A Party to an Arbitration Agreement May Be Compelled to Arbitrate a Dispute

[10] Id. The court also found that Eisai, PharmaBio and IQVIA were «sophisticated business entities» that could have «easily» crafted an agreement that included the three companies if they had intended to do so. Id. at *5. Thus, the parties may give arbitrators the power for arbitrators – not the court – to determine their own power or «jurisdiction» by using contractual clauses that expressly grant that power to arbitrators, or by including in their arbitration agreement «by reference» arbitration rules that expressly grant arbitrators that power if they do so «unequivocally» and their intent «unambiguously» is. In recent years, the U.S. Supreme Court has taken over a number of arbitrations, but most of these cases have focused on domestic consumer issues such as the inclusion of class action waivers in contracts. [1] On June 1, 2020, in GE Energy Power Conversion France SAS v. Outokumpu Stainless USA, the Supreme Court considered an issue relating to international arbitration agreements between two sophisticated companies and related to the application of the New York Convention. [2] This unanimous decision was intended to clarify and standardize the application of international arbitration conventions and was widely praised for its compliance with international law. This does not mean that the rules of international arbitration and their application will be free from procedural disputes.

«Although issues of threshold of arbitrality normally have to be decided at first instance under the FAA (Ajamian, loc. cit., 203 Cal.App.4th, pp. 781-782), `[p]arties of an arbitration agreement may agree to delegate questions relating to the applicability of the agreement to the arbitrator rather than to a court.` (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 241 [171 Cal. Rptr.3d 621] (Tiri).) In the underlying case, Outokumpu claims that GE Energy`s engines failed, causing more than $100 million in damages. Outokump then filed a lawsuit against GE Energy in a State of Alabama court, which GE Energy then referred to federal court. The District Court dismissed the lawsuit against GE Energy in favor of arbitration because the agreement between ThyssenKrupp and F.L. Industries defined the «parties» as including subcontractors, which would include GE Energy. In Hearn v. Comcast Cable Communs., LLC, 2019 U.S. Dist.

LEXIS 1811430 *23 (October 21, 2019), the court ruled that a claimant`s right to legal protection under the Fair Credit Reporting Act (FCRA) did not relate to the service contract between the plaintiff and the defendant and therefore did not fall within the scope of its arbitration agreement. The case arises from a contractual agreement between Eisai Co. (the Customer), PharmaBio (the Contractor) and IQVIA RDS Inc. (the Subcontractor). Eisai has entered into a contract with PharmaBio to conduct clinical trials related to new pharmaceutical products. PharmaBio, in turn, commissioned IQVIA to provide some work related to these studies. The «Cooperation Agreement» between Eisai and PharmaBio included a dispute resolution clause requiring that all disputes be submitted to the American Arbitration Association («AAA») for binding arbitration. [2] IQVIA was neither a signatory nor a party to the cooperation agreement, and instead its subcontracting obligations and remuneration were set out in a separate «framework service agreement» with PharmaBio. [3] In October 2018, IQVIA initiated a special proceeding within the Commercial Division under paragraph 7503(b) of the CPLR to request a stay of arbitration on the basis that it was not a party to the cooperation agreement and had not otherwise «participated» in the arbitration.

Eisai rejected the request for suspension. PharmaBio did not appear in the special proceedings. The auditors forced arbitration. They argued that the investors` claims – that they were third party beneficiaries of the contracts – they were bound by the contractual obligation to settle any dispute that «arose» from or was «related» to those contracts – even if they were not signatories. Investors, on the other hand, relied on the general principle that a party that had not signed an arbitration agreement could not be compelled to do so. «Under the protocol before us, First Options cannot demonstrate that the Kaplans have clearly agreed that the arbitrators will decide (i.e., arbitrate) the issue of arbitrability. First Options relies on the submission of a written note from chaplains to arbitrators challenging the arbitrators` jurisdiction. But the mere reasoning of the question of arbitrability for an arbitrator does not indicate a clear desire to resolve that issue, that is, a desire to be effectively bound by the arbitrator`s decision on that point. On the contrary, to the extent that the Kaplans vigorously opposed the arbitrators from deciding their dispute with First Options, one would naturally think that they did not want the arbitrators to have binding authority over them. (Emphasis added) The Supreme Court has held that the silence of the New York Convention on the issue of unsigned enforcement of arbitration agreements does not preclude such enforcement and that domestic law can be more generous in the application of arbitration agreements. The Court treated in the same way the interpretation of the New York Convention by other countries. The courts of several Contracting States allow the execution of agreements by non-signatories.

[2] The treaty required the United States and about 160 other signatory states to apply arbitration agreements between companies and individuals in member states. A simple review of the Parker Family LP case in 2004 shows that a lot of time (and undoubtedly the client`s money) was spent in the commercial department, ending up in arbitration to start all over again. In deciding the case, the court considered whether the arbitration clause would continue to bind the parties after the termination of the agreement and whether the plaintiff`s FCRA claim falls within the scope of the arbitration clause. The court stated that, based on the plain language of the contract, «the parties intended that the arbitration clause would survive the termination of the agreement.» However, the tribunal ultimately dismissed the arbitration because the claimant`s claims did not arise from the agreement and therefore did not fall within the scope of the arbitration clause. «It is easy to establish the `clear and unambiguous rule`. The most difficult thing is to apply it. To what extent must parties be «clear and unambiguous» if they choose for an arbitrator to decide on his or her own jurisdiction? A simple case, of course, is when the actually signed document contains explicit language for this purpose. For example, «We want arbitrators chosen under this Agreement to have the power to decide whether what is presented to them is actually subject to arbitration under this Agreement.» But life is rarely that simple. While lawyers have the foresight to draft such clauses, their contracts are generally not subject to the courts of appeal.

Cases that end up before the courts of appeal often revolve around whether an agreement to be bound by a particular set of rules, such as the rules of the American Arbitration Association or the National Association of Securities Dealers.B, is itself sufficient to demonstrate that the parties have «clearly and unequivocally agreed» that the arbitrators would decide on their own jurisdiction. For example, if a non-signatory applies arbitration in the United States and receives an arbitral award, they may need to enforce that award in a foreign country. There is no guarantee that the executing country will recognize that a non-signatory may apply a post-confiscation arbitration agreement or a similar theory. This would then create a basis for the courts of that foreign country to refuse to enforce the award under the New York Convention. [3] Even if such a complex outcome is possible, international arbitration agreements still offer companies a much better way to resolve international trade disputes than relying solely on the courts. This is especially true since there are no international treaties governing the recognition and enforcement of U.S. judgments abroad. Applying the direct benefit of confiscation theory, the Court concluded that investors sought a «direct benefit» from these liabilities, as investors` rights focused on the services they should have received as beneficiaries of the auditors` obligations, as set out in the mandate letters (i.e.

the detailed audit reports). On this basis, investors were required to comply with all obligations arising from these mandate letters, including the obligation to arbitrate. Citing the New York Court of Appeals case God`s Battalion of Prayer Pentecostal Church, Inc. v. Miele Assocs., LLP, 6 NY3d 371, 374 (2006), the court concluded that investors «cannot choose which terms [of the engagement letter] are appropriate for their purposes» and which are not. In other words, since investors relied on those contracts to assert their own rights, they could not selectively reject the arbitration clause contained in those contracts. They were «discouraged» from doing so. The scope of the arbitration or the issues that may be decided by the arbitrators are also determined by the specific language in the written agreement of the parties. .

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