International Arbitration, Nonsignatories, Equitable Estoppel: SCOTUS Holds Enforcement Of Arbitration Agreement By Nonsignatory May Be Consistent With New York Convention

The US Supreme Court Was In Agreement About This One.

          The Supreme Court has held unanimously, with Justice Sotomayor concurring, that the "New York Convention does not conflict with the enforcement of arbitration agreements by nonsignatories under domestic-law equitable estoppel doctrines." GE Energy Power Conversion France SAS v. Outokumpu Stainless USA, et al (US S.Ct.  6/1/20) (Thomas, J.).

        The case involved cold rolling mills in Alabama : ThyssenKrupp Stainless USA contracted with F. L. Industries, Inc., for the construction of cold rolling mills at ThyssenKrupp's steel manufacturing plant in Alabama.

Sheffield, Alabama. Reynolds Alloys Company. Cold rolling of aluminum sheets. Jack Delano, photographer. August 1942.

        The contracts included arbitration clauses that, on the face of the contracts, applied to the seller, F.L. Industries, the buyer ThyssenKrupp, and F.L. Industries' subcontractors. One of the subcontractors, GE Energy, provided nine motors to power the mills. When the motors failed, Outokumpu Stainless USA, which had acquired the plant, sued GE Energy, which removed to federal court, seeking to compel arbitration, though as a subcontractor, it was not a signatory to the arbitration agreement. 

        The New York Convention is a multilateral treaty addressing international arbitration. While the New York Convention provides that parties to an arbitration may compel arbitration, the Court found that the treaty is silent about nonsignatories. Under many state law theories, such as agency, alter ego, and equitable estoppel, nonsignatories to an arbitration agreement can compel arbitration.  SCOTUS found that the New York Convention allows domestic law as a filler where it does not contradict the New York Convention. And because Alabama law allows nonsignatories to rely on equitable estoppel in order to compel arbitration, GE Energy will now be allowed on remand to argue that Alabama law allows it to compel arbitration.

        Justice Sotomayor concurred, while insisting on a clarifying point: "Any applicable domestic doctrines must be rooted in the principle of consent to arbitrate." So the applicable state doctrine allowing a nonsignatory to compel arbitration must also be based on the principle of consent to arbitrate.

        BONUS: Wikipedia has an article on the rolling process in metal working. The article includes a gif that enables us to visualize how the process works, as metal is extruded between the rollers. Looks kind of like a pasta machine.