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On June 1, 2020, the U.S. Supreme Court decided in GE Energy Power Conversion France SAS Corp., FKA Converteam SAS v. Outokumpu Stainless USA, LLC1 (GE Power) that non-signatories may employ the doctrine of equitable estoppel to enforce arbitration agreements that fall within the scope of the 1958 United Nations Convention on the Recognition of Foreign Arbitral Awards (New York Convention) against signatories. The GE Power decision is significant for international arbitration practitioners because it: (1) brings U.S. arbitration law on enforcement by non-signatories into line with the law in other major arbitral jurisdictions; (2) constitutes another example of the pro-arbitration stance that the U.S. Supreme Court has consistently displayed over the last several decades; (3) affirms that the New York Convention establishes a “baseline” of treatment that does not preclude more favorable standards for award recognition and enforcement; and (4) signals a willingness to look to the manner in which foreign courts apply the New York Convention to achieve universal outcomes.

Authors: James P. Duffy IV Ben Love

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Background 

The dispute in GE Power arose out of allegations by Outokumpu Stainless USA, LLC (Outokumpu) that GE Energy Power Conversion France SAS Corp. (GE Energy), which was a subcontractor to F.L. Industries, had manufactured faulty motors. 

In 2007, F.L. Industries entered into three contracts with Outokumpu’s legal predecessor to manufacture a steel rolling plant (Manufacturing Contract) in the U.S. state of Alabama. The Manufacturing Contract contained an arbitration clause.

F.L. Industries later subcontracted with GE Energy to design and build motors for the plant. GE Energy did not, however, execute the Manufacturing Contract in its subcontractor role.

Outokumpu and its insurers later sued GE Energy in state court, alleging that the motors that GE Energy had designed and installed in the plant had failed. GE Energy responded to that lawsuit by removing the case to federal district court and then invoking the arbitration clause in the Manufacturing Contract. GE moved to compel arbitration of Outokumpu’s claims on grounds that Outokumpu was invoking the terms of the Manufacturing Contract against GE Energy, and was therefore estopped from avoiding that contract’s arbitration obligations.2

The district court granted GE Energy’s motion to compel on grounds that GE Energy could employ equitable estoppel to require Outokumpu to arbitrate its claims. The Eleventh Circuit Court of Appeals reversed that decision, however, on grounds that GE Energy was not a signatory to the arbitration clause found in the Manufacturing Contract within the meaning of Article II of the New York Convention and could not rely on the equitable estoppel doctrine to invoke that arbitration clause.