Estoppel Doctrine in Arbitration
By Andra Curutiu
Can a national court use a domestic legal doctrine in order to compel arbitration in an international dispute?
This is the question to be decided in the dispute between GE Energy Power Conversion France SAS (hereinafter ¨GE Energy¨) v. Outokumpu Stainless USA LLC (hereinafter ¨Outokumpu¨)[1]. The case, which is currently pending adjudication, requires the US Supreme Court to decide whether the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereinafter ¨the New York Convention”) permits a non-signatory to an arbitration agreement to compel arbitration based on the doctrine of equitable estoppel.
In 2007, Outokumpu, the USA subsidiary of Outokumpu Oyj, contracted F.L. Industries Inc. (now Fives St Corp. (“Fives”)) for the purchase of cold rolling mills. Any dispute between the parties would have been referred to arbitration in Düsseldorf, under the substantive laws of Germany. Subsequently, Fives concluded a consortium agreement with GE Energy, a foreign corporation established in France, to supply the motors for three of the mills. The consortium agreement provided that all stipulations contained in the Outokumpu USA-Fives contracts would bind each party. The agreement also required the parties to resolve any arising disputes through arbitration in France, applying the ICC Rules.
When the motors failed in 2015, Outokumpu sued GE Energy in the Alabama state court. GE Energy removed to federal court and moved to dismiss and compel arbitration. The district court granted GE Energy’s motion. Outokumpu appealed to the Eleventh Circuit, which reversed and remanded the District Court’s decision. During the case before the Eleventh Circuit, GE Energy relied its argument on the doctrine of equitable estoppel.
Equitable estoppel serves primarily as a defensive mechanism, in order to protect the equity-based expectations of a party which relied on the existence of an arbitration clause. The US Supreme Court relied on this doctrine in numerous cases to compel arbitration arising from disputes under the Federal Arbitration Act.
Accordingly, if the current dispute had indeed arisen from a domestic arbitration agreement, GE Energy could have enforced it as long as it satisfied the domestic non-signatory enforcement doctrines, like equitable estoppel. However, this dispute is governed by the New York Convention. In this regard, the Eleventh Circuit rejected GE Energy´s argument that an arbitration agreement may be implied by conduct under the equitable estoppel doctrine. GA Energy appealed the case.
In the Introductory part for the Petition for a writ of certiorari[2], GE Energy stated that The New York Convention does not conflict with the doctrine of equitable estoppel and they ´should not have been worse off simply because it is a foreign corporation´.[3]
The decision of the US Supreme Court will be of paramount importance for two reasons.
First, it is often debated whether international arbitration should be compelled when a party to the dispute is not a party to the arbitration agreement. As it has been described above, US courts have used the doctrine of equitable estoppel to do so in domestic arbitration. However, in international arbitration, this is slightly different and the New York Convention is silent on the matter. Accordingly, the case could have the potential to provide some clarity.
Second, the core of GE Energy’s position is that nothing in the New York Convention explicitly forbids the application of domestic rules, like equitable estoppel. However, the doctrine of equitable estoppel is mostly associated with common law tradition and it is not recognized as being part of customary international law. If the US Supreme Court compels arbitration, it could raise questions of ¨How far can a Court go in interpreting international obligations¨ or ¨Could this be the departure point of equitable estoppel in international arbitration?¨
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[1] GE Energy Power Conversion France SAS, Corp. V. Outokumpu Stainless USA, LLC, et al., 902 F.3d 1316 (11th Cir. 2018).
[2] The Petition can be accessed at https://www.supremecourt.gov/search.aspx?filename=/docket/docketfiles/html/public/18-1048.html
[3] GE Energy Power Conversion France SAS, Corp. V. Outokumpu Stainless USA, 902 F.3d 1316 (11th Cir. 2018), cert. Granted, (U.S. February 07, 2019) (No. 18-1048).