Matthew H. Kirtland, Katie Connolly, Esha Kamboj and Ernesto M. Hernandez | Norton Rose Fulbright
This past year, most in-house counsel have wrestled with significant disruption, distractions and lack of time. It has proved difficult for many to stay on top of legal developments. This article offers summaries of the most significant recent international arbitration law developments in the United States.
Impact of corruption on enforceability of awards
In Vantage Deepwater Company v Petrobras America Inc, the Supreme Court denied Petrobras’s petition for certiorari concerning a Fifth Circuit decision confirming Vantage’s arbitral award over Petrobras’s objection that the award had been procured by bribery and contrary to US public policy. Petrobras had asked the Supreme Court to clarify whether US courts should:
review de novo an arbitrator’s conclusions on issues of law or mixed questions of law and fact bearing on the ultimate question of whether United States public policy should prevent enforcement of an arbitral award.
In the now-final decision, the Fifth Circuit deferred to the arbitral tribunal’s conclusion that Petrobras had “ratified” the parties’ allegedly corrupt contract because it had notice of alleged bribery and nonetheless performed.(1)
Foreign sovereign immunity
In Bolivarian Republic of Venezuela v Crystallex International Corp, Venezuela, PDVSA, CITGO Petroleum and PDV Holding appealed to the Third Circuit a 14 January 2021 Delaware district court order denying their respective post-judgment motions challenging the court’s grant of Crystallex’s writ of attachment fieri facias and directing the sale of the CITGO shares to proceed.(2) The January order followed the Supreme Court’s May 2020 denial of Venezuela’s and PDVSA’s joint petition for certiorari in which they sought review of a now-final Third Circuit decision holding, among other things, that:
- jurisdiction under the Foreign Sovereign Immunities Act (FSIA) from a recognition proceeding carried over to post-judgment enforcement and did not require an independent basis for subject matter jurisdiction; and
- the Bancec alter ego extensive control analysis did not require proof that PDVSA was extensively controlled by Venezuela and that its control was connected to Crystallex’s injury.(3)
In Process & Industrial Developments Ltd v Federal Republic of Nigeria, Nigeria appealed to the DC Circuit a district court decision holding that signatories to the New York Convention relinquish their ability to claim sovereign immunity in other convention signatories’ courts.(4) In June 2020, the DC Circuit reversed a different district court decision in the same case, holding that Nigeria’s immunity defence – that a confirmable “award” under the FSIA arbitration exception cannot include an award set aside by a court with supervisory jurisdiction – was colourable and that it could not be forced to brief the merits before resolution of this immunity defence, because the FSIA provides immunity from litigation as well as from entry of adverse judgments.(5)
Service on foreign parties
In Compañía de Inversiones Mercantiles (CIMSA) v Grupo Cementos de Chihuahua (GCC), the Tenth Circuit affirmed a Colorado District Court’s decision that:
- alternative service of process on a foreign party is appropriate under Federal Rule of Civil Procedure 4(f)(3) where the alternative method is not “prohibited” by the Hague Service Convention;
- the district court has personal jurisdiction over GCC; and
- the district court did not err by confirming CIMSA’s arbitral award against GCC.(6)
The Supreme Court denied GCC’s petition for writ of certiorari. Following the Supreme Court’s denial, the Colorado District Court denied GCC’s subsequent motion to vacate judgment.(7)
Contracting out to retain right to seek court interim injunctive relief
In Henry Schein, Inc v Archer & White Sales, Inc, the Supreme Court reversed itself and dismissed Schein’s petition for certiorari, leaving as final a Fifth Circuit decision that a carve-out of injunctive relief disputes from an arbitration clause meant that such actions do not first have to go to an arbitrator to determine whether the carve-out applies to the dispute.(8) In 2019, on a prior appeal in this same case, the Supreme Court had held that when a contract delegates the question of arbitrability to an arbitrator, a court may not override the delegation, even if it thinks that the argument that the arbitration clause applies to a dispute is “wholly groundless”.(9)
Evidence for use in private commercial arbitrations
In Servotronics, Inc v Rolls-Royce PLC, the parties moved to dismiss their appeal to the Supreme Court after the Court had granted Servotronics’ petition for certiorari seeking a decision on whether:
the discretion granted to district courts in 28 U.S.C. § 1782(a) to render assistance in gathering evidence for use in ‘a foreign or international tribunal’ encompasses private commercial arbitral tribunals, as the Fourth and Sixth Circuits have held, or excludes such tribunals without expressing an exclusionary intent, as the Second, Fifth, and, in the case below, the Seventh Circuit, have held.(10)
The Seventh Circuit ruled that private commercial arbitrations cannot be “proceedings before foreign or international tribunals” under 28 US Code section 1782 and denied Servotronics’s petition for discovery in support of an anticipated commercial rules arbitration in England.(11) There are at least three pending cases in which this same question is currently being argued before circuit courts.(12)
Challenge to arbitrator
In Monster Energy Co v City Beverages, LLC, the Supreme Court denied Monster Energy’s petition for certiorari, leaving as final a Ninth Circuit decision vacating an arbitral award because of evidence that the arbitrator had failed to disclose certain facts, including that the arbitrator had had an ownership interest in the arbitral institution, creating a reasonable impression of partiality. There continues to be a circuit split on the standard, with the Eleventh Circuit endorsing the “evident partiality” standard adopted by the Ninth Circuit, while the First, Second, Third, Fourth, Fifth and Sixth Circuits require a showing that “a reasonable person would have to conclude that an arbitrator was partial to one party to the arbitration”.(13)
Non-signatories to arbitration
In GE Energy Power Conversion France SAS, Corp v Outokumpu Stainless USA, LLC, the Supreme Court analysed the New York Convention’s text, its negotiation and drafting history, and the post-ratification conduct of its signatories to hold that the New York Convention does not prohibit US courts from applying the equitable estoppel doctrine to determine whether an international arbitration clause can be enforced by a non-signatory to compel arbitration. The Supreme Court reversed and remanded the Eleventh Circuit’s decision for consideration of whether GE Energy, on the facts of this case, could enforce the arbitration clauses and compel arbitration (for more details please see “New York Convention does not prohibit enforcement by non-signatory under doctrine of equitable estoppel”.(14)
Impact of Achmea on enforcement
In Micula v Romania, the DC Circuit affirmed the district court’s decision that Slovak Republic v Achmea BV (Case C-284/16) (Achmea) – in which the European Court of Justice ruled that an investor-state arbitration clause in a bilateral investment treaty between two EU member states was incompatible with EU law – did not apply to invalidate an arbitral award against Romania, because the key events leading to the award occurred before Romania’s accession to the European Union, and because the dispute did not relate to the application of EU law.(15) There are several other enforcement actions pending in DC against Spain and Italy in which the states have argued, at least in part, that the courts lack jurisdiction because of Achmea.(16)
(1) 966 F3d 361 (5th Cir 16 July 2020), cert denied, No. 20-1032, 141 S Ct 1395 (22 February 2021).
(2) Nos. 21-1276, 21-1277, and 21-1289 (3d Cir 12 February 2021).
(3) 932 F3d 126 (3d Cir 29 July 2019), cert denied, 140 S Ct 2762 (18 May 2020).
(4) No. 21-7003 (DC Cir 31 December 2020) (appealing No. 18-CV-594 (CRC), 2020 WL 7122896 (DDC 4 December 2020).
(5) 962 F3d 576, 580 (DC Cir 19 June 2020).
(6) 970 F3d 1269 (10th Cir 17 August 2020).
(7) No. 1:15-CV-02120-JLK, 2021 WL 2213193 (D Colo 30 April 2021).
(8) 935 F3d 274 (5th Cir 14 August 2019), cert granted, 141 S Ct 107 (15 June 2020), and cert denied, 141 S Ct 113 (15 June 2020), and cert dismissed as improvidently granted sub nom Henry Schein, Inc v Archer & White Sales, Inc, 141 S Ct 656 (25 January 2021).
(9) 139 S Ct 524, 529 (8 January 2019).
(10) No. 20-794 (22 March 2021).
(11) 975 F3d 689 (7th Cir 22 September 2020).
(12) Luxshare, Ltd v ZF Automotive US, Inc, Case No. 21-2736 (6th Cir. 2021); HRC-Hainan Holding Co, LLC v Yihan Hu, Case No. 20-15371 (9th Cir 2020); In re: Application of EWE Gass, Case No. 20-1830 (3d Cir. 2020). Defendants have filed a petition for certiorari to the Supreme Court before judgment. ZF Automotive US, Inc, v Luxshare, Ltd, Case No. 21-401 (2021).
(13) 940 F3d 1130 (9th Cir 22 October 2019), cert denied, 141 S Ct 164 (29 June 2020).
(14) 140 S Ct 1637 (1 June 2020).
(15) 404 F Supp 3d 265 (DDC 11 September 2019) affd, 805 F Appx 1 (DC Cir 19 May 2020).
(16) NextEra Energy Global Holdings BV v Kingdom of Spain, 19-cv-1618 (DDC 3 June 2019); 9ren Holding SARL v Kingdom of Spain, 19-cv-1871 (DDC 25 June 2019); Infrastructure Servs Luxembourg SARL v Spain, No. 18-cv-1753 (DDC 28 August 2019); E v Kingdom of Spain, 18-cv-1148 (DDC 16 May 2018), which was consolidated with Foresight Luxembourg Solar 1 SARL v Kingdom of Spain, 20-cv-0925 (DDC, transferred 7 April 2020) on 9 September 2020; Rreef Infrastructure (GP) Ltd v Kingdom of Spain, 19-cv-3783 (DDC 19 December 2019); Cef Energia, BV v Italian Republic, 19-cv-3443 (DDC 2 October 2019) and Greentech Energy Systems A/S v Italian Republic, 19-cv-3444 (DDC 14 May 2019), which have been consolidated in the Columbia District Court.