Recent Court Cases in International Commercial Arbitration
Developments in Selected Jurisdictions: Germany, France, the UAE, the UK, and the US
.png)
On January 28, 2021, the AUWCL Center on International Commercial Arbitration invited four alumni who had studied arbitration at the Center as part of their LL.M. training to discuss recent jurisprudential developments in international commercial arbitration. Each panelist addressed different jurisdictions. The Director of the Center, Professor Horacio A. Grigera Naón, moderated the discussion with an audience of more than seventy students and practitioners connecting from around the world. The panel discussion addressed current trends regarding the determination of the law applicable to the arbitration agreement, the extension of arbitration clauses to non-signatories, the support of local courts for the production of evidence in an arbitration proceeding, and the competent courts to recognize and enforce and to set aside arbitral awards. In the Q & A session after the initial presentations, the panelists, the moderator and the audience further clarified and discussed some of these topics.
Ms. Marine de Bailleul, Associate at Reed Smith LLP in London, started the discussion by explaining the case of In Kabab-Ji SAL (Lebanon) v. Kout Food Group (Kuwait), which is an arbitration that was submitted to French and English courts for annulment and recognition and enforcement. In this case, the French and English courts arrived at contradicting findings on the question of the law applicable to the arbitration agreement.
On January 20, 2020, the English Court of Appeal decided that (i) the law of the underlying contract, English law, governed the arbitration agreement (the wording of the arbitration clause demonstrated a clear intention of the parties that their entire contract would be governed by English law); and (ii) the first instance judge should have made a final decision that, under English law, Kout Food Group was not a party to the arbitration clause or to the underlying contract. In ruling in this way, the English Court of Appeal generally upheld the first instance decision. Indeed, the High Court of Justice of England & Wales had determined that (i) English law governed the validity of the arbitration clause and (ii) Kout Food Group had not become a party to the arbitration clause, but declined to make a final determination on this point in case further evidence emerged on this issue after the French proceedings (discussed below). The High Court therefore refused enforcement and recognition of the award.
In contrast, on June 23, 2020, the Paris Court of Appeal confirmed the arbitral tribunal’s finding that the law of the seat, French law, governed the arbitration agreement and the issue of its validity. The Paris Court of Appeal found that it was not bound by the English decisions. It ruled that the arbitration clause is legally independent from the underlying contract in which it is included; and there was nothing in the underlying contract to disturb or derogate from the substantive rules of international arbitration applicable at the seat (namely the doctrine of separability of the arbitration clause, pursuant to which the arbitration clause is legally independent from the underlying contract in which it is included, and its existence and validity are interpreted only according to the common will of the parties, subject to French mandatory laws and international public policy, without the need to refer to any national law).
Both jurisdictions’ Supreme Courts are due to issue further judgments on these matters.
Eckhard Hellbeck, Counsel at White & Case in Washington, D.C., discussed the U.S. Supreme Court case of GE Power v. Outokumpu, No. 18–1048. Argued January 21, 2020—Decided June 1, 2020. The case background is that ThyssenKrupp Stainless USA, LLC, 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 subcontractor agreement with petitioner (GE Energy) for the provision of nine motors to power the cold rolling mills. After the motors for the cold rolling mills allegedly failed, Outokumpu Stainless USA, LLC (which acquired ownership of the plant), and its insurers sued GE Energy in Alabama state court. GE Energy removed the case to federal court under 9 U. S. C. §205. It then moved to dismiss and compel arbitration, relying on the arbitration clauses in the F. L. Industries and ThyssenKrupp contracts. The District Court granted the motion, concluding that both Outokumpu and GE Energy were parties to the agreement. The Eleventh Circuit reversed. It concluded that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention or Convention) allows enforcement of an arbitration agreement only by the parties that actually signed the agreement and that GE Energy was a non-signatory. It also held that allowing GE Energy to rely on state-law equitable estoppel doctrines to enforce the arbitration agreement would conflict with the Convention’s signatory requirement.
The Supreme Court held that the New York Convention does not conflict with domestic equitable estoppel doctrines that permit the enforcement of arbitration agreements by non-signatories.
David Neukirchner, Attorney and Rechtsanwalt in New York, discussed the German Supreme Court case BGH – I ZB 45/19, Judgment of 20 February 2020. In this judgment, the German Supreme Court addressed the issue of judicial assistance in the taking of evidence in arbitral proceedings. Applicant and Respondent were conducting an ICC arbitration with the seat in Frankfurt. Applicant, with the consent of the arbitral tribunal, requested the assistance of the Local Court of Frankfurt for the taking of evidence pursuant to Sec. 1050(1) of the German Zivilprozessordnung (ZPO). The German Supreme Court held that when such a request for the taking of evidence was filed with a local state court, and if that state court decides to grant the request, the opponent of the requesting party, who opposes the requested taking of evidence, cannot appeal this decision. This case illustrates how local laws and courts can contribute to conducting arbitral proceedings efficiently.
Maria Rubert, a Partner at United Advocates in Dubai, discussed the Dubai Court of Cassation Judgment No. 1/2018, of 11 July 2018. This case dealt with the recognition and enforcement of an arbitral award issued under the Dubai International Financial Arbitration Center and the London Court of International Arbitration (DIFC-LCIA). Appellants (who were the losing party in the arbitration) resisted recognition and enforcement by the DIFC courts with the argument that the mainland courts should decide about the enforcement. The Court of Cassation did not only dismiss the case about referring the claim for recognition to the mainland Dubai courts, but also added that the “competent court” to decide about recognition and enforcement are the DIFC courts. This comment generated a separate opinion by three judges to clarify that while the Dubai courts may be the only ones with jurisdiction to entertain a setting aside procedure, both Dubai and DIFC courts should have the competence to hear a claim for recognition and enforcement of the award.