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Justices Expand Foreign Arbitration Accords in GE Unit Case (1)

June 1, 2020, 2:45 PMUpdated: June 1, 2020, 4:23 PM

A non-party to a foreign arbitration agreement can still enforce it under an international treaty provided it can show a sufficient connection to those who signed it, the U.S. Supreme Court said.

The high court’s unanimous ruling on Monday that overturned a lower court decision broadens the reach of such agreements while continuing its robust pattern of upholding arbitration pacts generally.

The decision is a win for a wholly-owned overseas subsidiary of General Electric Co. The aligns foreign arbitration agreements under the U.N. Convention on the Recognition and Enforcement of Foreign Arbitral Awards with domestic agreements under the Federal Arbitration Act by allowing non-signatories to sometimes enforce them.

Justice Clarence Thomas said in writing for the majority that the so-called New York Convention sets only baseline rules for signatory states dealing with international arbitration agreements.

Domestic laws, like the equitable doctrine here, can “fill gaps in the Convention,” Thomas said.

Justice Sonia Sotomayor agreed, but wrote separately to emphasize that the decision to enforce an arbitration agreement by a non-party must still be rooted in the idea of consent to arbitrate.

“This limitation is part and parcel of Federal Arbitration Act (FAA) itself,” she said.

But in this case, the party against whom the agreement is being enforced appears to have agreed to arbitrate with subcontractors like GE, Sotomayor said.

The justices sent the case back to the U.S. Court of Appeals for the Eleventh Circuit, which had said that the New York convention only allows for the parties that signed an agreement to enforce it.

The Supreme Court wants the Eleventh Circuit to determine whether an Alabama-based steel plant run by Outokumpu Stainless USA must arbitrate its claims over a dispute involving steel mill motors against GE Energy Power Conversion France SAS in Europe rather than in more plaintiff-friendly U.S. courts.

In doing so, it left open the question of whether the Eleventh Circuit should give special weight to the government’s position in treaty cases like this.

The government agreed with GE that it should be able to enforce the agreement, so the high court didn’t have to address the issue. But the justices seem skeptical of giving special deference to the government in this instance.

“We have never provided a full explanation of the basis for our practice of giving weight to the Executive’s interpretation of a treaty,” Thomas wrote. “Nor have we delineated the limitations of this practice, if any.”

The case is GE Energy Power Conversion France SAS v. Outokumpu Stainless USA LLC, U.S., No. 18-1048, 6/1/20.

(Updates with quotes from the opinion.)

To contact the reporter on this story: Kimberly Strawbridge Robinson in Washington at krobinson@bloomberglaw.com

To contact the editors responsible for this story: Tom P. Taylor at ttaylor@bloomberglaw.com; John Crawley at jcrawley@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com

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