The case of the day is Outokumpu Stainless USA, LLC v. Converteam SAS (11th Cir. 2018). Outokumpu operated a steel plant in Alabama. It contracted with Fives for the purchase of three cold rolling mills for use in the plant. The contract had an agreement to arbitrate calling for arbitration in Germany under the ICC Rules. GE Energy Conversion France SAS was identified in the contract as a potential subcontractor; its job, in the event, was to provide the motors for the mills. Although the contract defined the buyer and the seller as the “Parties,” it also said that the word “seller” includes sub-contractors, unless expressly provided. GE and Fives were also party to an “Agreement for Consortial Cooperation,” unknown to Outokumpu at the time of the execution of the main contract, which provided that “any and all stipulations of the [main contract] shall apply mutatis mutandis to each party for its own scope of supply and services,” and which contained an agreement to arbitrate disputes in Paris under the ICC Rules.
When the motors failed, Outokumpu sued GE in the Alabama Circuit Court. GE removed the case to the Southern District of Alabama, asserting jurisdiction under FAA § 205. Outokumpu moved to remand, and GE moved to compel arbitration. The district court denied the motion to remand and granted the motion to compel arbitration. Outokumpu appealed.
On the remand issue, the question was whether the “subject matter of [the] action — relates to an arbitration agreement or award falling under the [New York] Convention.” 9 U.S.C. § 205. The Eleventh Circuit joined the Fifth, Eighth, and Ninth Circuits, holding that
while the link between the arbitration agreement and the dispute is not boundless, the arbitration agreement need only be sufficiently related to the dispute such that it conceivably affects the outcome of the case. Thus, as long as the argument that the case “relates to” the arbitration agreement is not immaterial, frivolous, or made solely to obtain jurisdiction, the relatedness requirement is met for purposes of federal subject matter jurisdiction.
And the court noted that this question is not the same as the ultimate question of arbitrability. The court must first determine whether the arbitration agreement may “fall under the Convention.” This turns on well-known factors: whether the agreement is in writing and either signed by the parties or contained in an exchange of letters or telegrams; whether the agreement calls for arbitration in the territory of a party to the Convention;whether the agreement arises out of a commercial relationship; and whether a party is not an American citizen, or instead whether the commercial relationship has a relationship with a foreign state. Next, the court must decide whether there is a non-frivolous basis to conclude that the agreement relates to the action such that the agreement to arbitrate could affect the outcome of the action. Here, the test was clearly met, because the action was for breach of the contract that pertained to the agreement to arbitrate.
The more interesting question was the question of arbitrability. A case under the convention is arbitrable only if there is “an agreement in writing within the meaning of the Convention.” The Convention itself (article 2) defines “agreement in writing” to “include an arbitral clause in a contract or an arbitration agreement, signed by the parties, or contained in an exchange of letters or telegrams.” The court held that a contract could be “signed” for these purposes, if the signatory was in privity with the party who is seeking to arbitrate, or whom another party is seeking to compel to arbitrate. But without privity, a signature is required. And GE was not a privy of the seller: it was a “stranger to the Contracts and, at most, a potential subcontractor.”
GE argued that it was entitled to compel arbitration under Chapter 1 of the FAA. This would have been an interesting argument had it been presented to the District Court: under Chapter 1, the agreement to arbitrate must be in writing, but there is no requirement that it be signed. I came across this issue recently in a domestic arbitration: the contract had two pages and two spaces for the respondent to sign, and the respondent had signed the first page but not the second page (the page with the arbitration clause). The respondent claimed the case was not arbitrable. In my award I pointed out that even the absence of a signature on both pages wouldn’t have been fatal to the claimant.
I am not sure how the court would have resolved the point: without doing some looking, I’m not sure whether Chapter 2’s requirements trump Chapter 1 in cases falling under the Convention. But GE had failed to raise the argument below, so the court didn’t consider it.