Certiorari Granted in Eleventh Circuit Case Holding that Non-Signatory Party Cannot Compel Arbitration Under the NY Convention
Posted on Categories Arbitration, Arbitration Agreements, Court Decisions, Non-Securities ArbitrationTags , , ,

On the Term’s last day, SCOTUS on June 28 granted Certiorari in an arbitration-centric case. As we reported in SAA 2019-15 (Apr. 17), a Petition for Certiorari was filed February 8 seeking review of Outokumpu Stainless USA, LLC v. Converteam SAS, 902 F.3d 1316 (11th Cir. 2018), a case we covered in SAA 2018-42 (Nov. 7).

FAA and the UN Convention

To review, Federal Arbitration Act (“FAA”) Chapter 2, which implements the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards, enforces not only arbitration Awards, but also predispute arbitration agreements (“PDAA”). It is also hornbook law that a signatory to a broad PDAA is bound by its terms under the FAA, and that sometimes such an arbitration agreement can be enforced by or against a non-signatory via equitable estoppel. The core issue presented in Outokumpu was whether a non-signatory could compel arbitration  under FAA Chapter 2.

Case Below: Non-Signatory has No Equitable Estoppel Right to Compel Arbitration Under FAA Chapter 2

“No,” said a unanimous Eleventh Circuit, as a matter of statutory construction. After determining that the underlying transaction was international, the Court found that the Convention and FAA Chapter 2 grant this right only to signatories, thus rendering the PDAA unenforceable by a non-signatory subcontractor: “Here, our inquiry starts and ends with the first factor because we find that there is no agreement in writing within the meaning of the Convention. Under the New York Convention, ‘[e]ach Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.’ New York Convention, Article II, ¶ 1. Article II further states that ‘[t]he term “agreement in writing” shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.’ New York Convention, Article II, ¶ 2. The requirement that the agreement to arbitrate be ‘signed by the parties’ applies to both an arbitral clause and an arbitration agreement.”

GE Energy Not a Signatory

Applying the holding to the facts here, the Court concludes: “However, GE Energy is undeniably not a signatory to the Contracts. At the time the Contracts were signed by Outokumpu and Fives, GE Energy was a stranger to the Contracts and, at most, a potential subcontractor. Private parties -- here Outokumpu and Fives -- cannot contract around the Convention’s requirement that the parties actually sign an agreement to arbitrate their disputes in order to compel arbitration” (citations omitted; emphasis in original).

Question Before the Court

The question presented in the Petition is: “Whether the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the ‘New York Convention’) permits a non-signatory to an arbitration agreement to compel arbitration based on the doctrine of equitable estoppel.” Contrast this with FAA Chapter 1, section 2, which in domestic transactions requires a written agreement to arbitrate, but makes no mention of signatures.


(ed: *The SCOTUS case is GE Energy Power Conversion France SAS v. Outokumpu Stainless USA LLC, No. 18-1048; the Cert. grant is on page 6 of the Order. **Our prior editorial comment was spot on: “Query whether SCOTUS will take up the issue, given a clear split in the Circuits?” ***It’s way too early to be making predictions, but readers should note that new Justices Gorsuch and Kavanaugh seem, to be sticklers on statutory construction.)