Arbitration in the Courts

August 2023 | Volume 11
Where Advocacy Meets Business

Arbitration in the Courts, August 2023
(Vol. 11)

by

U.S. Supreme Court holds that appeal from the denial of a motion to compel arbitration automatically stays litigation:

The filing of appeal divests the district court of jurisdiction because the very issue on appeal is whether the case can proceed before the trial court.

Coinbase, Inc. v. Bielski, 143 S. Ct. 1915 (2023).

Congress added Section 16(a) to the Federal Arbitration Act (FAA) in 1988, authorizing an immediate, interlocutory appeal from a trial court’s order denying a motion to compel arbitration.  The FAA is silent, however, on whether such appeal operates to stay proceedings before the trial court.  Most Circuit Courts of Appeal have held that an appeal from a non-arbitrability determination automatically stay district court proceedings, but the Ninth Circuit has held that a stay of district court proceedings is discretionary.  In Coinbase, the Supreme Court resolved this Circuit split, holding that a district court must stay its proceedings pending an appeal from the denial of a motion to compel arbitration.

The underlying dispute in Coinbase arose out of a putative class action by users of the online cryptocurrency platform who alleged that Coinbase had failed to replace funds fraudulently taken from their accounts. Coinbase moved to compel arbitration pursuant to the arbitration provision contained in the User Agreement.  The United States District Court for the Northern District of California denied Coinbase’s motion.  Coinbase took an immediate appeal under FAA §16(a) to the U.S. Court of Appeals for the Ninth Circuit.  After the district court and the Ninth Circuit both declined to stay the litigation pending resolution of the appeal, Coinbase sought review by the Supreme Court, which granted certiorari.

The Court held that an interlocutory appeal from an order refusing to compel arbitration automatically stays the district court proceedings.  The Court found that Congress enacted Section 16(a) against the background of the Court’s 1982 decision in Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58 (1982), which held that “an appeal, including an interlocutory appeal, divests the district court of its control over those aspects of the case involved in the appeal.”  Under Griggs, a stay is mandatory pending an appeal on arbitrability because “when a party appeals the denial of a motion to compel arbitration, whether the litigation may go forward in the district court is precisely what the Court of Appeals must decide.”

The Court further explained the practical reasons for requiring an automatic stay.  It noted, “absent an automatic stay of district court proceedings, Congress’s decision in § 16(a) to afford a right to an interlocutory appeal would be largely nullified.”  If trial court proceedings moved forward in the district court while the appeal on arbitrability was pending, “many of the asserted benefits of arbitration (efficiency, less expense, less intrusive discovery, and the like) would be irretrievably lost.”  In addition, the “parties could be forced to settle to avoid the district court proceedings (including discovery and trial) that they contracted to avoid through arbitration.”  For the Court, an interlocutory appeal without an automatic stay of trial court proceedings is “like a lock without a key, a bat without a ball, a computer without a keyboard – in other words, not especially sensible.”

Following Coinbase, it is now clear that an immediate appeal from an order denying a motion to compel arbitration automatically stays the litigation.  It is important to note, in contrast, there is no right under the FAA to an immediate appeal from an order granting a motion to compel arbitration.  Rather, consistent with the strong federal policy in favor of arbitration, appellate review of a district court’s decision to compel arbitration must await completion of the arbitration.

Read the court’s full decision here.


U.S. Supreme Court holds that foreign award creditor can pursue RICO claim to redress domestic debtor’s scheme to avoid enforcement:

A California award debtor’s frustration of efforts to collect on U.S. court judgment confirming a foreign award constitutes a “domestic injury” for RICO purposes.

Yegiazaryan v. Smagin et al., 143 S. Ct. 1900 (2023).

It is an unfortunate fact that award debtors sometimes resort to extreme measures to frustrate collection by hiding assets or taking other evasive measures.  In Smagin, the Supreme Court recognized that a debtor who attempts to frustrate enforcement of a U.S. judgment confirming a foreign arbitral award may be liable under the Racketeer Influenced Corrupt Organizations Act (RICO), a federal statute designed to combat organized crime.

RICO prohibits multiple participants comprising an “enterprise” from engaging in “a pattern of racketeering activity,” or conspiring to commit such violations. 18 U.S.C. § 1962.  Section 1961(1) defines “racketeering activity” to include certain enumerated predicate criminal acts, such as murder, robbery, extortion, bribery, obstruction of justice, mail or wire fraud, and money-laundering.  In addition to criminal penalties, RICO provides those injured by RICO activities with a private civil right of action for damages, which includes treble damages and attorneys’ fees.  However, a private right of action is only available where the RICO activity results in a “domestic injury.”

The Smagin case arose after an arbitral tribunal seated in London awarded $84 million to Vitaly Smagin against his former partner in a Moscow-based real estate venture, Ashot Yegiazaryan, who fraudulently misappropriated Smagin’s real estate investment.  Although both parties were Russian nationals, Yegiazaryan had relocated to California to evade indictment for that fraud.  Smagin therefore sought and obtained recognition and enforcement of the award in the United States District Court for the Central District of California.  After reducing the award to judgment, the district court issued an injunction freezing Yegiazaryan’s assets.

Yegiazaryan then allegedly embarked on a scheme to avoid this asset freeze by (i) creating a “complex web of offshore entities to conceal the funds;” (ii) “direct[ing] those in his inner circle to file fraudulent claims against him” to obtain collusive “sham judgments” that would encumber his assets; and (iii) “hiding his assets in the United States through a system of ‘shell companies’ owned by family members.”  After the district court held him in contempt for failing to comply with post-judgment orders prohibiting him from taking actions to prevent collection of the judgment, Yegiazaryan sought to avoid complying with the order by feigning illness, supported by a forged doctor’s note.  When Smagin sought to subpoena evidence from the doctor, Yegiazaryan “used ‘intimidation, threats, or corrupt persuasion’” to convince the doctor to avoid service of the subpoena.

Smagin then filed a RICO action, alleging a conspiracy “to frustrate Smagin’s collection of the California judgment through a pattern of wire fraud and other RICO predicate racketeering acts, including witness tampering and obstruction of justice.”  Yegiazaryan moved to dismiss the claims, asserting that these allegations did not plead a “domestic injury,” as the statute requires, because Smagin, as a Russian domiciliary, necessarily suffered any financial injury resulting from the non-payment outside of the United States.  The crux of Yegiazaryan’s argument was that a foreign award creditor could never recover under RICO because financial injury in the form of non-payment to a foreign domiciliary is necessarily a nondomestic injury.

The Court rejected this proposed bright line rule.  Rather, the Court held that whether a RICO claim alleges a domestic injury depends upon all of the “circumstances surrounding the alleged injury,” including “the nature of the alleged injury, the racketeering activity that directly caused it, and the injurious aims and effects of that activity.”  Where “those circumstances sufficiently ground the injury in the United States, such that it is clear the injury arose domestically, then the plaintiff has alleged a domestic injury.”

Applying this standard to the facts here, the Court reasoned Smagin’s interests in a “California judgment against . . . a California resident . . . directly injured by racketeering activity either taken in California or directed from California, with the aim and effect of subverting . . . rights to execute on that judgment in California” sufficed to show domestic injury for purposes of RICO.

In Smagin, the Supreme Court has now recognized RICO liability as a potential tool to deter and redress evasion of the enforcement of foreign awards in the U.S.  However, according to the Court, because RICO covers an “expansive” scope of predicate acts and the domestic-injury inquiry is contextual, no definitive set of factors captures the relevant considerations in all cases.  Thus, it remains to be seen, as a practical matter, the extent to which courts will find that attempts to evade foreign award enforcement rise to the level of a RICO violation.

Full disclosure: Chaffetz Lindsey represented Professor George A. Bermann of Columbia Law School as amicus curiae in support of Respondent Vitaly Ivanovich Smagin.

Read the court’s full decision here.


The FAA equitably tolls for thee:

Eleventh Circuit holds that three-month deadline to seek vacatur of an arbitral award is subject to equitable tolling and vacates award for fraud based on belatedly uncovered evidence of witness coaching during remote hearing.

NuVasive Inc. v. Absolute Medical LLC, 71 F.4th 861 (11th Cir. 2023).

Section 10 of the Federal Arbitration Act (9 U.S.C. § 10) provides the exclusive grounds for vacating an award arising from a U.S.-seated arbitration.  Pursuant to FAA § 12, notice of a motion to vacate under § 10 must be served upon the opposing party “within three months after the award is filed or delivered.”  Courts have generally strictly enforced this three-month deadline to move for vacatur, but in NuVasive, the Eleventh Circuit Court of Appeals held that the deadline may be equitably tolled in “extraordinary circumstances.”  It further found that such circumstances existed based on the discovery of evidence that one party to the arbitration was sending text messages coaching a witness who was testifying remotely.

The dispute in NuVasive concerned claims under an exclusive distribution agreement whereby Absolute Medical had the exclusive right to distribute the products of NuVasive, a medical device manufacturer.  The agreement covered a territory that included central Florida, and prohibited Absolute from distributing any NuVasive competitor’s products during the term of the agreement or for one year thereafter.  Less than one year into the agreement, Absolute terminated the agreement, and its owner immediately formed a new entity, AMS, which began distributing a competitor’s product.

NuVasive commenced suit in the U.S. District Court for the Middle District of Florida against Absolute, AMS, the companies’ owner, and certain of their sales representatives, seeking injunctive relief and damages.  The district court compelled arbitration of NuVasive’s claims for breach of contract against Absolute pursuant to the arbitration clause in the distribution agreement, and stayed the remainder of the claims pending arbitration.  The arbitrators ultimately issued an award in March 2021, finding that Absolute had breached the distribution agreement, but that NuVasive had failed to prove that Absolute caused NuVasive’s alleged lost-profit damages.

Following the award, litigation of NuVasive’s remaining claims resumed in the district court.  After NuVasive served requests for documents on the defendants, and moved the court to compel production, the district court granted the motion, in part, ordering defendants to produce certain documents by August 26, 2021.  Rather than comply, defendants moved for reconsideration, which was denied.  They did not ultimately produce the requested documents until November 4.  Six days after its belated production, Absolute moved to confirm the award.  In its motion, Absolute suspiciously stated that it believed that NuVasive would allege that there was some misconduct that would justify vacating the award, and that the court should deny any such motion as untimely.

In turns out that defendants’ belated production included certain text messages demonstrating that Absolute’s principal had been coaching a witness testifying remotely in the arbitration on how to answer certain questions during cross-examination.  As Absolute predicted, NuVasive did move to vacate the award under FAA, § 10(a)(1) on the ground that Absolute had procured the award through “corruption, fraud, or undue means.”  NuVasive, recognizing its motion was made more than three months after the award, argued that the district court should equitably toll the deadline and consider its overdue motion.

The district court held that the deadline in § 12 could be equitably tolled, and vacated the award on the grounds that Absolute had procured the award by fraud; the Eleventh Circuit affirmed.

The Eleventh Circuit first held that the three-month statutory deadline in § 12 could be equitably tolled, provided the moving party demonstrates that this “extraordinary remedy” is warranted by showing “extraordinary circumstances that are both beyond the [movant’s] control and unavoidable even with diligence.”

The court found the requisite “extraordinary circumstances” existed here considering Absolute’s “shocking conduct” in coaching its witness during a remote hearing, compounded by its attempt to “run out the clock” and cover up its misdeeds by resisting NuVasive’s attempts to obtain the documents revealing this conduct.  The court further found that NuVasive exercised due diligence.  It could not have known about the text messages until it received Absolute’s post-award document production, and once those messages were produced, NuVasive requested the district court’s permission to file its vacatur motion “mere days later.”

Turning to whether vacatur was warranted under FAA § 10(a)(1) the court applied a three-part test for whether the award was procured by fraud: (1) there was clear and convincing evidence of fraud; (2) the fraud was not discoverable upon the exercise of due diligence during the arbitration; and (3) the fraud “materially related to an issue in the arbitration.”  The court held that all three elements were met.

First, the fraud was established by clear and convincing evidence, as the timing of the text messages coincided with the witness’s testimony, and that testimony tracked the texted instructions.  Second, NuVasive could not have discovered the fraud during the arbitration because the arbitration was conducted remotely, and there was no noticeable behavior that would have alerted NuVasive to the coaching.  Third, the testimony influenced by the text messages “related directly” to several issues bearing on Absolute’s liability.

Finally, the court rejected Absolute’s argument that the fraud was not material because the testimony related only to Absolute’s liability, not the issue of damages, and the arbitrators had found that Absolute breached the parties’ agreement, but NuVasive had failed to prove that breach caused its damages.  The court held that the materiality element “does not require the movant to establish that the result would have been different absent the fraud,” because “to permit a party who committed fraud to render its fraud immaterial in this way would undermine the purpose of vacatur for fraud under § 10(a)(1).”

Read the court’s full decision here.


SDNY finds it has subject-matter jurisdiction over action to remove arbitrator for bias in Bermuda-seated arbitration:

But court holds that an arbitrator’s unfavorable procedural rulings against a party’s counsel in prior arbitration do not demonstrate bias.

Endurance Specialty Insurance Ltd v. Horseshoe Re Ltd, No. 23-cv-1831 (S.D.N.Y. July 5, 2023).

In Endurance Specialty, the United States District Court for the Southern District of New York (SDNY) clarified the broad subject matter jurisdiction of federal courts over disputes concerning international arbitrations, while reaffirming the narrow scope of their supervisory power.  Relatedly, the court reinforced the heavy burden a party faces when challenging an arbitrator for bias.

The case arose out of a reinsurance dispute between Endurance Specialty Insurance Ltd. and Horseshoe Re Ltd., both Bermuda-based companies engaged in a Bermuda-seated ad hoc arbitration.  Pursuant to the governing arbitration clause, the parties had asked the ICC Court of International Arbitration to appoint the presiding arbitrator.  After the ICC made the appointment, Endurance objected that the person appointed by the ICC Court was biased against Endurance’s counsel based on experience in a prior, unrelated arbitration.  Endurance further contended that the ICC had tainted the appointment by sharing with the arbitrators the parties’ submissions in the ICC appointment process, which showed that Horseshoe preferred an arbitrator with qualifications similar to those of the person appointed, while Endurance had urged the ICC to pick someone with a different profile.

After the ICC Court rejected Endurance’s petition to disqualify, Endurance petitioned a New York state court to remove the arbitrator based on the same objections. Horseshoe removed the state court petition to the SDNY pursuant to Chapter 2 of the Federal Arbitration Act, which incorporates the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”).  FAA § 203 provides for federal question jurisdiction over all proceedings “falling under” the New York Convention, and § 205 permits the removal of state court proceedings concerning matters within the purview of § 203.

Before the SDNY, Endurance moved to remand the case back to state court for lack of federal jurisdiction over its petition and Horseshoe cross-moved to dismiss Endurance’s petition to disqualify the arbitrator.

The court first addressed Endurance’s remand motion, which contended that federal subject matter jurisdiction under FAA § 203 was strictly limited to four types of actions, namely those to compel arbitration, enforce or vacate awards, stay an arbitration, or to obtain preliminary relief in aid of arbitration.  The court disagreed, holding that jurisdiction existed because the action “plainly ‘falls under the Convention.’”  For the court, it was “hard to conceive of a proceeding more intimately intertwined with an international arbitration than a petition to disqualify and replace the presiding arbitrator.”  Accordingly, “[b]ecause the parties’ arbitration falls under the New York Convention and the relief sought in Endurance’s petition is tightly intertwined with that arbitration, the Court has federal subject-matter jurisdiction” over the petition.

The court then turned to Horseshoe’s motion to dismiss.  As a threshold matter, the court held that it did not have the power to remove an arbitrator in an ongoing, Bermuda-based arbitration.  The parties designated Bermuda law as the procedural law, and “consistent with the plain language of the Bermuda Arbitration Act, only the Supreme Court of Bermuda can remove an arbitrator for bias in this proceeding.”

The court further explained that, even if it had the power to remove an arbitrator for bias, there would be no basis to do so.  Under Bermuda law, an arbitrator can be removed only if “there is a real danger of bias.”  The court agreed with the ICC Court’s determination that neither of the alleged grounds urged by Endurance met this standard.

First, the disclosure of the parties’ formal submissions on the appointment of an arbitrator – in accordance with the ICC Court’s usual practice – did not meet this standard, because it is “plain … that the disclosure of a party’s general preferences as to the profile of the presiding arbitrator are not sufficient to give rise to a risk of the arbitrator having a bias.”

Likewise, the alleged bias towards Endurance’s counsel based on his experience with the arbitrator in a prior case was insufficient to demonstrate a real danger bias.  First, that proceeding was “unrelated to the present case” and the “bias was alleged toward counsel and did not involve a party in the present case.”  Moreover, and in any event, “unfavorable procedural decisions by an arbitral tribunal typically do not constitute bias unless they are manifestly improper or raise due process concerns,” neither of which was shown here.  Thus, the court concluded, “the cited bases for [the presiding arbitrator’s] supposed bias and prejudice fall far short of meeting [the applicable ‘real danger’] standard, whether considered individually or taken together.”

Finally, the court noted that the result would be the same if New York law governed the bias inquiry.

Full disclosure:  Chaffetz Lindsey was counsel for Horseshoe Re Ltd.

Read the court’s full decision here.

2023 Chambers USA Recognizes Chaffetz Lindsey’s International Arbitration and Enforcement Team

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June 2023—The newly released 2023 Chambers USA Guide comes with high praise for Chaffetz Lindsey’s International Arbitration and Enforcement team.

In a first, Andy Frischknecht has earned the highly esteemed Band 1 recognition in the International Arbitration: Enforcement rankings. Andy has led or co-led most of the firm’s major award and enforcement engagements for over a decade. This marks the second year the firm overall has been recognized for its nationwide specialized practice in award and judgment enforcement.

In addition, the firm’s international arbitration team continues to be ranked in “International Arbitration: The Elite,” as one of the top eight arbitration practices nationwide—and the only New York-based boutique. For the first time, partner Gretta Walters receives personal mention for her international arbitration expertise. With all six of its core international arbitration partners individually recognized, Chaffetz Lindsey has more ranked New York lawyers than any other firm.

A source close to the firm noted, that “The Chaffetz Lindsey team has been absolutely outstanding. We’ve felt the strength of their team on every step of the collaboration – they are excellent, very responsive and open.” Another commented that the firm has a “strong arbitration team, with attorneys from different jurisdictions and special focus on the client needs. The team is excellent and the partners are very well prepared.”

Anibal Sabater, Caline Mouawad, James Hosking, Yasmine Lahlou and Gretta Walters have all been recognized for their work as Counsel in International Arbitration (Nationwide).

Anibal Sabater, David Lindsey and James Hosking have also been named among the top Arbitrators in the US.

Sources had this to say about Chaffetz Lindsey partners:

  • James Hosking is “extraordinary, his attention to detail and ability to dissect the most difficult issues is remarkable. He is the type of guy who’s great at very difficult cases – he’s like a brain surgeon.” His “secret sauce is that he has an even-handed approach. We can all modulate somewhat broadly; he brings things more to the middle – he presents the case straight down the line, he doesn’t push the envelope and he gains his credibility.”
  • Andreas Frischknecht “has a very analytical mind and he likes approaching problems in a systematic manner, always looking for the most reasonable solution.”
  • Yasmine Lahlou “has been amazingly responsive, razor sharp as a lawyer and showing great understanding of the commercial challenges of the client.”  Yasmine “is already a shining star on the international arbitration field. She is really impressive.”
  • David Lindsey “is a strategist, he’s very good at outlining the strategies of the case and looking at the big picture. He beats his opponent, but always with a smile.”
  • Caline Mouawad “is absolutely lovely. She’s very, very intelligent, very personable and came up with creative ideas. She devotes a lot of time to the case and gives us her full attention.” “I think the world of [Caline], she is incredibly smart and knowledgeable.”
  • Anibal Sabater “is extremely knowledgeable and he was extremely well prepared, he really understood the case.” He “is extremely pleasant to work with and knows how to be a real team player.”
  • Gretta Walters “is great, extremely bright, very organized and efficient.”

To view the firm’s International Arbitration profile, visit our website or the Chambers USA website.  For a full breakdown of Chaffetz Lindsey’s Chambers USA International Arbitration Rankings, see below.

2023 Chambers USA International Arbitration Rankings

USA-Nationwide International Arbitration: Enforcement

  • Andy Frischknecht (Band 1)

International Arbitration: The Elite

Firm: Band 2

USA- Nationwide International Arbitration: Counsel

  • James Hosking (Band 1)
  • Aníbal Sabater (Band 3)
  • Caline Mouawad (Band 4)
  • Yasmine Lahlou (Band 4)
  • Gretta Walters (Up & Coming)

USA-Nationwide International Arbitration: Arbitrators

  • James Hosking (Band 2)
  • Aníbal Sabater (Band 3)
  • David Lindsey (Band 3)

Arbitration in the Courts, June 2023
(Vol. 10)

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The Achmea-mania continues:

DC district court reaches conflicting decisions whether EU high court’s landmark decision deprives US courts of jurisdiction to enforce investors’ arbitral awards against Spain.

9REN Holding SARL v. Kingdom of Spain, No. 1:19-cv-1871-TSC (D.D.C. Feb. 15, 2023); Blasket Renewable Investments LLC v. Kingdom of Spain, No. 21-3249 (RJL) (D.D.C. March 31, 2023).

The Slovak Republic v. Achmea B.V., the Court of Justice of the European Union (CJEU) held that arbitration agreements in European Union Member States’ bilateral investment treaties violate EU law if they vest arbitrators with the authority to decide questions of EU law without review by EU courts. In Republic of Moldova v. Komstoy, the CJEU held that its decision in Achmea extends to arbitration agreements in multilateral treaties between EU Member States, such as the Energy Charter Treaty (ECT), a multilateral agreement intended to promote cooperation and investment in the energy sector.

In the wake of Achmea and Komstoy, US courts deciding petitions to recognize arbitral awards against European Union Member States have grappled with the jurisdictional implications of these decisions.  US courts have jurisdiction over such cases exclusively to the extent permitted by the Foreign Sovereign Immunities Act (FSIA).  The FSIA provides that foreign states are presumptively immune from suit in the US, and US courts therefore lack subject matter jurisdiction over such actions, unless one of the FSIA’s enumerated exceptions to immunity apply.  One such exception is the “arbitration” exception (FSIA § 1605(a)(6)), which provides that a foreign state is not immune against suits to enforce arbitration awards if the foreign state agreed to arbitrate and is also a signatory to any treaty or international agreement, such as the New York Convention, calling for the enforcement of such awards in the US.

In two recent decisions – 9REN Holding SARL v. Kingdom of Spain and Blasket Renewable Investments v. Kingdom of Spain – the United States District Court for the District of Columbia addressed whether Achmea and Komstoy deprived the court of jurisdiction under the FSIA’s arbitration exception to confirm awards against Spain.  Although both cases presented analogous facts and the same jurisdictional question, the courts reached opposite conclusions.

First, the similarities.  9REN and Blasket each concerned arbitration awards against Spain in favor of investors from other EU Member States who had invested in Spanish renewable energy projects.  The investor in 9REN was a Luxembourg corporation, who had invested in seven Spanish solar power projects in reliance on certain Spanish legislation incentivizing such investments, which Spain later rolled back.  The investors in Blasket were Dutch companies who had invested in Spanish renewable energy projects in reliance on certain tax incentives, which Spain later rescinded.  The investors in both cases claimed that Spain’s rescission of the favorable legislation violated the investors’ rights under the ECT.  In accordance with the ECT’s arbitration provision, the investors in both commenced arbitration against Spain.  While 9Ren pursued arbitration under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention), the investors in Blasket initiated ad hoc arbitration in Geneva under the UNCITRAL Rules.  In both cases, the tribunals issued substantial damages awards against Spain.

In each case, Spain unsuccessfully challenged the award on jurisdictional grounds.  In 9REN, an ICSID Annulment Committee denied Spain’s jurisdictional challenge.  In Blasket, after the arbitrators rejected Spain’s challenge, the Swiss Federal Supreme Court refused to annul the award.  The investors in both cases filed petitions in the United States District Court for the District of Columbia, the default venue for suits against foreign sovereigns, seeking confirmation of their respective awards.

Spain argued in both cases that the court lacked subject-matter jurisdiction under the FSIA.  Relying on Achmea and Komstoy, Spain argued that it never had the authority or legal capacity to agree to the ECT’s arbitration provisions, and thus there was no agreement on Spain’s part to arbitrate.  That is where the similarities end.  The 9REN court held it had jurisdiction over the enforcement petition, while the Blasket court held that it lacked jurisdiction.

9Ren was decided first.  The court explained that jurisdiction under the FSIA’s arbitration exception is predicated on a narrow set of jurisdictional facts, namely “the existence of an arbitration agreement, an arbitration award and a treaty governing the award.” On the other hand, a challenge to the “arbitrability of a dispute is not a jurisdictional question under the FSIA,” but rather goes to the merits of the petition.

Applying this framework, the 9REN court held that Spain’s claim that it lacked the legal capacity to agree to the ECT’s arbitration provision went to the arbitrability of the investor’s claims, not the existence of the arbitration agreement.  According to the court, “[t]he assertion that a party lacked a legal basis to enter or invoke an arbitration agreement is not a challenge to the jurisdictional fact of that agreement’s existence.”  Rather, Spain’s assertion “goes to arbitrability even if it contends that the ECT was not validly applied.”  Thus, the court held, an award debtor may “assert the lack of a legal basis for entering an agreement to contest an award’s merits…, but not to rebut a plaintiff’s evidence that an agreement to arbitrate exists.”  The court noted that “there is no question as to the existence of the ‘copies of [the underlying treaty], the notice of arbitration, and the tribunal’s decision.”  It therefore concluded that whether Spain “lacked a legal basis” to enter the arbitration agreement went to the merits of the petition, and Spain could not deploy this “arbitrability” argument as a “backdoor challenge to FSIA jurisdiction.”

After finding jurisdiction, the court moved to considering 9REN’s motion for a preliminary anti-suit injunction enjoining Spain from continuing to prosecute an action in Luxembourg, which sought to enjoin 9REN from continuing to prosecute its petition to confirm the award before the DC court.  The court found that the anti-suit injunction, while an extraordinary measure, was warranted to preserve its own jurisdiction, as Spain’s “express and primary purpose” in pursuing the Luxembourg action was to terminate the proceeding before the DC court.

9Ren also had to demonstrate a likelihood of success on the merits of its petition to confirm the award to obtain a preliminary injunction.  In that context, the court ruled that “9Ren’s success in confirming the award highly likely” because “the court’s role in enforcing an ICSID arbitral award is … exceptionally limited.”  Once the court is satisfied that it has jurisdiction, it must accord ICSID awards the same full faith and credit as the judgment of any US state.  Thus, the court had no basis to scrutinize the substance of the award, including the finding that the arbitrators had jurisdiction, notwithstanding Achmea and Komstroy.  Spain has appealed the court’s decision to the United States Court of Appeals for the District of Columbia.

Blasket was subsequently decided by a different judge on the same DC court.  The court applied the same basic jurisdictional framework, but expressly rejected the 9REN court’s distinction between the arbitrability and the jurisdictional analyses.  The court found that it lacked jurisdiction to enforce the award at issue because Achmea and Komstroy rendered Spain’s agreement to arbitrate in the ECT a nullity.  For the Blasket court, the issue was not merely whether the investors’ claims fell within the scope of a valid arbitration agreement, but rather, whether any arbitration agreement existed at all.  Because the court read Achmea and Komstroy to hold that EU Member States such as Spain lacked legal capacity to agree to arbitrate, “no valid agreement to arbitrate existed.”  Finding that petitioners failed to establish the jurisdictional predicate of a valid arbitration agreement, the Blasket court held the FSIA’s arbitration exception did not apply, and it therefore lacked jurisdiction to hear the petition.

In reaching this conclusion, the Blasket court also rejected investors’ arguments that it should defer to the arbitrators’ prior determination that a valid arbitration agreement existed.  For the court, the question was whether, “under the law applicable to them, the parties were incapable of entering into an agreement to arbitrate anything at all.”  This, the court reasoned, could not be a question for the arbitrators, because “deference to the tribunal in such a case effectively assumes away the antecedent question of whether the parties could have agreed to [delegate that question to the arbitrators] in the first instance.”  Blasket too is now on appeal to the DC Circuit.

The DC Circuit will hear these appeals in these cases together, and will hopefully provide some much needed clarity on the impact of Achmea and Komstoy on the jurisdiction of US courts to entertain petitions to confirm awards in favor of European investors against EU Member States.

Read the court’s full decision here.


Eleventh Circuit reverses long-standing precedent to hold that FAA Chapter 1 grounds for vacatur of domestic awards apply to non-domestic awards seated in the United States.

Court joins majority of federal appellate circuits in recognizing that the New York Convention permits countries to apply their own domestic laws to annul awards issued under that country’s law.

Corporación AIC SA v. Hidroeléctrica Santa Rita SA, 66 F.4th 876 (11th Cir. 2023).

The Convention on the Recognition and Enforcement of Arbitral Awards (New York Convention) is codified in Chapter 2 of the FAA (9 U.S.C. § 201 et seq).  It governs not only awards issued outside of the US, but also “non-domestic” awards governed by the Convention – those awards issued by tribunals seated in the US, which involve one or more foreign parties or have some other reasonable relation with one or more foreign states.  The Second, Third, Fifth, Sixth, Seventh, Ninth, Tenth and D.C. Circuits have all held that, in addition to the grounds for refusing to recognize and enforce awards found in Article V of the Convention, FAA Chapter’s 1’s vacatur standards (FAA, § 10) also apply to non-domestic awards and govern their validity.

The Eleventh Circuit, whose jurisdiction includes appeal from district courts in Miami, had been an outlier, having previously held that Article V of the Convention provided the exclusive grounds on which a court may not only refuse to recognize or enforce an award governed by the Convention, but also vacate awards seated in the U.S.  In Corporación AIC, the Eleventh Circuit revisited this issue, overruled its prior decisions, and held that the grounds for vacatur in FAA § 10 do apply to nondomestic awards governed by the Convention.

Other federal appeals courts had reasoned that Article V(1)(e) of the Convention – permitting an enforcing court to refuse enforcement of an award that “has been set aside or suspended by a competent authority of the country in which … [it] was made” – necessarily contemplates that the courts at the seat may apply their own domestic arbitration laws to vacate a Convention award.  Agreeing with its sister circuits, the Eleventh Circuit acknowledged that its prior decisions erroneously “equated the defenses to recognition and enforcement [in Article V] with the grounds for vacatur.” The court held its prior decisions were wrong because Article V refers to grounds for refusing “[r]ecognition and enforcement,” which “serve different purposes and request different relief than vacatur.” “Recognition and enforcement seek to give effect to an arbitral award, while vacatur challenges the validity of the award and seeks to have it declared null and void.”  The reference in Article V(1)(e) to “set aside or suspension” referred to what the FAA terms “vacatur,” i.e., invalidation or annulment of an award.  Article V(1)(e) therefore distinguishes between the legal seat of the arbitration (i.e., the “primary jurisdiction”) and other signatory jurisdictions in which the award may be recognized (i.e., “secondary jurisdictions”).  Under the Convention, “only a court in the primary jurisdiction can vacate an arbitral award,” which then becomes a ground on which a secondary jurisdiction may refuse recognition and enforcement.

The Convention, however, “does not purport to regulate the procedures or set out the grounds for vacatur in the primary jurisdiction.”  Rather, “the Convention requires courts to rely on domestic law to fill gaps.”  Thus, the court held, “in a case under the Convention where the United States is the primary jurisdiction—the jurisdiction where the arbitration was seated or whose law governed the conduct of the arbitration—the grounds for vacatur of an arbitral award are set out in domestic law, currently Chapter 1 of the FAA.”

Following Corporación AIC, every federal appellate circuit to have addressed the issue is now in agreement that the grounds for vacatur in FAA § 10 apply to nondomestic awards.

Read the court’s full decision here.


Tenth Circuit enforces Bolivian arbitration award notwithstanding annulment by Bolivian court.

Bolivian annulment order not entitled to comity when award debtor sought and obtained annulment after the US district court entered judgment recognizing the award.

Compañía de Inversiones Mercantiles S.A. v. Grupo Cementos de Chihuahua S.A.B. de C.V., 58 F.4th 429 (10th Cir. 2023).

Article V of the New York Convention (codified in Chapter 2 of the Federal Arbitration Act) sets forth the exclusive grounds on which US courts may refuse to recognize and enforce arbitration awards governed by the Convention and issued under the laws of a foreign state.  Article V(1)(e) provides that “recognition and enforcement of the award may be refused” if “the award … has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.”  This permits a US court to deny enforcement of an award that has been vacated or annulled by a court at the seat.  While the Convention does not mandate non-recognition of such awards, under principles of international comity, US courts will ordinarily give effect to foreign annulment orders and refuse enforcement of the annulled award.  It is only in the rare and narrow circumstances in which refusing enforcement violates a strong US public policy that US courts will enforce an award that has been set aside at the seat.

In Compañía de Inversiones Mercantiles, the United States Court of Appeals for the Tenth Circuit held that such extraordinary circumstances existed to justify enforcing the underlying award, notwithstanding that it had been annulled by a Bolivian court.  Until Compania, the Second Circuit’s decision in Corporacion Mexicana de Mantenimiento Integral, S. de R.L. de C.V. v. Pemex-Exploracion y Produccion, 832 F.3d 92, 106 (2d Cir. 2016) (Pemex) was the only instance in which a federal appeals court had upheld a US court’s judgment enforcing an award that had been set aside by a court at the seat.  

The dispute arose from a shareholder agreement between Compañía de Inversiones Mercantiles (CIMSA) and Grupo Cementos de Chihuahua (GCC), pursuant to which GCC acquired a 47% interest in Bolivian cement company Sociedad Boliviana de Cemento (SOBOCE).  At that time of purchase, CIMSA was SOBOCE’s controlling shareholder. The shareholder agreement provided that, after five years, either party could sell its shares to a third party, subject to the other party’s right of first refusal to purchase the shares on the same or better terms.  The agreement’s arbitration clause required that any dispute under the agreement be submitted to arbitration before the Inter-American Commercial Arbitration Commission (IACAC) in Bolivia, and the arbitration would be governed by Bolivian law.

When GCC sought to sell its shares to a third party, CIMSA exercised its right of first refusal and offered to purchase GCC’s shares on the same terms. GCC accepted CIMSA’s offer, but just before the transaction was set to close, GCC demanded additional collateral to secure payment of the purchase price under the agreed schedule.  When CIMSA refused, GCC declared CIMSA’s offer invalid and sold its shares to the third party.

CIMSA initiated arbitration, claiming that GCC had violated CIMSA’s contractual right of first refusal. The tribunal issued a merits award for CIMSA holding GCC in breach of the shareholder agreement, and a separate damages award providing compensation to CIMSA for GCC’s breach.  GCC sought annulment of the awards in Bolivian court, and CIMSA petitioned the United States District Court for the District of Colorado to enforce the damages award. Following procedurally complex actions in Bolivian courts, Bolivia’s highest court refused to annul the damages award.  The District of Colorado subsequently entered judgment recognizing the award. After the US court issued its judgment, GCC again petitioned the Bolivian courts to annul the damages award, and a different chamber of Bolivia’s highest court, which had not been involved in the prior decision, issued an order annulling the award.  GCC then returned to the District of Colorado, and moved under Federal Rule 60(b)(5) to vacate the district court’s earlier judgment enforcing the award. The district court denied GCC’s motion, finding that vacating its earlier judgment would offend US public policy.  The Tenth Circuit affirmed.

The Tenth Circuit began its analysis by noting the unusual procedural posture of the case, where GCC both started a new annulment proceeding and obtained the Bolivian court’s annulment order after the district court had already entered judgment confirming the award.  Given this posture, this case involved the confluence of Convention Article V(1)(e) and Federal Rule of Civil Procedure 60(b) governing the courts’ power to relieve parties from the effect of final federal court judgments.

Ordinarily, courts will refuse enforcement of awards set aside at the seat (i.e., the “primary jurisdiction”) because “comity interests generally constrain a court from disregarding a primary jurisdiction’s annulment of an arbitral award.”  US courts may only refuse to give effect to a foreign annulment order if doing so would violate a fundamental US public policy.  This is a high threshold, which is met only where giving effect to the foreign judgment would be “repugnant to fundamental notions of what is decent and just in the United States.”

But, the court noted, revisiting a final judgment under Rule 60(b) is also “extraordinary relief” that may only be granted in “exceptional circumstances.”  In deciding whether to undo a final judgment, the movant must not only show grounds for relief under Rule 60(b), but also why “its conduct, as a matter of equity, should allow vacatur.”  And the district court has broad discretion to weigh the relevant factors in determining whether to vacate its prior judgment.

Applying these standards to the instant case, the Tenth Circuit found the district court acted within its discretion in refusing to afford comity to the Bolivian annulment order.  This was because, although the court recognized that the Bolivian annulment order was not itself repugnant to US public policy, it found that giving “effect to” the Bolivian order and refusing enforcement of the award would violate three “strong” US public policy interests.  These included protecting the finality of judgments, upholding parties’ contractual expectations, and the policy favoring arbitral dispute resolution.  Focusing on the standard for vacating judgments under Rule 60(b), the court further emphasized how GCC’s “inequitable” conduct frustrated these fundamental policies.

The court was primarily focused on how giving effect to the Bolivian annulment order and vacating its prior judgment would violate the public’s “strong interest in protecting the finality of judgments.”  At the time the district court entered judgment, Bolivia’s high court had already refused annulment.  But GCC then went back to Bolivian courts to seek a new annulment order.  Applying Rule 60(b), the court concluded that it was inequitable for GCC to wait until after the district court recognized the award to initiate new annulment proceedings in Bolivia, which militated against undoing the court’s final judgment.  Emphasizing the point, the court distinguished this case from others that had refused to enforce awards that had been annulled at the seat, noting that “in every case affirming a district court’s decision not to confirm an arbitral award due to a foreign court’s annulment, the movant had sought annulment in the primary jurisdiction before confirmation of the arbitral award in the United States.”

The court then noted that vacating the judgment and refusing to recognize the award would also frustrate the strong policy in favor of upholding parties’ contractual expectations, particularly whereas here, the parties’ arbitration agreement provided that the parties “waive[d] all actions for annulment, objection, or appeal against that award.”  Finally, and relatedly, refusing to enforce the award would also frustrate the “emphatic federal policy in favor of arbitral dispute resolution,” which “applies with special force in the field of international commerce.”

There was a dissent.  According to the dissent, a foreign judgment should only be denied comity in the narrowest of circumstances, where it is “the judgment itself, or the processes that yielded it, that violates fundamental notions of decency and justice in the United States.”  There being no question that the Bolivian annulment order itself was not repugnant to any strong US public policy, the dissent believed that the majority erred in declining to afford comity to the Bolivian order.  In the dissent’s view, the majority was wrong to conclude that the mere fact that “giving effect” to an otherwise unobjectionable foreign judgment frustrated the US public policy favoring finality of judgments.  This, the dissent argued, “suggests the presumption of comity yields to an easily satisfied ‘repugnancy’ standard,” which would be not only inconsistent with the decisions of other federal appellate courts, but “moves this court out of line globally with signatory countries.”

The case was not appealed to the Supreme Court, so it remains to be seen whether future disputes clarify whether the Tenth Circuit’s decision is truly out of step with the strong presumption of comity afforded foreign judgments, or whether it is a sui generis decision limited to its unique facts.

Read the court’s full decision here.


District court in Philadelphia holds agreement to arbitrate under ICC rules not clear and unmistakable agreement to arbitrate arbitrability where dispute arguably fell within arbitration agreement’s carveout for equitable claims:

But court construed carveout merely to permit parties to seek court intervention in aid of arbitration and compelled arbitration.

Continental Materials, Inc. v. Veer Plasticas Private Limited, No. 22-cv-3685-MRP (E.D. Pa. April 4, 2023).

Whether a dispute falls within the scope of the parties’ arbitration agreement, often termed “arbitrability,” is a “gateway” issue that is presumptively for the court, rather than the arbitrators, to decide.  However, where the parties have “clearly and unmistakably” agreed to arbitrate arbitrability, the question is for the arbitrators.  The rules of many arbitral institutions, including the ICC rules, provide that arbitrators may determine their own jurisdiction, and courts have consistently held that the agreement to arbitrate under such institutional rules therefore constitutes clear and unmistakable intent to arbitrate arbitrability.  In Continental Materials, the United States District Court for the Eastern District of Pennsylvania recognized a narrow exception to this rule.  Because the parties’ arbitration agreement arguably carved out a category of disputes from arbitration, whether the dispute falls within the carveout was for the court, notwithstanding the agreement to arbitrate under the ICC rules.

The underlying dispute in Continental Materials concerned a distribution agreement between Continental Materials, Inc. (CMI), a Pennsylvania roofing products company, and Veer Plastics, an Indian roofing products company.  Under the agreement, CMI would distribute Veer’s products in North America, and would appoint a sales manager to “develop and facilitate new sales” of Veer’s products.  The agreement prohibited Veer from soliciting or hiring CMI employees.

CMI hired Mark Hinterlong to serve as sales manager under the agreement with Veer.  As a condition of his employment, Hinterlong signed a Confidential Information and Relationship Protection Agreement, which precluded him from disclosing CMI’s trade secrets and from accepting employment with CMI’s competitors or interfering with its vendor relationships for one year after the termination of his employment.

In August 2022, Hinterlong resigned from CMI.  Shortly thereafter, he began working for Veer.  CMI instructed Hinterlong to return his company-issued laptop, but before doing so Hinterlong provided the computer to Veer, who hired a third party to image the hard drive and delete information related to Veer.  CMI then commenced suit against Veer in the Eastern District of Pennsylvania, asserting various claims, including a claim for injunctive relief.  Veer moved to compel arbitration under the arbitration clause in the parties’ distribution agreement.

Though the agreement required that “any dispute, controversy or claim between the parties” be settled by arbitration before the ICC in London, it further provided that “notwithstanding the foregoing, a Party may seek specific performance of this Agreement or any other equitable relief in a court of competent jurisdiction.”  CMI argued that this carveout permitted any party seeking equitable relief to litigate its claims in court.

In deciding whether to compel arbitration, the court first determined that whether the carveout applied was a question for the court, not the arbitrators.  The court noted that the burden of overcoming the presumption that courts decide arbitrablity was “onerous, as it requires express contractual language unambiguously delegating the question of arbitrability to the arbitrator.”  The court recognized that a broad agreement to arbitrate any dispute coupled with designation of the ICC rules “tend to evince the parties’ intent to delegate questions of arbitrability to the arbitrators.” However, “the inclusion of a provision that at least arguably carves out” CMI’s claims “creates an ambiguity.”  Accordingly, Veer did not meet its burden of demonstrating the parties’ “clear and unmistakable” intent to arbitrate arbitrability, and thus it was for the court to decide arbitrability.

But on the merits, the court held the dispute was arbitrable and granted the motion to compel.  The most reasonable interpretation of the carveout was that it permitted the parties to seek equitable relief from a court only in aid of arbitration, such as “judicial enforcement of the arbitration agreement and of any award entered by the arbitrators.”  This was because accepting CMI’s claim that the equitable relief carveout “broadly permits the parties to seek injunctive relief directly from any court” would permit a party to circumvent arbitration by merely including any claim for equitable relief.  This “would create a carveout so broad that it would render the rest of the arbitration agreement void,” which would be “contrary to … the parties’ evidenced intent to send the disputes to arbitration.”

Read the court’s full decision here.

Yasmine Lahlou to Speak on 2023 Columbia Arbitration Day Panel

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April 2023— Chaffetz Lindsey’s Yasmine Lahlou will speak at the upcoming 2023 Columbia Arbitration Day on Friday, April 14th. The theme of this year’s event is “Arbitration Beyond the Box: New Innovations & Perspectives” and will feature panels discussing ESG arbitration, Belt-and-Road disputes, and domestic judges on international arbitration.

Yasmine will take part in the second panel of the day “Navigating Belt-and-Road Disputes” alongside Jingzhou Tao (Arbitration Chambers), Lianjun Li (Partner, Reed Smith Hong Kong), Diana Tsutieva (Partner, Foley Hoag) and Simon Navarro (Partner, Sidley Austin). Prof. Robert Smit (Columbia Law School) will moderate.

This panel features law firm partners and arbitrators that will discuss the role of the Belt-and-Road Initiative (BRI) in their practice and how different jurisdictions and arbitration institutions deal with BRI disputes.

Chaffetz Lindsey is a proud sponsor of the event.

Event Details

When: Friday, April 14th 2023 | 8:30am-9pm EST

Where: Low Memorial Library (2960 Broadway New York, NY 10027)

Register for the event here.

Chambers Global Recognizes Chaffetz Lindsey’s International Arbitration Team in 2023 Rankings

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February 2023– Recognized for the fifth consecutive year in Chambers & Partners Global rankings, Chaffetz Lindsey’s international arbitration practice remains a standout in the industry.

Chaffetz Lindsey partners Anibal Sabater and Yasmine Lahlou have both been individually recognized as Global Market Leaders in International Arbitration in the 2023 Global Guide. The team continues to be the only US-based boutique named in the Global Market Leaders International Arbitration rankings.

Sources speak highly of Chaffetz Lindsey’s client service, with one noting that “Chaffetz Lindsey [is] ready and available to address issues at any time – day or night. They’re staffed up appropriately with experts to handle matters. The firm has a very strong, analytical, flexible and practical team.”

Further comments on our globally ranked arbitration partners include:

  • Aníbal Martin Sabater is a prominent practitioner within the US and Latin American markets. He has strong skills handling big-ticket ICC arbitrations, as well as investment treaty disputes. An interviewee gives praise to these skills, stating “Anibal is fantastic – a consummate professional and a respectful advocate of his client’s positions.”
  • Peers recognise Yasmine Lahlou for her arbitration expertise across the US and Latin American markets. She regularly handles commercial and treaty cases, attracting a range of international clients, especially those within the oil and gas sector. A client notes “Yasmine is very prompt and attentive.”

Chambers & Partners is a world leader in researching the global legal profession, and identifying the leading lawyers and law firms. Chambers Global ranks the top lawyers and law firms in over 190 countries across the world based on in-depth research and interviews with thousands of lawyers and their clients worldwide.

Click here to view Chaffetz Lindsey’s Chambers Global profile.

Arbitration in the Courts, February 2023
(Vol. 9)

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Functus Officio gets a new exception:

Second Circuit holds that district courts remand of unreasoned award to arbitrator does not violate the functus officio doctrine.

Smarter Tools, Inc. v. Chongqing SENCI Import & Export Trade Co., Ltd., No. 21-724, (2d Cir. January 17, 2023).

The functus officio doctrine – Latin for having “completed one’s office” – dictates that “once arbitrators have fully exercised their authority to adjudicate the issues submitted to them, their authority over those questions is ended, and the arbitrators have no further authority, absent agreement of the parties, to redetermine those issues.”  Its principal purpose is to prevent “re-examination of an issue by a nonjudicial officer potentially subject to outside communication and unilateral influence.”  But courts have developed a number of exceptions to the doctrine, permitting arbitrators to revisit their awards to make non-substantive modifications, lest the doctrine waste tremendous efforts and resources.

In Smarter Tools v. SENCI, the Second Circuit Court of Appeals held that the doctrine warranted another exception – permitting remand to the arbitrator to provide the requisite reasoning for his award.

The underlying arbitration arose out of a series of contracts between Smarter Tools Inc. (STI) and Chongqing SENCI Import & Export Trade Co. Ltd. (SENCI) for the supply of gas-powered generators.  After STI failed to pay the purchase price for a number of generators, SENCI commenced arbitration before the Arbitration Association’s International Centre for Dispute Resolution (“ICDR”) to recover the outstanding amounts.  STI counter-petitioned, claiming that it was SENCI who had breached the contract by delivering generators that failed to comply with California Air Resources Board (CARB) standards. The arbitrator ultimately issued an award in favor of SENCI, finding that the parties’ contract did not specify that the generators had to comply with CARB standards.  However, although the parties had agreed that the arbitrator would issue a reasoned award, the arbitrator’s award contained scant reasoning.

STI petitioned the United States District Court for the Southern District of New York to vacate the award, arguing the arbitrator had exceeded his authority by issuing an unreasoned award.  The district court agreed, finding the award contained no rationale for rejecting STI’s counterclaims.  But, rather than vacate the award, the court remanded the case to the arbitrator “for clarification of his findings.”  The arbitrator issued an amended award granting the same relief and providing further reasoning and explanation for his findings.  STI again moved to vacate the award on the ground that remand was improper because the arbitrator was functus officio after issuing his original award.  SENCI cross-moved to confirm the award.  The district court confirmed the award and STI appealed.

On appeal, the Second Circuit noted that it was an “open question” as to “whether a court may remand for an arbitrator to produce a reasoned award,” but it was a “permissible choice” under these circumstances because “[i]t simply makes no sense to redo an entire arbitration proceeding over an error in the form of the award issued.”  Remand to provide further reasoning was analogous to well-recognized exceptions to functus officio, such as permitting arbitrators to clarify an ambiguous award.  As with such other exceptions, the arbitrator was not changing his merits determination and therefore remand would not “undermine the functus office doctrine’s purpose” of protecting against the risk the arbitrator would change his ruling “after issuance due to outside influence by an interested party.”

The court also rejected STI’s argument that the arbitrator had exceeded his powers by issuing an unreasoned award, and the lower court’s only option under the Federal Arbitration Act (FAA) was to vacate the award under Section 10(a)(4).  Awards are presumptively valid and vacatur is narrowly construed, and here “the question was whether the arbitrator’s original award was reasoned; there was no question that the arbitrator here had the power to reach the issues addressed.”  Accordingly, the failure to issue a reasoned award “best fits under Section 11 of the FAA,” which permits a court to “make an order modifying or correcting the award … where the award is imperfect in matter of form not affecting the merits of the controversy.”  The award’s failure to provide the requisite reasoning rendered it “imperfect in matter of form,” and remand to the arbitrator to produce an award comporting to the parties’ agreement best “effects the intent” of the parties and “promotes justice” between them.

Read the court’s full decision here.


Ninth Circuit holds that FAA Chapter 1 grounds are available to vacate New York Convention awards seated in the U.S.:

Confirming the award, the court reinforced that an arbitrator’s mere error of law does not warrant vacatur under FAA, §10(a)(4).

HayDay Farms, Inc. v. FeeDx Holdings, Inc., 55 F.4th 1232 (9th Cir. 2022).

The Convention on the Recognition and Enforcement of Arbitral Awards (New York Convention) is codified in Chapter 2 of the FAA,  9 U.S.C. § 201 et seq.  It governs not only awards issued outside of the U.S., but also “non-domestic” awards – those awards issued by tribunals seated in the U.S., but involving one or more foreign parties or having some other reasonable relation with one or more foreign states.  HayDay v. FeeDx concerned whether the grounds for vacating domestic awards under Chapter 1 of the FAA apply to non-domestic awards governed by the Convention.  This was a question of first-impression for the Ninth Circuit Court of Appeals, which has jurisdiction over appeals from U.S. district courts in several western states, including California.  The Ninth Circuit joined the Second, Third, Fifth, Sixth, Tenth and D.C. Circuits in finding that Chapter’s 1’s vacatur standards (set forth in FAA, § 10) apply to non-domestic awards.  (The Eleventh Circuit is the only federal appeals court to have addressed the issue and found chapter 1 inapplicable to nondomestic awards, although the Eleventh Circuit is now in the process of reconsidering the issue.  See Corporacion AIC, SA v. Hidroelectrica Santa Rita S.A., 50 F.4th 97, 98 (11th Cir. 2022).)

The arbitration in HayDay arose out a series of contracts between Cayman corporation FeeDx and California corporation HayDay, which culminated in an exclusive global distribution agreement signed in 2014, under which FeeDx would purchase and distribute HayDay’s forage crops and pay Hayday $8 million to expand its operations.  Under a supplemental agreement, Hayday agreed to provide FeeDx at least 170,000 metric tons of crops per year at $360 per ton.  After disputes arose between them, the parties entered into a settlement agreement under which HayDay would pay FeeDx $8 million in monthly installments, and once this amount was fully paid, the parties would mutually release all claims under their distribution agreement, with their respective obligations to buy and sell HayDay’s crops terminating in December 2016.  Neither party performed the settlement.  HayDay paid only $1 million of the $8 million due.  FeeDx failed to continue purchasing HayDay’s crops through December 2016.  Arbitration ensued before a panel of three arbitrators seated in California before the American Arbitration Association’s International Centre for Dispute Resolution.

Over four years, the arbitrators issued various partial awards finding that: (i) the settlement agreement supplemented rather than supplanted the distribution agreement; (ii) FeeDx had breached the settlement agreement by failing to continue purchasing crops through December 2016; (iii) FeeDx breached the distribution agreement prior to entering into the settlement; and (iv) the settlement agreement did not release HayDay’s claims under the distribution agreement because FeeDx breached the settlement agreement. The Tribunal awarded HayDay approximately $21 million in lost profits. The tribunal rejected FeeDx’s argument that HayDay’s damages should be reduced by the remaining $7 million it owed under the settlement agreement, finding that FeeDx’s breach of the settlement agreement excused HayDay’s payment obligation.

FeeDx petitioned the United States District Court for the Central District of California to vacate the award under Section 10(a)(4) of the FAA on the grounds that the arbitrators had exceeded their authority.  The district court agreed in part and vacated $7 million from the award, finding that the arbitrators’ refusal to reduce HayDay’s damages by the $7 million outstanding under the settlement agreement violated California law precluding a party from receiving a windfall on a breach of a contract claim.  FeeDx appealed the court’s refusal to vacate the entire award; HayDay appealed the partial vacatur of the award.

On appeal, the Ninth Circuit first addressed the threshold question whether the vacatur grounds in Section 10 of Chapter 1 of the FAA applied to Convention awards in arbitrations seated in the U.S.  The court held that Section 10 applied.  In doing so, it adopted the Second Circuit’s oft-cited decision in Yusuf v. Toys “R” Us, 126 F.3d 15 (2d Cir. 1997), which held that Article V(1)(e) of the Convention – permitting an enforcing court to refuse enforcement of an award that “has been set aside or suspended by a competent authority of the country in which … [it] was made” – necessarily contemplates that the courts at the seat may apply the seat’s domestic arbitration laws to vacate a Convention award.

Turning to the merits, the court reversed the lower court’s partial vacatur.  Section 10(a)(4) permits vacatur of an arbitration award “where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.”  The court held that Section 10(a)(4) permits only an “extremely limited” review of the award, and an arbitrator exceeds its authority in two circumstances – (i) when the arbitrator manifestly disregards the applicable law or (ii) his or her decision is completely irrational.  An arbitrator manifestly disregards the law only when there is “some evidence in the record other than the result, that the arbitrators were aware of the law and intentionally disregarded it.”  An award is “completely irrational” only where it “completely ignores controlling terms of the parties’ contract.”  If the arbitrator even “arguably construes the contract,” the court “must defer to the arbitrator’s decision.”  Neither standard is met by showing that the arbitrator merely “committed an error–or even a serious one.”

The court agreed with the lower court that the arbitrator likely erred in deciding that FeeDx was not entitled to credit for HayDay’s failure to make the $7 million payment, which resulted in a “seemingly unfair damages award that likely violates” California law.  Nevertheless, this error, without more, was insufficient to meet the stringent standard for vacatur.  To hold otherwise would frustrate the FAA, which reflected Congress’s decision to “carefully limit” judicial review of arbitration awards to protect the contractual choice to “forego the procedural rigor and appellate review” of judicial proceedings in favor of expediency and finality of arbitration.

Read the court’s full decision here.


SDNY holds that Section 1782 does not authorize discovery for use before ICSID tribunal:

ICSID panel does not qualify as a “foreign or international tribunal” under Section 1782 because it is not “imbued with governmental authority.”

In re Webuild S.p.A., 22-mc-140(LAK) (S.D.N.Y. Dec. 19, 2022).

28 U.S.C. § 1782 authorizes U.S. courts to order persons in the United States to give testimonial or document discovery “for use in a proceeding in a foreign or international tribunal.”  Whether Section 1782 discovery is available in aid of foreign arbitrations had split federal appellate courts.  In June 2022, the Supreme Court took up this issue in ZF Auto. US, Inc. v. Luxshare, Ltd., 142 S. Ct. 2078 (2022).  The Court held that neither commercial arbitration tribunals nor ad hoc investor-state tribunals qualified as foreign or international tribunals under the statute.  In so holding, the Court explained that a “foreign tribunal” is “imbued with governmental authority by one nation,” and an “international tribunal” is “imbued with governmental authority by multiple nations.”  Neither the commercial tribunal nor ad hoc investor-state tribunal before it fit either definition.

Webuild applied ZF Auto to determine whether Section 1782 permitted discovery for use before an International Center for Investment Disputes (ICSID) tribunal.  The case arose after an Italian investor arbitrating claims against Panama under the Italy-Panama bilateral investment treaty (BIT) before an ICSID tribunal obtained an ex parte order pursuant granting it Section 1782 discovery from a non-party U.S. company for use in the arbitration.  The non-party moved to vacate the order and quash the ensuing subpoena.

The court granted the motion and quashed the subpoena, finding that under ZF Auto, the ICSID tribunal did not constitute “a foreign or international tribunal” within the statute because Italy and Panama did not “imbue it with governmental authority.”  The court noted that although ZF Auto “did not provide a test for lower courts to apply, it did set forth several factors that it considered in determining that such an intent did not exist.”  In a methodical opinion, the court explained how, under each of the factors set forth in ZF Auto, the ICSID tribunal here was analogous to the private commercial and ad hoc investor-state panels ZF Auto found not to be governmental or intergovernmental authorities. 

The court highlighted the following attributes demonstrating that the ICSID tribunal was not akin to a governmental body: (i) “ICSID does not have standing or pre-existing arbitration panels,” but rather it convenes tribunals in response to requests from the parties; (ii) the Panama-Italy BIT did not create the ICSID tribunal, but merely provides the set of rules that govern the tribunal’s formation; (iii) the ICSID tribunal “functions independently of and is not affiliated with either” Italy or Panama, with arbitrators chosen by the parties, who lack “any official affiliation” with either state; (iv) the ICSID tribunal is funded by the parties and “does not receive any government funding;” (v) the ICSID tribunal’s proceedings are confidential and not public; and (vi) the panel derives its authority from the “parties’ consent to arbitrate,” rather than any state law.

Accordingly, the court held that “Italy and Panama did not intend to imbue the ICSID Panel with governmental authority,” and therefore the ICSID panel was not a “foreign or international tribunal” under Section 1782.  In October 2022, the United States District Court for the Eastern District of New York likewise held that an ICSID tribunal empaneled pursuant to the Malta-China BIT did not constitute a “foreign or international tribunal” for purposes of Section 1782.  See In re Alpene, Ltd., 2022 WL 147008 (E.D.N.Y. Oct. 27, 2022).  It remains to be seen whether other federal courts will likewise hold that Section 1782 discovery is not available for use in ICSID arbitrations.

Read the court’s full decision here.


“Service of Suit” Clause complements rather than supersedes agreement to arbitrate: 

Parties’ agreement to submit to jurisdiction of court of competent jurisdiction merely ensured a judicial forum for enforcing the agreement to arbitrate and the arbitrator’s awards.

Upper Room Bible Church, Inc. v. Sedgwick Delegated Auth., No. 22-340 (E.D. La. Dec. 16, 2022).

Insurance contracts, particularly those issued by foreign insurers, often include both an arbitration clause requiring that all disputes be resolved in arbitration, and a “service of suit” clauses providing that the foreign insurer will submit to the jurisdiction of local courts.  Upper Bible Room confirmed that the two clauses can co-exist without vitiating the right to arbitrate.

Upper Room Bible Church was seeking coverage from a group of insurance companies under two policies of commercial property insurance for property damage allegedly sustained from Hurricane Ida and Tropical Storm Nicholas.  After the insurers denied these claims, Upper Room brought suit in the United States District Court for the Eastern District of Louisiana.  The insurers moved to compel arbitration based on the arbitration clause in the policies requiring that “all matters in difference between the Insured and the Companies … shall be referred to an Arbitration Tribunal.”

Upper Room opposed the motion, arguing that the policies’ arbitration clause was superseded by a separate policy endorsement stating that the “insurance shall be subject to the applicable state law to be determined by the court of competent jurisdiction as determined by the provisions of the Services of Suit Clause (USA).”  The “Service of Suit Clause,” in turn, stated, “in the event of failure of the Underwriters hereon to pay any amount claimed to be due hereunder, the Underwriters hereon … will submit to the jurisdiction of a Court of competent jurisdiction within the United States.”  Upper Room therefore argued that the endorsement reflected the parties’ intent that all coverage disputes be resolved in court, rather than through arbitration.

The court disagreed and granted the motion to compel arbitration.  Drawing on twenty years of precedent rejecting similar arguments, it noted that “courts have consistently held that endorsements and service of suit clauses like those in Upper Room’s policy do not nullify otherwise valid arbitration agreements.”  Rather, the arbitration and service of suit provisions were in harmony, and the service of suit clause was properly construed “as complementing the arbitration clause by providing a judicial forum for compelling or enforcing arbitration.”

Read the court’s full decision here.

Latinvex Recognizes Three Chaffetz Lindsey Partners in 2022 Rankings

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January 2023— Chaffetz Lindsey’s Caline Mouawad, Yasmine Lahlou and Gretta Walters have been recognized for their international expertise by Latinvex in their recently released 2022 rankings.

Caline Mouawad and Yasmine Lahlou have been named among the “Top 100 Female Lawyers in Latin America,” marking the fourth consecutive year Caline has been recognized and the fifth consecutive year for Yasmine. In addition, Gretta Walters has debuted as one of 25 Rising Legal Stars in Latin America. Prominent attorneys on this list have been highlighted for the scope and prominence of work and future potential in the region.

Click here for Latin America’s Top 100 Female Lawyers rankings.

Click here for Latin America’s Rising Legal Stars rankings.

              * Note: a subscription to Latinvex may be required.

Latinvex’s editorial staff selects the top 100 female lawyers specializing in Latin America among international law firms. The tenth annual ranking looked at nearly 100 law firms and chose attorneys from 61 different firms based in the United States, the United Kingdom, Canada and Bermuda. The criteria for selection was a combination of factors, including recent track record on major deals and business, prominence of firm in Latin America and rankings.

Chaffetz Lindsey Named One of Four Leading Firms in North America by Who’s Who Legal

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December 2022— Who’s Who Legal Arbitration has released their 2023 rankings with the top names in arbitration, ranking seven Chaffetz Lindsey team members amongst the elite group. Among the team, both James Hosking and Yasmine Lahlou have been named as “Global Elite Thought Leaders”, with just 17 individuals receiving such recognition in North America & the Caribbean. According to Who’s Who Legal this title is reserved for the top 2.5% of ranked practitioners considered the “very best by peers and clients, achieving the highest number of recommendations in the research.” Chaffetz Lindsey is one of only 8 firms in the world with more than one Global Elite Thought Leader.

Additional accolades include Anibal Sabater, Caline Mouawad, Peter Chaffetz and David Lindsey as “Global Leaders in Arbitration” and Gretta Walters as a “Future Leader (Partner) in Arbitration.”

Chaffetz Lindsey has also been highlighted as one of four “Leading Firms” in North America and the Caribbean in the Legal Marketplace Analysis.

“This year’s guide highlights the top arbitration practitioners globally, who variously impress with their persuasive work as counsel and their expertise on arbitration panels,” Who’s Who Legal states.

Here’s what Who’s Who Legal had to say about the team:

  • James Hosking has “an excellent reputation” as “a thought leader” in the field with peers describing him as “responsive, efficient and sharp”.
  • Yasmine Lahlou is “a very experienced” practitioner and “effective advocate” according to market commentators who add that she is “extremely knowledgeable about international arbitral procedures”.
  • Caline Mouawad is lauded as “an absolute star” who is “an excellent choice” for investment treaty arbitration.
  • Having amassed over 25 years of experience, Aníbal Martín Sabater is “a well-respected and knowledgeable” figure with a focus on international commercial and investment arbitration.

Three Chaffetz Lindsey Members Among Arbitration Lawyers to Launch New Association Focused on the Arab World

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November 2022— Chaffetz Lindsey senior associate May Khoury is among five international arbitration practitioners that are joining forces to launch “ArabArb”, an independent network that aims to unite, promote, and serve the U.S.-based arbitration community with roots, affinity, or interest in the Arab World. Founders of the organization include Randa Adra, partner at Crowell & Moring; Cherine Foty, senior associate at Covington & Burling in Washington, DC; Lillian Khoury, senior associate at Steptoe & Johnson in New York; and Nour Nicolas, associate at Foley Hoag in New York.

Chaffetz Lindsey partners Caline Mouawad and Yasmine Lahlou will sit on the advisory committee of this women-led group, making three out of eleven members represented by the Chaffetz Lindsey team.

Additional advisory committee members include Meriam Al-Rashid, global co-chair of International Arbitration at Eversheds Sutherland; Amal Bouchenaki, partner at Herbert Smith Freehills; Maria Chedid, global co-chair of the International Arbitration Group at Arnold & Porter; and Samaa Haridi, partner at King & Spalding.

ArabArb’s mission is to create a platform for members to connect and collaborate with fellow practitioners as well as advance the knowledge and understanding of international arbitration as it relates to the Arab World. The group will work to increase the visibility of diverse and qualified counsel, arbitrators, and experts who are particularly suited to handle disputes relating to the Arab World.

ArabArb will host a launch event in New York City on November 16, 2022 during New York Arbitration Week to introduce itself to the legal community, present its mission, and welcome new members. The group plans to organize conferences and training seminars on topics relevant to the community, as well as offer mentoring opportunities and exposure to law students of Arab descent. Register for the event here.

Learn more about the organization here.

Filed Under: Uncategorized

Arbitration in the Courts, October 2022
(Vol. 8)

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Ninth Circuit Holds Federal Court Can Enforce Arbitrator’s Subpoena.

Court has jurisdiction to compel compliance with arbitrator’s subpoena so long as it relates to an underlying arbitration agreement governed by the New York Convention.

Day v. Orrick, 42 F.4th 1131 (9th Cir. 2022).

Chapter 2 of the Federal Arbitration Act (FAA) provides that federal courts have subject matter jurisdiction over “actions and proceeding[s] falling under the [New York] Convention.”  In Day v. Orrick, the Ninth Circuit Court of Appeals held, as a matter of first impression, that this includes jurisdiction to enforce an arbitrator’s subpoena to non-parties.

The case arose out of an arbitration between law firm Jones Day and a former partner who left Jones Day’s Paris office to join the firm of Orrick, Herrington & Sutcliffe.  The arbitration was before a single arbitrator and was seated in Washington, D.C.  Because the former partner was a German national and Jones Day is based in the U.S., the New York Convention governed the arbitration.  At Jones Day’s request, the arbitrator issued a subpoena to Orrick summoning it to appear before the arbitrator in Washington D.C. to produce documents.  Following Orrick’s failure to comply, the Superior Court for the District of Columbia denied Jones Day’s petition to enforce the subpoena, finding both that it lacked personal jurisdiction over Orrick and that Section 7 of the Federal Arbitration Act (FAA) required such petitions to be brought in federal district court.

At Jones Day’s request, the arbitrator issued a second subpoena summoning Orrick to appear at a hearing to be held in Northern California, where Orrick maintained its principal place of business.  When Orrick refused to comply, Jones Day filed a petition in the United States District Court for the Northern District of California seeking to compel its compliance.  The District Court held that the Northern District of California was an improper venue because Section 7 of the FAA only permitted courts at the seat—here Washington D.C.—to compel compliance with arbitral subpoenas.  The District Court therefore did not address Orrick’s arguments that the federal court lacked subject matter jurisdiction over the petition.

On appeal, the Ninth Circuit reversed, finding that the District Court had jurisdiction to enforce the arbitral subpoena, and venue in the Northern District of California was proper.

As to jurisdiction, the court held that Section 203 of the FAA conferred jurisdiction on federal district courts to enforce arbitral subpoenas in proceedings governed by the Convention.  Orrick argued that an action or proceeding to enforce an arbitral summons was not an action “fall[ing] under the Convention,” because the Convention authorizes only three types of actions, namely those seeking to compel arbitration, appoint arbitrators in accordance with the arbitration agreement, and enforce final arbitral awards.

The Ninth Circuit disagreed, finding that the purpose of Chapter 2 of the FAA is to “encourage arbitration and to authorize district courts to take actions necessary to ensure that the parties’ underlying controversy is successfully resolved through arbitration.”  In light of this legislative purpose, the federal courts’ jurisdiction over actions “falling under” the Convention extends to all “proceedings necessary to complete the arbitration process.”  The federal courts therefore have jurisdiction if: (i) there is an underlying arbitration agreement or award that falls under the Convention; and (ii) the action or proceeding relates to that arbitration agreement or award in the sense that it “could conceivably affect the outcome of the plaintiff’s case.”  Petitions to compel compliance with arbitral subpoenas meet this standard because they “are necessary ancillary proceedings that ensure the proper functioning of the underlying arbitration.”

As respects venue, the court found that the relevant statutory provision was not FAA § 7, but rather Section 204, which provides that where an arbitration agreement falling under the Convention designates a “place of arbitration” in the United States, an action or proceeding “may be brought” in the district embracing the place of arbitration.  But, the court held, “[n]othing in the text of [FAA § 204] indicates that Congress intended the FAA venue provision to be exclusive or restrictively applied.”  Rather, Congress’s use of the permissive “may” indicates the intent that venue under Section 204 is “non-exclusive.”  The general federal venue provisions found in 28 U.S.C. § 1391 provide that venue over any civil action is proper if brought in a district designated in Section 1391, “unless otherwise provided by law.”  Given that Section 204 is non-exclusive, Section 1391 also governs venue for actions falling under the Convention.  Under Section 1391, the Northern District of California was a proper venue because it is Orrick’s principal place of business.

Interestingly, the court did not merely remand the decision to the district court to consider the petition to enforce the subpoena, but rather remanded with instructions to the district court to enforce the subpeona and order Orrick to comply.

Read the court’s full decision here.


Second Circuit holds that incorporation of the ICC Rules is not always clear and unmistakable agreement to delegate arbitrability determinations to the arbitrators.

Where contract carved out certain disputes from arbitration clause, whether claims at issue fell within the carve-out was a question for the court.

Lavvan, Inc. v. Amyris, Inc., No. 21-1819 (2d Cir. Sept. 15, 2022).

It is well-settled under U.S. arbitration law that questions of arbitrability, i.e., the existence and scope of arbitrators’ jurisdiction, are presumptively for courts, not arbitrators.  However, where there is “clear and unmistakable” evidence that the parties agreed to delegate arbitrability determinations to the arbitrators, courts will enforce that agreement (referred to as a delegation clause) to the same extent as any other arbitration agreement.  Courts have consistently held that such a delegation can be found where a broad arbitration agreement governing all disputes between the parties designates institutional rules that grant the arbitrators authority to rule on their own jurisdiction.  But, in Lavvan, the Second Circuit recognized the limits of incorporating institutional rules as a means of delegating arbitrability determinations to the arbitrators.

Lavvan, Inc. brought suit against Amyris, Inc. claiming trade secret misappropriation and patent infringement.  Amyris moved to compel arbitration of these claims under the parties’ license agreement, which contained two relevant provisions regarding dispute resolution.  First, the agreement provided that “all disputes that cannot be resolved by the management of both parties” shall be resolved in arbitration under International Chamber of Commerce (ICC) rules.  However, the agreement further provided that “if a dispute arises with respect to the scope, ownership, validity, enforceability, revocation or infringement of any Intellectual Property … such dispute will not be submitted to arbitration and either Party may initiate litigation.”

Amyris argued that the agreement’s incorporation of the ICC rules, which provide that the arbitrators have jurisdiction to determine their own jurisdiction, provided “clear and unmistakable” evidence that the parties intended to arbitrate disputes as to arbitrability, including disputes over whether claims fell within the carve-out for intellectual property matters.  The district court disagreed, and the Second Circuit affirmed.

The court explained, “it is true that the incorporation of procedural rules that empower an arbitrator to decide arbitrability can in some circumstances serve as ‘clear and unmistakable’ evidence of an intent to arbitrate arbitrability, but not where, as here, ‘other aspects of the contract create ambiguity as to the parties’ intent.’”  The “other aspect” of the contract was the provision stating that disputes regarding intellectual property would not be subject to arbitration.

The parties’ contract incorporated the ICC rules only into the section requiring the arbitration of some disputes, and not the section providing for litigation of intellectual property rights.  This, the court held, “suggests the parties intended for the ICC rules to apply only to those disputes that the parties agreed to arbitrate, which excludes [intellectual property] disputes.”  Accordingly, applying “ordinary contract principles,” the court found that the “evidence that the parties intended to litigate a particular category of disputes” demonstrated there was no agreement to arbitrate the arbitrability of such disputes.

Amyris next argued that even if the parties did not delegate arbitrability determinations to the arbitrators, the district court erred in finding that Lavvan’s claims were not otherwise subject to arbitration under the parties’ agreement.  The court acknowledged the general rule that “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.”  However, although this “presumption of arbitrability may tip the scale if an agreement is truly ambiguous, … it does not alter the controlling question:  is the agreement best construed to encompass the dispute?”

Here, the court held it was not.  Lavvan’s claims plainly concerned enforcement of certain specified trade secrets and patents, which were “clearly disputes of the sort exempted from arbitration” by the parties’ agreement.  The court therefore rejected Amyris’s argument that these claims had to be arbitrated because they were intertwined with other contractual issues the parties had submitted to arbitration.  By requiring the arbitration of some disputes and litigation of others, the parties’ agreement clearly contemplated that different aspects of their dispute could proceed separately in different fora.  Arbitration is a matter of contract, and “federal law requires piecemeal litigation when necessary to give effect to an arbitration agreement.”

Read the court’s full decision here.


Federal district court holds that so-called arbitration delegation clause did not encompass inquiry into whether nonsignatory could invoke arbitration agreement.

But once court held nonsignatory was entitled to enforce arbitration agreement, the delegation clause required that arbitrators decided other defenses to arbitrability.

The Chickasaw Nation v. Caremark PHC, LLC, Case No. CIV-20-00488-PRW (E.D. Okla. Sept. 30, 2022).

Arbitration is matter of contract.  As just discussed, the parties to a contract may not only agree to arbitrate certain substantive disputes, but also to arbitrate whether claims fall within the scope of the arbitration clause, if their intent to do so is “clearly and unmistakably” evidenced.  But does such a clause cover questions concerning the rights of nonsignatories to invoke an arbitration agreement?  In Chickasaw, the United States District Court for the Eastern District of Oklahoma held it does not.  Rather, whether a non-signatory may invoke an arbitration clause is for the court in the first instance.  However, if the court determines that the nonsignatory may invoke an arbitration agreement that contains a delegation clause, questions concerning other defenses to arbitrability are for the arbitrators.

Chickasaw involved claims by the Chickasaw Nation against certain health insurers for reimbursement of medication costs for tribal members under pharmaceutical benefits plans.  As relevant here, one group of defendants were certain United Healthcare affiliated entities (the United Entities), who the Nation claimed were directly or indirectly responsible for administering the Pharmacy Network Agreement (PNA) between the Nation and United Healthcare’s captive plan manager.  The Nation filed a lawsuit in federal court and claimed that these entities’ denial of benefits violated the Indian Health Care Improvement Act (aka the Recovery Act).

In response, the United Entities sought to compel arbitration of the Nation’s claims.  The PNA contained an arbitration clause providing for the arbitration of any dispute, “including, but not limited to all questions of arbitrability, the existence, validity, scope, interpretation or termination of the agreement or any term thereof.”  Because only the Nation and the plan manager were signatories to the arbitration agreement, the Nation argued that the non-signatory United Entities could not invoke arbitration and that the Nation’s claims should therefore proceed in court.

The United Entities, however, argued that they were entitled to invoke the arbitration agreement because the Nation’s claims were inextricably intertwined with the PNA, and that under controlling California law the Nation was therefore estopped from litigating, rather than arbitrating, its claims.

The court found that although the PNA’s arbitration clause “contains clear-cut language showing an intent to arbitrate threshold issues of arbitrability between the PNA signatories,” there was no “clear and unmistakable evidence that the Nation agreed to arbitrate arbitrability with nonsignatories.”  Accordingly, it ruled, the “Court—rather than the arbitrator(s)—will decide whether the nonsignatories may enforce the arbitration clause of the PNAs.”

The court concluded that the United Entities could enforce the arbitration clause, because the Nation alleged that the nonsignatories acted in concert with their captive plan manager to deny benefits due under the PNA.  Those allegations estopped the Nation from avoiding its obligation to arbitrate disputes arising under that same agreement, even where the dispute was with nonsignatories.  However, while the Nation also advanced two additional defenses to its obligation to arbitrate, including sovereign immunity, the court did not reach those issues.  Having concluded that the United Entities could enforce the arbitration agreement, that agreement’s delegation clause clearly reserved those additional questions for the arbitrators.

Read the court’s full decision here.


Federal courts have circumscribed role in enforcing ICSID awards.

An enforcing court must generally do no more than examine the decision’s authenticity and enforce the obligations imposed by the award.

Valores Mundiales v. Venezuela, No. 19-cv-46-FYP-RMM (D.D.C. Aug. 3, 2022).

The enforcement of international arbitration awards is generally governed by either the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) or the Inter-American Convention on International Commercial Arbitration (the Panama Convention).  These conventions are codified in Chapters 2 and 3 of the Federal Arbitration Act (FAA), and each provides explicit grounds on which a court may refuse enforcement of an award.  In contrast, the enforcement of awards in investor-state arbitrations falling under the International Convention on the Settlement of Investment Disputes (ICSID Convention), is codified in 22 U.S.C. §1650, not the FAA.  Section 1650 does not provide grounds for refusing enforcement of such awards.  The case of Mundiales v. Venezuela concerned the comparatively limited role of U.S. courts in enforcing awards issued in ICSID arbitrations.

The dispute in Valores Mundiales arose in the context of Venezuela’s 2019 constitutional crisis, when over 50 countries, including the U.S., refused to recognize the Maduro government, and instead recognized the alternative government in exile led by Juan Guaidó. At that time, Venezuela, through the Guaidó government, appeared in a 2019 case before the United States District Court for the District of Columbia to resist enforcement of an ICSID tribunal’s arbitral award in favor of two Spanish companies.  The Maduro government had previously initiated annulment proceedings before an ICSID committee, and the Guaidó government sought to substitute itself in that proceeding as Venezuela’s rightful representative.

However, the committee denied the application, finding that the Guaidó government “had not proven its legitimacy to represent Venezuela.”  The Maduro regime therefore continued to represent Venezuela in the annulment proceedings, and the ICSID committee ultimately denied the annulment application and affirmed the award.

Thereafter, the Guaidó government argued to the D.C. District Court that it should deny enforcement of the award, because the ICSID committee’s refusal to allow the Guaido government to prosecute the annulment proceedings amounted to a denial of due process.

The court (acting through a Magistrate), rejected this claim.  Relying on Article 54(1) of the ICSID Convention and the codifying statute (§ 1650), the court reasoned that, unlike under the New York and Panama Conventions, a denial of due process was not a recognized ground for refusing to enforce an ICSID award.  Rather, the convention and the enabling legislation were clear that “[t]he pecuniary obligations imposed by [an ICSID] award [] shall be enforced and shall be given the same full faith and credit as if the award were a final judgment of a court of general jurisdiction of one of several States.”  In the ICSID award context, this means that “if the Centre would treat one of its awards as binding, that award is binding in a United States federal court.”  Accordingly, “[t]he role of the courts in this scheme is largely limited to enforcing ICSID awards,” and “an enforcing court must generally do no more than examine the judgment’s authenticity and enforce the obligations imposed by the award.”

In applying the full faith and credit standard under Section 1650, a U.S. court may review the rendering jurisdiction’s procedures to ensure a “constitutional floor” of due process, but “federal courts do not impose their own rules or laws designed to ensure due process in federal court onto other tribunals.”  Instead, they “accept the rules chosen by the [s]tate from which the judgment is taken,” in part because “no single model of procedural fairness, let alone a particular form of procedure, is dictated by the Due Process Clause.”

ICSID’s “robust internal mechanisms” ensure awards “are rendered consistent with core principles of due process,” because parties must be represented by counsel, arbitral awards must be in writing and reasoned, annulment proceedings are available, and no ICSID proceeding is possible absent the State’s consent in the ICSID Convention.  In sum, the court held, U.S. courts will enforce an ICSID award “except in the most extraordinary of circumstances,” none of which were present there.

Venezuela also challenged enforcement of the award to the extent it imposed a post-award interest rate of Libor + 2%.  Venezuela argued for the lower rate set in 28 U.S.C. 1961, which governs interest on “any money judgment in a civil case recovered in district court.”  The court rejected Venezuela’s objection, finding that Section 1961 did not govern judgments recognizing ICSID awards.  Section 1961 governs only federal judgments, but Section 1650 requires that ICSID awards be treated as “a final judgment of a court of general jurisdiction of one of the several [U.S.] [s]tates.”  Because payment of interest under an ICSID award is a “pecuniary obligation” under Section 1650, the court has no choice but to enforce that portion of the award as drafted.  This again contrasts with the treatment of New York and Panama Convention awards.  Those Conventions are codified in the FAA, which provides in Section 13 that a judicially confirmed award be treated “as if” the award was a federal court judgment, governed by Section 1961.

Read the court’s full decision here.

James Hosking and Yasmine Lahlou Celebrate Launch of ICCA Report at 2022 Edinburgh Conference

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September 2022— Attendees of the ICCA 2022 Edinburgh conference will celebrate the launch of the ICCA Report “Does a Right to a Physical Hearing Exist in Arbitration?” co-edited by Chaffetz Lindsey’s James Hosking and Yasmine Lahlou and D|R Arbitration & Litigation’s Giacomo Rojas Elgueta. On Wednesday, September 21st the co-editors will present the Report, summarizing key takeaways from the 78 national reports collated from around the globe and including eight essays on cutting-edge issues around remote arbitration hearings.

To close out the event, a moderated panel of thought leaders in the space will debate how remote hearings can be used in a post-pandemic world. Speakers include Kingshuk Banerjee, Valentine Chessa, Hussein Haeri, Yoshimi Ohara, and Franz Schwarz.

The ICCA 2022 conference is taking place September 18th-September 21st in Edinburgh, Scotland. The event titled ‘Arbitration’s Age of Enlightenment?’, explores ideas to adapt to a fast-changing environment, and shape the future of international arbitration. Learn more about the conference here.

About ICCA

The International Council for Commercial Arbitration (ICCA) is a global non-governmental organization devoted to promoting the use and improving the processes of arbitration, conciliation and other forms of international dispute resolution.

Chambers Latin America 2023 Ranks Chaffetz Lindsey’s International Arbitration Practice Among Best in the Region

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August 2022 – The recently released Chambers & Partners Latin America 2023 rankings once again recognized Chaffetz Lindsey’s international arbitration practice as a standout among elite firms and lawyers across the region. Chambers praises Chaffetz Lindsey’s practice as an “esteemed international arbitration outfit [that] offers valued expertise in Latin American mandates” and one that is “in high demand among prominent international and regional corporate groups for its knowledge of commercial disputes.” Chaffetz Lindsey is the only Americas-based boutique firm included in the rankings.

Clients highlighted the firm’s impressive organization, reliability and the comfort the team engenders.

Chaffetz Lindsey is one of the only firms that feature four individually ranked partners, all of whom have been recognized in the International Counsel ranking table. Aníbal Sabater has also earned special recognition as a leading arbitrator on the Arbitrators in International Counsel ranking table. Chambers provided comments on the following members of the team:

  • Esteemed partner Aníbal Martin Sabater is widely recognised by the market for his impressive track record leading investment treaty arbitration cases across Latin America. His practice includes solid expertise assisting clients with commercial controversies and also acting as arbitrator in complex disputes in the region. Lauding his skills as counsel, one client declares: “He has a lot of practical experience in arbitration. He can provide advice on the law as well as on how to move. He is also very calm and his reasoning is rational.”
  • James Hosking continues to assist key clients with commercial and infrastructure construction disputes in Latin America, particularly in Argentina and Mexico. He also advises investors on bilateral investment treaty cases. “James Hosking is super sophisticated. He knows how to approach hot issues, and goes to the core of each matter,” points out a market onlooker.
  • Yasmine Lahlou is adept at handling commercial arbitrations in Latin America arising out of joint operating agreement disputes and construction claims. Lauding her solid expertise, one client declares: “Yasmine Lahlou delivers a very strong service and she is one of the best in her field.”
  • David Lindsey enjoys a wealth of experience acting on Latin American arbitration cases before various arbitral panels. He possesses solid expertise advising oil and gas and construction companies on commercial disputes arising from joint operating agreements and EPC contracts.

To view the firm’s International Arbitration profile, please visit our website or the Chambers Latin America website.

About Chambers Latin America

Chambers Latin America ranks the top law firms and lawyers across the region based on in-depth research conducted throughout the year and determined through interviews with thousands of lawyers and their clients worldwide. Read more about Chambers’ methodology here.

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