2 of the FAA and the New York Convention.

The Court should issue its opinion in the case within the next year and will offer practitioners in the field of international construction arbitration, where disputes like that seen in Outokumpu are relatively common, insight into how the U.S. Courts should interpret and apply the New York Convention.