On June 1, 2020, in GE Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA, LLC, the US Supreme Court ruled, in a unanimous opinion, that 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, declining to accept Outokumpu’s invitation to treat international arbitration agreements differently from domestic arbitration agreements.
Outokumpu, the owner of a steel manufacturing plant, entered into contracts with F.L. Industries, Inc. for cold rolling mills. These contracts contained arbitration agreements. F.L. Industries entered into subcontracts with GE for production of the motors for cold rolling mills. The motors allegedly failed, and Outokumpu filed suit against GE in Alabama state court. GE removed the case to federal court and moved to compel arbitration of the dispute. The US District Court for the Southern District of Alabama granted the motion to compel arbitration and dismissed the action. Outokumpu appealed, and the United States Court of Appeals for the Eleventh Circuit reversed the order compelling arbitration. The Eleventh Circuit held that only signatories (or their privies) to an arbitration agreement governed by the New York Convention were entitled compel arbitration, and because GE did not sign the arbitration agreement with Outokumpu, GE could not compel arbitration by invoking the doctrine of equitable estoppel.
In reaching this decision, the Eleventh Circuit sided with the Ninth Circuit’s conclusion in Yang v. Majestic Blue Fisheries, LLC, 876 F.3d 996, 1001 (9th Cir. 2017) that the New York Convention “does not allow non-signatories or non-parties to compel arbitration” and rejected contrary holdings of the First and Fourth Circuits. The First Circuit in Sourcing Unlimited, Inc. v. Asimco Int’l, Inc., 526 F.3d 38, 47 (1st Cir. 2008), held that the New York Convention incorporates the doctrine of equitable estoppel, which “precludes a party from enjoying rights and benefits under a contract while at the same time avoiding its burdens and obligations.” The Fourth Circuit twice had held that equitable estoppel applies to arbitration agreements subject to the New York Convention. See Aggarao v. MOL Ship Mgmt. Co., 675 F.3d 355 (4th Cir. 2012); Int’l Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411 (4th Cir. 2000). The Eleventh Circuit’s decision thus deepened the circuit split on this issue, and GE filed a petition for a writ of certiorari, seeking reversal and resolution of the circuit split.
In a unanimous opinion, the Court reversed the Eleventh Circuit’s ruling, holding that the New York Convention does not conflict with the enforcement of arbitration agreements by non-signatories under domestic-law equitable estoppel doctrines. The Court remanded the case for a determination of whether GE could compel arbitration under equitable estoppel principles on the facts of the case.
In reaching its holding, the Court explained that: the text of the New York Convention does not prohibit the application of domestic equitable estoppel doctrines; the Convention’s drafting history does not indicate any intention to prohibit courts from applying domestic law that would allow non-signatories to compel arbitration; and the weight of authority from contracting states indicates that the Convention does not prohibit application of domestic law addressing the enforcement of arbitration agreements.
Importantly, the Court’s recent Outokumpu decision is consistent with its decision in Arthur Andersen LLP v. Carlisle, 556 U. S. 624, 630 (2009), where it determined that the Federal Arbitration Act does not “alter background principles of state contract law regarding the scope of agreements (including the question of who is bound by them).” In Arthur Andersen, the Court recognized that the FAA permits a non-signatory to rely on state-law equitable estoppel doctrines to enforce an arbitration agreement. 556 U. S., at 631–632. Had the Court affirmed the Eleventh Circuit’s ruling and accepted Outokumpu’s position, international arbitration agreements would have been placed on an entirely different footing than domestic arbitration agreements. The Court thus resolved a split among the Circuits and maintained consistency in the treatment of domestic and international arbitration agreement in the United States.