U.S. Supreme Court Holds Equitable Estoppel Can Allow Non-Signatories to Compel Arbitration Under the New York Convention

Carlton Fields

Carlton Fields

The U.S. Supreme Court has held that equitable estoppel doctrines can be invoked by non-signatories seeking to compel arbitration under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

ThyssenKrupp Stainless USA contracted with F.L. Industries Inc. to build cold rolling mills at ThyssenKrupp’s steel plant in Alabama. The contracts between ThyssenKrupp and F.L. contained arbitration clauses. F.L. subcontracted with GE Energy Power Conversion France SAS Corp. for motors for the mills. After GE Energy delivered the motors, Outokumpu Stainless USA acquired the plant from ThyssenKrupp. Shortly thereafter, the motors allegedly failed. Outokumpu sued GE Energy, which sought to compel arbitration under the arbitration clauses in the ThyssenKrupp-F.L. contracts.

The district court granted GE Energy’s motion. It concluded that the ThyssenKrupp-F.L. contracts included subcontractors within the definition of the terms “seller” and “parties” and that Outokumpu and GE Energy were therefore parties to the ThyssenKrupp-F.L. contracts. The court therefore declined to reach GE Energy’s alternate argument that the arbitration clauses were enforceable under equitable estoppel principles even if the litigants were not parties.

The Eleventh Circuit reversed. It concluded, in relevant part, that the Convention required parties to sign arbitration agreements, that GE Energy had indisputably not signed the ThyssenKrupp-F.L. contracts, and that GE Energy could therefore not rely on equitable estoppel because that doctrine conflicted with the Convention’s signatory requirement.

The Supreme Court granted certiorari to resolve a circuit split and held that equitable estoppel doctrines can allow non-signatories to compel arbitration under the Convention.

The court explained that chapter 1 of the Federal Arbitration Act (FAA) “permits a nonsignatory to rely on state-law equitable estoppel doctrines to enforce an arbitration agreement” and that the Convention in turn provided that chapter 1 of the FAA applies to proceedings brought pursuant to the Convention’s implementing legislation “to the extent that [chapter 1] is not in conflict with [the implementing legislation] or the Convention.” Thus, the court needed to determine whether applying equitable estoppel principles conflicted with the Convention.

The court concluded it did not. It explained that the Convention was “silent” on the issue and that that “silence [was] dispositive … because nothing in the text of the Convention could be read to otherwise prohibit the application of domestic equitable estoppel doctrines.”

The court also explained that the relevant section of the Convention did not contain exclusionary language stating that arbitration agreements could only be enforced in the circumstances identified. In addition, the Convention “contemplate[s] the use of domestic doctrines to fill gaps in the Convention,” its drafting history supported the conclusion that domestic law could apply, and a majority of the courts of other signatory countries to analyze the issue had concluded that the Convention “does not prohibit the application of domestic law.”

The Supreme Court, therefore, remanded the case to the Eleventh Circuit to consider the merits of GE Energy’s equitable estoppel argument.

GE Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA, LLC, No. 18-1048 (U.S. June 1, 2020).

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Carlton Fields

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