In short, the Eleventh Circuit found that Article II of the New York Convention requires a party to be an actual signatory to the arbitration clause it seeks to enforce, and that the equitable estoppel doctrine conflicts with Article II of the New York Convention. By concluding that the equitable estoppel doctrine conflicts with Article II of the New York Convention, the Eleventh Circuit sided with the Ninth Circuit, and rejected the conclusion reached by the First and Fourth Circuits, which have allowed non-signatories to employ equitable estoppel to enforce arbitration clauses that fall under the New York Convention.³

GE Power later appealed the Eleventh Circuit’s ruling to the U.S. Supreme Court, which accepted the case to resolve the split between federal appellate circuits as to whether the doctrine of equitable estoppel conflicts with Article II of the New York Convention.

The U.S. Supreme Court determines that equitable estoppel conforms with the New York Convention

In its decision, the U.S. Supreme Court rejected the Eleventh Circuit’s reasoning and concluded that GE Energy could employ the doctrine of equitable estoppel to enforce the arbitration clause in the Manufacturing Contract against Outokumpu under Article II of the New York Convention.

To reach that conclusion, the Supreme Court first found that in cases which fall under Chapter 1 of the U.S. Federal Arbitration Act (FAA), which governs domestic and other arbitrations seated in the U.S., non-signatories may enforce arbitration clauses against signatories.

The Supreme Court next concluded that Chapter 2 of the FAA, which implements the New York Convention in the U.S., expressly provides that Chapter 1 concurrently applies in New York Convention cases where it does not conflict with Chapter 2. The Supreme Court found that because the New York Convention does not address the issue of non-signatory enforcement, Chapter 1’s endorsement of the equitable estoppel doctrine complements Chapter 2, and equitable estoppel may therefore be employed by non-signatories to enforce arbitration clauses against signatories in cases subject to the New York Convention.⁴ Specifically, the Court stated that the New York Convention’s silence on the issue of non-signatories “is dispositive here because nothing in the text of the Convention could be read to otherwise prohibit the application of domestic equitable estoppel doctrines.”⁵

The Court then extracted a broader principle from this reasoning – namely, that the New York Convention sets “baseline requirements” for the recognition of foreign arbitral awards and “does not prevent the application of domestic laws that are more generous in enforcing arbitration agreements.”⁶ It therefore decided that when the New York Convention is silent on an issue, Chapter 1 plays a gap-filling role in cases that fall within the ambit of Chapter 2.

Lastly, the Supreme Court also looked to see whether other New York Convention signatory states allow non-signatories to enforce agreements under Article II and found that “the weight of authority from contracting states” shows that they not only apply domestic law to enforce arbitration agreements under the New York Convention, but “permit enforcement of arbitration agreements by entities who did not sign an agreement.”⁷ The Supreme Court therefore sought to harmonize its practice with that of other signatory states around the world.

The Court subsequently remanded the case to the Eleventh Circuit to decide whether applicable domestic-law equitable estoppel doctrines would permit GE Energy to compel arbitration.

Practical implications of the GE Power decision

The GE Power decision has several practical implications for international arbitration practitioners and users.

First, the decision confirmed that non-signatories may compel signatories to arbitrate claims under the New York Convention, and the Supreme Court did so in a manner that is consistent with how many large international projects are structured. Any other conclusion would have put the U.S. at a disadvantage to other jurisdictions that allow non-signatories to enforce international arbitration agreements, and could have negatively impacted the attractiveness of the U.S. as an arbitral seat.

Second, the decision confirms that international arbitration agreements should be enforced in the same manner as domestic agreements, and practically ensures that any positive developments in domestic clause enforcement cases will be applicable to international arbitration agreements.

Third, the decision confirms that contracting states may treat clauses and awards more favorably than the New York Convention requires, which could have implications in the future for areas such as award enforcement.

Fourth, by looking to the manner in which other jurisdictions apply the New York Convention, the Court signaled a willingness to take an international approach to the treaty, which could also have positive future consequences, particularly in the area of award enforcement. 

Conclusion

The GE Energy decision is a welcome outcome that constitutes further proof of the Supreme Court’s pro-arbitration stance and additional evidence of the United States’ attractiveness as an international arbitration seat.

1. No. 18-1048, Slip Op. (June 1, 2020) (“GE Power”).
2. In the U.S., the equitable estoppel doctrine permits a non-signatory to a contract which contains an arbitration clause to rely on that arbitration clause when the signatory asserts claims that implicate the contract.
3. Compare GE Energy Power Conversion France SAS Corp., FKA Converteam SAS v. Outokumpu Stainless USA, LLC., 902 F. 3d 1316, 1326 (CA11 2018), and Yang v. Majestic Blue Fisheries, LLC, 876 F. 3d 996, 1001–1002 (CA9 2017), with Aggarao v. MOL Ship Mgmt. Co., 675 F. 3d 355, 375 (CA4 2012), and Sourcing Unlimited, Inc. v. Asimco Int’l, Inc., 526 F. 3d 38, 48 (CA1 2008).
4. GE Power, at 6.
5. Id., at 6.
6. Id., at 7-8.
7. Id., at 9 (citing G. Born, International Commercial Arbitration section10.02, pp. 1418–1484 (2d ed. 2014)).