Non-Signatories Cannot Compel Arbitration Under Arbitration Agreements Pursuant to the New York Convention: Eleventh Circuit | Practical Law

Non-Signatories Cannot Compel Arbitration Under Arbitration Agreements Pursuant to the New York Convention: Eleventh Circuit | Practical Law

In Outokumpu Stainless USA, LLC, et al. v. Converteam SA, the US Court of Appeals for the Eleventh Circuit held that a non-signatory sub-contractor may not compel arbitration under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).

Non-Signatories Cannot Compel Arbitration Under Arbitration Agreements Pursuant to the New York Convention: Eleventh Circuit

by Practical Law Litigation
Published on 04 Sep 2018 • International, USA (National/Federal)
In Outokumpu Stainless USA, LLC, et al. v. Converteam SA, the US Court of Appeals for the Eleventh Circuit held that a non-signatory sub-contractor may not compel arbitration under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).
On August 30, 2018, in Outokumpu Stainless USA, LLC, et al. v. Converteam SA, the US Court of Appeals for the Eleventh Circuit held that a non-signatory sub-contractor may not compel arbitration under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). ( (11th Cir. Aug. 30, 2018).)
Buyer Outokumpu Stainless, LLC, a steel manufacturer with a plant in Alabama, entered into an agreement with seller Fives to provide Outokumpu with cold rolling mills, which is required for manufacturing and processing certain steel products. Outokumpu and Fives' contract contained a clause requiring the "parties" to submit disputes to arbitration. "Parties" under the terms of the contract included both the buyer and the seller, and "seller" included any subcontractor. Fives then subcontracted the production of the motors for the cold rolling mills to GE Energy Conversion France SAS. When those motors failed to operate, Outokumpu sued GE Energy in Alabama state court. GE Energy removed the case to federal district court. Outokumpu moved to remand and GE Energy moved to compel arbitration. The district court granted the motion to compel arbitration and dismissed the action, and Outokumpu appealed.
The Eleventh Circuit reversed. It held that the New York Convention requires arbitration agreements to be signed by the parties before the court or their privities. GE Energy did not sign the agreement, and while the terms of the contract included subcontractors as "sellers" who were subject to the arbitration clause, the court held that the creation of this relationship after the arbitral clause was signed was not sufficient to make it a signatory. The court further reasoned that despite the Federal Arbitration Act (FAA) policy in favor of arbitration, Chapter 2 of the FAA codified the New York Convention, and Chapter 2's signing requirement trumps Chapter 1. Most courts considering the issue have held the opposite (see Practice Note, Agreements in Writing under US Arbitration Law: International Agreements).