An ex parte proceeding in a U.S. court to “recognize,” “enforce,” or “confirm” an arbitration award against a foreign sovereign is improper. The U.S. Court of Appeals for the Second Circuit issued a lengthy and instructive decision to that effect in Mobil Cerro Negro, Ltd. v. Bolivarian Republic of Venez., 863 F.3d 96 (2d. Cir. 2017). Its lesson is that in the United States, the only way to enforce (or recognize or confirm) an arbitral award issued against a sovereign entity by the International Centre for Settlement of Investment Disputes (“ICSID”) (and probably otherwise as well) is in compliance with the Foreign Sovereign Immunities Act (“FSIA”).
As discussed in an earlier post, obtaining discovery from a non-party to an arbitration often is easier said than done. Depending on the law of the place of arbitration, arbitrators may not be able to compel document production or testimony from a non-party before a hearing on the merits. This can impair a claimant’s ability to prove its claims considerably, or in some cases altogether inhibit a potential claimant from learning the facts necessary to identify the correct respondent(s) or to articulate a competent claim. Moreover, while Fed. R. Civ. P. 27 permits pre-action discovery to “perpetuate testimony regarding [a] matter that may be cognizable,” many federal courts have interpreted the phrase “perpetuate testimony” to mean that Rule 27 may only be used to “preserve testimony which could otherwise be lost,” rather than as a “substitute for discovery.” Ash v. Cort, 512 F.2d 909, 912 (3d Cir. 1975); accord Bryant v. Am. Fedn. of Musicians of the United States, 666 Fed. Appx. 14, 16 (2d Cir. 2016); In re Allegretti, 229 F.R.D. 93, 96 (S.D.N.Y. 2005) (“[Rule 27] is not a method of discovery to determine whether a cause of action exists; and, if so, against whom the action should be instituted.”)).
Arbitration is a creature of contract. So is the law concerning contracts with an arbitration clause the same as the law concerning any other contract? Almost. One must always bear in mind the “separability” or “independence” of the arbitration agreement — the autonomy principle.
The courts undoubtedly have the power to grant provisional remedies in aid of a pending arbitration – including temporary restraining orders, preliminary injunctions, and attachments. As a recent Fifth Circuit decision reminds us, the courts also can grant such remedies in aid of an arbitration that has yet to be commenced. Indeed, those remedies may be available under state law, even if the future arbitration is governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”), and even if the arbitration will be sited in a state other than the one in which the interim remedy is sought.
Published in Law 360 (February 15, 2018)
In a series of articles over the past several months, we asked whether “class arbitration” — meaning the utilization of the Fed.R.Civ.P. 23 class action protocol in an arbitration proceeding — is ultimately viable in U.S. jurisprudence. We suggested that it arguably is not, considering the fundamental nature of arbitration. And we noted that the U.S. Supreme Court had not addressed core issues that will ultimately determine the viability of a class arbitration award, nor had the various Courts of Appeal grappled with those issues. But the courts in the Second Circuit have begun to do so.
Under 28 U.S.C. § 1782, “[t]he district court of the district in which a person resides or is found may order him to . . . produce a document for use in a proceeding in a foreign or international tribunal . . . .” Courts in the Second Circuit appear to be coming around to accepting that a commercial arbitration can be “a foreign or international tribunal” for these purposes. Swell. But there is one more thing: they are also likely to treat a subpoena under that statute like a subpoena under Fed. R. Civ. P. 45, and therefore require that the court have personal jurisdiction — general, preferably — over the subpoena target. See, Australia and New Zealand Banking Group Ltd. v. APR Energy Holding Ltd., 2017 U.S. Dist. LEXIS 142404 (S.D.N.Y. Sept. 1, 2017) (“ANZ Bank”).
Typically, the issue of whether a party is bound by an arbitration agreement is raised in a judicial motion to compel under Section 4 of the Federal Arbitration Act (9 U.S.C. § 4). The issue also may be raised in a judicial application to stay an arbitration, as to which the Section 4 procedure applies as well. Occasionally, however, the issue is decided by an arbitrator in the first instance. When the matter eventually reaches a court — e.g., in the context of a post-arbitration motion to confirm or to vacate an award (FAA §§ 9, 10) — and the arbitrator’s decision regarding party arbitrability is to be reviewed, that facet of the judicial proceeding is likely to resemble one for an application under FAA § 4. That is, the judicial review will be de novo, the Section 4 procedure will likely be adopted, and the court will not be restricted to the record before the arbitrator — additional evidence will be permitted.
Litigators in the U.S. often take for granted the ease with which they can obtain discovery from non-parties in our federal and state courts. One might assume that the “presumption in favor of arbitrability” embodied in the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. (“FAA”), would have been implemented with, among other things, a statutory grant of subpoena power to arbitrators that is virtually coextensive with that of a federal district court. No so, however. And depending on the place of arbitration, a party’s ability to compel document production from a non-party, much less to depose that witness, prior to a hearing, may be very limited indeed. Problems and issues abound.
What makes an on-line arbitration agreement binding against a website user? In Meyer v. Uber Technologies, Inc., 2017 U.S. App. LEXIS 15497 (2d Cir. Aug. 17, 2017), the U.S. Court of Appeals for the Second Circuit issued a second decision on this issue, providing additional elucidation following its 2016 decision in Nicosia v. Amazon, Inc. 834 F.3d 220 (2d Cir. Aug. 24, 2016).The Nicosia and Meyer cases each involved an on-line agreement with a user who claimed not to have read the company’s terms and conditions, including an arbitration clause. In Meyer, Uber’s agreement to arbitrate was held to be enforceable against the user; in Nicosia, Amazon’s was not—at least on the record before the Court of Appeals.
When is “silence” in an arbitration clause concerning class arbitration not “Stolt-Nielsen silence”? And what is the difference between a “claim” and a “procedure”? The Ninth Circuit seemingly took hair-splitting to a new level in conceiving the former question, and apparently suffered some uncertainty regarding the latter, when it issued its memorandum decision in Varela v. Lamps Plus, Inc., No. 16-56085 (Aug. 3, 2017).