In 2007, ThyssenKrupp Stainless USA, LLC signed three contracts with FL Industries, Inc. for the construction of cold rolling mills at the ThyssenKrupp steel plant in Alabama. 1 Each of the contracts contained an arbitration clause stipulating that all disputes under German law were to be settled by arbitration based in Germany in accordance with the Arbitration Rules of the International Chamber of Commerce. 2 The agreements also provided that FL Industries and all its subcontractors would be treated in the same way in the context of the contracts. 3 For example, if a non-signatory enforces the arbitration in the United States and obtains an arbitral award, he or she may be required to enforce that award in a foreign country. There is no guarantee that the executing country will recognize that a non-signatory may apply a post-confiscation arbitration agreement or a similar theory. This would then create a basis for the courts of that foreign country to refuse to enforce the award under the New York Convention. [3] Even if such a complex outcome is possible, international arbitration agreements still offer companies a much better way to resolve international trade disputes than relying solely on the courts. This is especially true since there are no international treaties governing the recognition and enforcement of U.S.
judgments abroad. The consent of the parties is the basis of any international arbitration. As a rule, this consent is expressed in an arbitration agreement that binds the formal signatories of the contract. The award is often misunderstood in such a way that it suggests that the corporate relationships within the group were sufficient to establish the jurisdiction of the court and have therefore been criticized. In fact, the reasoning was more nuanced when considering the role of the non-signatory « in the conclusion, performance or termination of contracts. » The Seventh Circuit upheld the District Court`s rejection of the coercion claim and ruled that the defendant tech company had made no statement from the plaintiff to persuade the tech company to invoke the contract arbitration provision. Interestingly, the Seventh District applied Illinois law to confirm the rejection of the application and explicitly refused to take a federal common law test, which was arguably milder. Outokumpu filed a lawsuit against GE Energy in Alabama state court. 7 GE Energy referred the case back to the United States Federal District Court and forced arbitration on the basis of the arbitration agreement between ThyssenKrupp and FL Industries.
8 The District Court granted GE Energy`s application for enforcement of the arbitration and dismissed the action on the ground that GE Energy had to be classified as a `party` under the arbitration clause. 9 In Setty v. Shrinivas Sugandhalaya, LLP [14], the Ninth District Court of Appeal considered a case in which the plaintiff and his brother each owned 50% of the defendant company LLC. The two brothers` interests in the LLC were governed by a separate corporate deed (similar to a shareholders` agreement) that included an arbitration clause. When the plaintiff brother sued the LLC for trademark infringement, the LLC (which is controlled by the other brother) forced arbitration, even though the LLC was not a party to the partnership act. The LLC relied on the fair estoppel to take advantage of the arbitration clause in the company deed. In general, estoppel is « a unique Anglo-American concept » that is « rarely used in arbitration in continental Europe. » [13] In the United States, the fair trade estoppel is usually the main arrow in the non-signatory`s quiver. In fact, it was the contractual doctrine of the common law affirmed (and blessed) in Arthur Andersen and GE Power. In practice, however, the arrow just Estoppel rarely hits its target. In the underlying case, Outokumpu claims that GE Energy`s engines failed, causing more than $100 million in damages.
Outokump then filed a lawsuit against GE Energy in a State of Alabama court, which GE Energy then referred to federal court. The District Court dismissed the lawsuit against GE Energy in favor of arbitration because the agreement between ThyssenKrupp and F.L. Industries defined « parties » as including subcontractors, which would include GE Energy. In 2007, ThyssenKrupp Stainless USA, LLC signed contracts with F.L. Industries, Inc. for the construction of steel rolling mills at the ThyssenKrupp steel mill in Alabama. The contracts contained all the arbitration clauses. F.L. Industries, Inc. subsequently entered into a subcontract with GE Energy Conversion France SAS (« GE Energy »), which required GE Energy to develop and supply engines for rolling mills. Outokumpu Stainless USA, LLC (« Outokumpu ») subsequently acquired the ThyssenKrupp plant. FL Industries has signed subcontracts with GE Energy Power Conversion France SAS, Corp for the design, manufacture and supply of engines for cold rolling mills.
4 The engines were delivered to the Alabama plant between 2011 and 2012, shortly after, Outokumpu Stainless USA, LLC took over the plant. 5 Until the summer of 2015, Outokumpu claimed that all engines had failed and that Outokumpu had suffered significant damage. 6 The Supreme Court disagreed. In a statement drafted by Thomas J.A., the Court concluded that there was no conflict between the New York Convention and the doctrine of equitable estoppel. The New York Convention « simply remains silent on the issue of enforcement by unsigned persons, » and there is no language in the text that indicates conflict. Op. to 6-7. Therefore, non-signatories may invoke this doctrine to enforce the arbitration. In a concurring opinion, Sotomayor J. noted that consent to arbitration is a « fundamental principle » of the Federal Arbitration Act and must be considered on a case-by-case basis, particularly where a party relies on the doctrine of fair estoppel to enforce international arbitration agreements. An important case concerning the « Group of Companies » is the arbitration of Dow Chemical against ISOVER ICC. The dispute arose from several contracts entered into by various subsidiaries of the Dow Chemical Company (but not the Dow Chemical Company itself) and Isover.
Dow Chemical Company, along with its subsidiaries, commenced arbitration. Isover challenged jurisdiction over the claims claimed by Dow Chemical Company on the grounds that it was not a party to the contract. The court confirmed its jurisdiction. Arbitration, whether national or international, is a creature of contractual consent. [1] It would therefore naturally be concluded that a non-signatory to a contract requiring arbitration cannot be compelled to arbitrate, nor force a signatory to arbitrate. Finally, one of the most important considerations in deciding whether or not to include an arbitration clause in a contract is the valuation of the consideration. Not all counterparties are good candidates for the less formal procedures typical of arbitration. Some require the firmer (and stricter) hand that a dish provides. This applies in particular to cross-border contracts. In the case of GE Energy Power Conversion France SAS v. . .
