In GE Energy Power Conversion France SAS v. Outokumpu Stainless USA LLC, SCt. No. 18?1048 (June 1, 2020), ThyssenKrupp Stainless entered into three contracts with F. L. Industries, Inc. for the construction of cold rolling mills at ThyssenKrupp?s steel manufacturing plant in Alabama. Each contract contained a clause requiring arbitration of any contract dispute. F. L. Industries then entered into a subcontract with GE for the provision of nine motors to power the mills. After the motors for the mills allegedly failed, Outokumpu Stainless USA, LLC (which acquired ownership of the plant), and its insurers sued GE in Alabama state court. GE removed the case to federal court and then moved to dismiss and compel arbitration, relying on the arbitration clauses in the three ThyssenKrupp contracts.
The District Court granted the motion, concluding that both Outokumpu and GE were parties to the agreement and the Eleventh Circuit reversed, concluding instead that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards allows enforcement of an arbitration agreement only by the parties that actually signed the agreement and that GE Energy was a nonsignatory. The 11th Circuit also held that allowing GE to rely on state-law equitable estoppel doctrines to enforce the arbitration agreement would conflict with the Convention?s signatory requirement.
In turn, the Supreme Court reversed, holding that the Convention does not conflict with domestic equitable estoppel doctrines that permit the enforcement of arbitration agreements by nonsignatories to those agreements. The Court observed that the Federal Arbitration Act (FAA) permits courts to apply state-law doctrines relating to the enforcement of contracts, and that the Court had in fact previously recognized that the FAA allowed nonsignatories to rely on state-law doctrines to enforce an arbitration agreement. The Court concluded that nothing in the text of the Convention can be read to prohibit the application of domestic equitable estoppel doctrines. Indeed, the Court observed that “[f]ar from displacing domestic law, the provisions of [the Convention] contemplate the use of domestic doctrines to fill gaps in the Convention.” And nothing in the drafting history of the Convention called for a different conclusion.