The past year has been tumultuous for the United States, with legislation and rules upended in some legal fields; but international arbitration law has remained untouched. The future of international investment arbitration, including the US role in treaty regimes, is uncertain yet unchanged. Meanwhile, US courts continue to add clarifications and refinements to international arbitration law, including with respect to 'class action' arbitrations and enforcement of awards set aside at the place of arbitration. US law continues to be strongly supportive of the arbitral process.
i The structure of US courts
The United States court system includes a federal system and 50 state systems (plus territorial courts) with overlapping jurisdictions. The federal system is divided into district courts, intermediate courts of appeal referred to as 'circuits' and the Supreme Court, which is the court of last resort. Each state has its own court system, governed by its state constitution and its own set of procedural rules. While state systems vary, most mirror the federal system's three-tiered hierarchy of trial courts, appellate courts and a court of last resort. There are no specialist tribunals in the federal or state systems that deal solely with arbitration law, although New York and Florida have made provision for special handling of international arbitration matters in certain of their state courts. Because of the structure of US law, most cases involving international arbitration are dealt with in the federal courts.
ii The structure of arbitration law in the United States
The Federal Arbitration Act (FAA) governs almost all types of arbitrations in the US, regardless of the subject matter of the dispute. It is by no means comprehensive, however, instead regulating arbitrations only at the beginning and end of their life cycles. Under the FAA, all arbitration agreements 'shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract'.2 Upon the application of any party, judicial proceedings are stayed as to any issues determined to be referable to arbitration.3 As long as an arbitration agreement is deemed enforceable and a dispute arbitrable, the FAA leaves it to the parties and the arbitrators to determine how arbitrations should be conducted. While the FAA allows for some judicial review of arbitral awards, the grounds upon which an order to vacate the award may be issued are limited and exclusive and, in general, are designed to prevent fraud, excess of jurisdiction or procedural unfairness, rather than to second-guess the merits of the panel's decision.4
The FAA's largely hands-off approach reflects US federal policy strongly favouring arbitration as an alternative to sometimes congested, ponderous and inefficient courts.5 It was this pro-arbitration policy that led the Supreme Court to interpret an arbitration clause expansively to include statutory antitrust claims in Mitsubishi Motors Corp v. Soler Chrysler-Plymouth, allowing arbitrators to enforce federal antitrust law alongside judges.6 In the international context, this pro-arbitration policy is further evidenced by the implementation of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) and the Inter-American Convention on International Commercial Arbitration (the Panama Convention) in Chapters 2 and 3, respectively, of the FAA.7
State law, by comparison, plays a limited role in the regulation of arbitrations in the United States. The FAA pre-empts state law to the extent that it is inconsistent with the FAA and applies in state courts to all transactions that 'affect interstate commerce' – a term that the Supreme Court has interpreted to include all international transactions and many domestic ones.8 Thus, for international commercial disputes, state arbitration law is relevant only as a gap-filler where the FAA is silent.
iii Distinctions between international and domestic arbitration law in the United States
The FAA enacts the New York and Panama Conventions. Thus, as a general matter, there are no significant distinctions at the federal level between international and domestic arbitration law.9 The FAA gives federal courts an independent basis of jurisdiction over any action or proceeding that falls under the New York Convention, opening the federal courts to international parties who otherwise would have to demonstrate an independent basis for federal jurisdiction.10 Some states have international arbitration statutes that purport to govern only international arbitrations taking place in those states. As previously mentioned, however, these state statutes are pre-empted by the FAA to the extent that they are inconsistent with it and are thus of limited relevance to international arbitration.
II THE YEAR IN REVIEW
i Developments affecting international arbitration
Agreements containing arbitration clauses that include a waiver of any right to pursue 'class' or collective claims in any forum remained an important subject this year. Cases involving such 'class action waivers' arise most often in the context of consumer, employee or franchise cases that have few international aspects. However, since US arbitration law is largely uniform in its application to both domestic and international cases, the effect of the resolution of these issues is likely to be significant for both.
In the case of employment law, one important issue is whether employers that require employees to agree to arbitration clauses waiving their right to bring collective action claims thereby violate Section 8(a)(1) of the National Labor Relations Act (NLRA), which prohibits employers from interfering with employees' exercise of their rights to engage in concerted activities.
The US Supreme Court decided in Epic Systems Corp v. Lewis, by a 5–4 vote, that nothing in the NLRA prohibits employers from entering into employment agreements that bar collective or class actions or proceedings and mandate that each case be decided individually. The Court noted that the FAA generally requires enforcement of arbitration agreements as written and held that exceptions to enforceability of such a class action exclusion clause could be based only on 'generally applicable contract defenses' and not defences targeting arbitration by 'interfer[ing] with fundamental attributes of arbitration' such as the normally bilateral nature of arbitration claims between two parties. The Court determined that the NLRA does not provide such a contract defence to employees and does not 'even hint at a clear and manifest wish to displace the Arbitration Act'.
Another key issue is what language authorises class arbitration. In 2010, the Supreme Court held in Stolt-Nielsen SA v. Animal Feeds Int'l Corp that a party may not be compelled to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so. The Court reasoned that the parties' 'silence' on the issue of class arbitration does not constitute consent to class arbitration because the differences between bilateral and class arbitration are too great.
However, in Varela v. Lamps Plus, Inc, the Ninth Circuit distinguished Stolt-Nielsen and allowed a class arbitration to proceed, even though the arbitration agreement in question did not mention class arbitration. The Ninth Circuit reasoned that the absence of an express reference to class arbitration was 'not the 'silence' contemplated in Stolt-Nielsen'. The Supreme Court has granted certiorari and is expected to issue a decision in 2019.
A potentially more general issue with respect to class arbitration is whether an arbitrator can make rulings, as a court may, with respect to 'absent' class members that arguably have not consented to class arbitration and purportedly are represented by others. This issue was decided in the long-running case of Jock v. Sterling Jewelers, Inc, a putative class action gender discrimination lawsuit that has been pending since 2008. The case was referred to arbitration, in which an arbitrator determined that the agreement permitted class arbitration despite the lack of express language in the arbitration agreement that each employee signed providing for class arbitration. This ruling led to a series of decisions from a New York federal district court and the Second Circuit Court of Appeals over the role of the courts in reviewing the arbitrator's authority to determine whether the parties agreed to class arbitration.11
The arbitrator certified a class of 70,000 members, including several class members who had not consented to join the class arbitration ('absent class members'). The district court rejected a motion to vacate the arbitrator's certification decision, but the Second Circuit reversed and remanded the case for further consideration of whether the arbitrator exceeded her authority in certifying a class that contained absent class members.
The New York district court issued a further decision in January 2018, vacating the arbitral award and holding that the arbitrator had no authority to certify a class of claimants that included absent class members.12 The plaintiff had argued that because the arbitrator had authority to decide whether the named plaintiffs' arbitration agreements permitted class procedures, that also meant that the arbitrator had authority to decide whether the absent class members' arbitration agreements (which were identical to those signed by the named plaintiffs) permitted class procedures that would bind those absent class members unless they opted out. The court rejected that argument, relying on Supreme Court Justice Alito's concurrence in the Oxford Health case, in which he had noted that 'absent members of the plaintiff class have not submitted themselves to the Arbitrator's authority in any way.'13 The New York court reasoned that although absent class members may have signed contracts with arbitration clauses that are materially identical to those signed by the plaintiff, that did not mean that they were bound by an arbitrator's erroneous interpretation of a contract that did not authorise class arbitration.14
This decision is potentially of great importance because it is the first district court decision to grapple with the issue of absent class members and class arbitration. However, it remains to be seen what view the Second Circuit will take on this issue on appeal.
FAA's Section 1 exemption
As noted above, the FAA provides that all arbitration agreements 'shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract'.15 However, Section 1 of the FAA contains an exemption for 'contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce'.16
The scope of this exemption is an issue that will be considered by the Supreme Court in the 2018 term when it rules in New Prime Inc v. Oliveira, a case involving a truck driver who worked as an independent contractor. The driver's contract with his employer specified that the truck driver was 'deemed for all purposes to be an independent contractor, not an employee of Prime'.17 The contract also contained an arbitration clause that provided for arbitration of 'any disputes arising out of or relating to the relationship created by the agreement, … and any disputes as to the rights and obligations of the parties, including the arbitrability of disputes between the parties'.18
The truck driver filed a class action lawsuit against his employer, but the employer moved to compel the truck driver to arbitrate the dispute. The district court ruled that the court, not the arbitrator, should decide whether the Section 1 exemption of the FAA applies. The First Circuit Court of Appeals agreed19 and went on to consider whether the Section 1 exemption applied to independent contractors, concluding that because the truck driver's contract was 'an agreement to perform work of a transportation worker', it is exempt from the FAA.20
The Supreme Court granted certiorari in February 2018 and is likely to rule in 2019.
The Second Circuit concluded that the Uber user was bound by the arbitration provision. The court first noted a distinction between 'clickwrap' agreements, which require users to affirmatively agree to a list of terms and conditions, and 'browsewrap' agreements, which generally post terms and conditions on a website via a hyperlink at the bottom of the screen.23 The arbitration provision at issue fell into the latter category, and the validity of such 'browsewrap' agreements depends on whether the user has actual or constructive knowledge of a website's terms and conditions.24
Enforcement and recognition of foreign arbitral awards
The enforcement of foreign arbitral awards continued to be an important topic in US arbitration jurisprudence this past year, particularly in the Second Circuit and with respect to awards issued against foreign sovereigns.
In Thai-Lao Lignite (Thailand) Co v. Gov't of the Lao People's Democratic Republic,29 the Second Circuit again faced the question of whether to enforce a foreign arbitral award that had been annulled at the seat. As discussed in last year's edition of The International Arbitration Review, the Second Circuit enforced an annulled arbitration award for the first time in 2016 in Corporación Mexicana de Mantenimiento Integral v. Pemex-Exploración y Producción.30 In that case, the Second Circuit noted that the Panama and New York Conventions permit, but do not mandate, that a court 'may refuse the recognition and enforcement of an award' if the award has been annulled. The court concluded that while the doctrine of international comity calls for deference to the annulling decision, it need not defer to the foreign judgment where it is against the public policy of the United States. After finding that the annulment of the arbitration award violated 'fundamental notions of what is decent and just', by inter alia, leaving the claimants without a forum to pursue their claims, the Second Circuit enforced the award.31
In 2017, the Second Circuit faced a different variation of this question. In Thai-Lao Lignite, an arbitration award had been enforced by a New York district court before it was annulled by a court at the place of arbitration, Malaysia. The Second Circuit was thus confronted with the question of whether to vacate an already-existing enforcement judgment of a foreign arbitral award in light of the award's subsequent annulment. In the underlying arbitration the claimant had obtained an award of approximately US$57 million against Laos for claims related to the construction of a lignite-burning power plant. After the limitation period for challenging the award at the seat had expired, the claimant moved to enforce the award against Laos in the United States, the United Kingdom and France. In 2011, the federal court for the Southern District of New York confirmed the award pursuant to the FAA and the New York Convention. However, while the motion to confirm was pending, and one year and nine months after the award had been made, Laos obtained an extension to file a motion for vacatur from a Malaysian court and moved to annul the award. In 2012 the Malaysian Supreme Court annulled the award, and Laos subsequently moved to vacate the enforcement judgment issued by the Southern District. The district court granted the motion to vacate pursuant to Federal Rule of Civil Procedure Rule 60(b)(5), which permits district courts to 'relieve a party…from a final judgment' when the judgment 'is based on an earlier judgment that has been reversed or vacated'.
The Second Circuit accepted Rule 60(b)(5) as the appropriate US procedural mechanism to address these circumstances and found it to be compatible with the New York Convention, Article III of which requires that contracting states 'recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon'. Whether to grant relief under Rule 60(b)(5) depends upon the discretion of the district court, considering whether the motion was made within 'a reasonable time' as required by Rule 60(c), whether the movant acted equitably and whether vacatur would strike a balance between justice and preserving the finality of judgments. While an annulment should not be treated as dispositive of the Rule 60(b)(5) analysis, the court held that 'prudential concerns for international comity and the high standard for overcoming the presumptive effect of a primary jurisdiction's annulment' also should be considered.32 Consistent with Pemex, the court held that in the absence of a concern that the annulling judgment offended 'fundamental notions of what is decent and just', the annulment of an award in the primary jurisdiction 'should weigh heavily in a district court's Rule 60(b)(5) analysis'33 because the power and authority of the local courts of primary jurisdiction are of 'paramount importance' under the New York Convention.34
Applying these principles, the Second Circuit held that the district court did not exceed its discretion. The court noted that although it 'might not necessarily agree with the merits of the Malaysian courts' judgments', there was no concern that they violated fundamental notions of justice.35 It found that Laos' delay in seeking annulment was considered by the district court and rejected within its discretion. While a 10-year delay in seeking annulment might have led to a different decision, the district court was within its discretion in determining that the interests of finality did not outweigh other considerations in favour of vacatur. The court appeared to be persuaded in part by the fact that the claimants knew annulment proceedings were under way before the district court issued its first judgment enforcing the award.
The Second Circuit also affirmed the district court's decision not to enforce an English judgment that the claimants had obtained enforcing the award in the United Kingdom. The court noted that New York's Uniform Foreign Country Money-Judgments Recognition Act provides that a foreign judgment 'need not be recognized if … the judgment conflicts with another final and conclusive judgment'.36 Since the Malaysian judgment conflicted with the English judgment, and the former was issued by the primary jurisdiction of the arbitration, the court held that equity favoured giving greater weight to the Malaysian judgment and thus that the district court did not abuse its discretion in refusing to recognise the English judgment.
The decision in Thai-Lao Lignite appears to confirm that the Second Circuit's decision in Pemex to enforce an annulled award was an exception to the deference given to annulment decisions and that petitioners will continue to face a high hurdle when attempting to enforce an award that has been (or may later be) annulled at the seat.
In two other separate decisions involving foreign sovereigns, the Second Circuit established that the Foreign Sovereign Immunities Act (FSIA) applies to the enforcement of ICSID awards and thus that ex parte enforcement of such awards against states is prohibited. The Second Circuit is now aligned with the DC Circuit on this question.
In Mobil Cerro Negro, Ltd v. Bolivarian Republic of Venezuela,37 the Second Circuit vacated an ex parte confirmation of an ICSID award against Venezuela. As described in the eighth edition of The International Arbitration Review, an ICSID tribunal had awarded five Exxon Mobil subsidiaries US$1.6 billion in compensation for the expropriation of their investments in Venezuela, an award that later was annulled in large part by an ICSID Annulment Committee. Before the award was annulled, the claimants moved to confirm it in the Southern District of New York on an ex parte basis. The district court confirmed the award on the ground that 22 USC Section 1650a, which addresses US participation in the ICSID Convention (but does not address the question of ex parte enforcement), permitted courts to take guidance from New York law. The court applied NY CPLR Article 54, which, subject to certain requirements,38 allows courts to enter authenticated 'foreign judgments' in the absence of the debtor party.
The Second Circuit reversed, holding that 'FSIA provides the sole basis for subject-matter jurisdiction over actions to enforce ICSID awards against a foreign sovereign'39 and that FSIA requires notice of an enforcement action be provided to the respondent state. As 22 USC Section 1650a did not provide an independent basis for subject-matter jurisdiction over the enforcement of ICSID awards, it could not be used as a vehicle for applying New York law in conflict with FSIA.
The Second Circuit vacated another ex parte enforcement order in Micula v. Gov't of Romania40 on similar grounds. In that case, the claimants had won a US$250 million award against Romania for violations of the Romania–Sweden BIT. The claimants filed an ex parte petition in the New York federal district court, which converted the award into a judgment. Romania appealed to the Second Circuit, which vacated the lower court's order as inconsistent with the FSIA.
The Second Circuit's decisions in Mobil Cerro Negro and Micula led a Southern District of New York judge to vacate the ex parte enforcement order of an ICSID award previously granted in a different case, EISER Infrastructure Limited v. Kingdom of Spain.41 The claimants in that enforcement action – UK and Luxembourg companies – had obtained an €128 million arbitration award against Spain under the Energy Charter Treaty. The ICSID Tribunal in the arbitration found that Spain's revocation of certain financial incentives for solar energy investments constituted a violation of the Treaty's fair and equitable treatment clause. The claimants sought ex parte enforcement of the award, which the Southern District granted in June 2017, only to reverse itself in November of the same year following the Second Circuit's decisions in Mobil Cerro Negro and Micula.42
The Second Circuit in Mobil Cerro also further clarified the terms 'confirmation', 'enforcement' and 'recognition' as used in the FAA, the New York Convention and 22 USC Section 1650a. In a 2017 decision in CBF Indústria De Gusa SA v. AMCI Holdings, Inc, 43 the Second Circuit clarified that the term 'confirmation' as used in the FAA is equivalent to the terms 'recognition and enforcement' in the New York Convention and thus held that no separate action is necessary to 'confirm' a foreign arbitral award before seeking to enforce it.44 In Mobil Cerro the Second Circuit similarly held that the terms 'recognition' and 'enforcement' as used in the ICSID Convention do not require separate 'confirmation' actions in the United States prior to enforcement. Because the ICSID Convention is not self-executing and because its implementing statute, USC Section 1650a, refers only to 'enforcement', the court held that a party only need seek 'enforcement' of an ICSID award and need not bring a separate action for an award's 'recognition'.45
The Third Circuit also handed down an enforcement-related decision involving a sovereign state in Crystallex International Corp v. Petróleos de Venezeula SA,46 holding that Venezuelan state-owned companies were not liable for fraudulent transfers under Delaware law where the enforcement action was against Venezuela and the state-owned entities were not respondents in the underlying arbitration.
Crystallex, a Canadian mining company, brought claims against Venezuela pursuant to the Venezuela-Canada BIT alleging that Venezuela had unlawfully expropriated its investment in a gold mining operation in Venezuela and otherwise violated protections under the Venezuela-Canada BIT. An ICSID Tribunal made an award of $1.2 billion in favour of Crystallex in 2016, which Crystallex then sought to enforce against Venezuelan state-owned assets in the United States.
Crystallex alleged that Venezuela, through its state-owned entities Petroleos de Venezula SA (PDVSA) and PDV Holding Inc (PDVH), had fraudulently transferred assets from the United States to Venezuela to shield them from Crystallex's enforcement action. Crystallex alleged that PDVSA, Venezuela's alleged alter ego, directed its wholly owned US subsidiary, PDVH, to order PDVH's wholly owned subsidiary, Citgo Holding, to issue US$2.8 billion in debt and then transfer the proceeds of the debt back to PDVSA in Venezuela through shareholder dividends. The practical effect of the transactions was to transfer approximately US$2.8 billion in assets from the United States to Venezuela.
The district court ruled in Crystallex's favour, finding that the transfers were fraudulent pursuant to the Delaware Uniform Fraudulent Transfer Act (DUFT), but the circuit court reversed. The appellate court reasoned that neither Venezuela nor its alleged alter ego PDVSA had transferred any assets. Rather, according to Crystallex's allegations, Venezuela and PDVSA received the assets from PDVH, which Crystallex did not allege to be a debtor of the arbitration liability. Because liability under DUFT requires that a debtor make the transfer, neither Venezuela nor any of the involved entities could be liable. The court recognised the practical and equitable consequences of its decision, which ostensibly would allow Venezuela's state-owned entities to avoid attachment of their assets, but said that it was compelled to adhere to the letter of the applicable Delaware law.
Finally, in Sharpe Corp v. Hisense USA Corp,47 a District of Columbia district court decided two interesting and important questions related to the enforcement of arbitral awards. The first was whether it had subject-matter jurisdiction to declare a foreign arbitral award unenforceable where the prevailing party had not sought enforcement in the court's jurisdiction. The second question was whether tribunal-ordered preliminary measures restraining a party's speech were enforceable or violated US public policy and, in particular, the First Amendment protection of freedom of speech. The court answered both questions in the affirmative.
In the underlying arbitration, seated in Singapore, a tribunal issued interim measures prohibiting Sharpe from making disparaging comments with respect to the counterparty, Hisense. Sharpe alleged in the district court that the arbitrator-issued 'gag order' was contrary to US public policy enshrined in the US Constitution. Hisense countered that the court had no jurisdiction to decide the complaint because Hisense was not moving to enforce the award in the United States and this was not an enforcement proceeding under the Convention pursuant to FAA Section 203. Nor, Hisense argued, was the award contrary to public policy in any event.
The court rejected the argument that it did not have jurisdiction to declare an award unenforceable. The court noted the New York Convention only discusses the power of a court of secondary jurisdiction to enforce an award and is silent as to pre-emptive claims seeking declarations and as to unenforceability. The court nevertheless held that it had jurisdiction over such a claim in light of the FAA and the Declaratory Judgment Act. The court reasoned that while the Declaratory Judgment Act does not confer jurisdiction, it applies where the court would have jurisdiction over the anticipated suit that the moving party seeks to avoid. In other words, the question presented to the court was whether the court would have subject-matter jurisdiction over a prospective enforcement claim brought by Hisense, had there been one. Since the court considered the answer to that question was affirmative under the FAA, the court reasoned that it also had subject-matter jurisdiction to hear Sharpe's claim pursuant to the Declaratory Judgment Act.
While the court found that it lacked personal jurisdiction over Hisense, the court went on to address the merits of the dispute because, it said, the question of personal jurisdiction was 'sufficiently close' to merit an alternative ruling.48 The court held that the interim measures prohibiting Sharpe from issuing certain statements with respect to Hisense did not violate the public policy of the US because the First Amendment protects speech from state action but not private action,49 which is what an agreement to arbitrate and the enforcement of a private arbitration award constitute.50 The court noted that 'If, for constitutional purposes, every private right were transformed into governmental action by the mere fact of court enforcement of it, the distinction between private and governmental action would be obliterated'.51 The court noted that the interim measures at issue were consistent with the SIAC Rules to which the parties agreed, which empower the arbitrator to 'award any interim relief that he deems necessary' and provide that 'all matters relating to the proceedings and the Award' would be confidential.
Non-statutory grounds for vacatur of awards
The FAA and the New York Convention that it implements strictly limit the grounds upon which a court can vacate an arbitral award. Their intent is to avoid merits-based judicial review of arbitral awards except in very narrow circumstances. Over the past half-century, a judicially created doctrine called 'manifest disregard' has developed in the United States and has allowed parties to seek an expanded review of the merits of arbitrators' decisions, at least in theory. Successful use of the doctrine is rare, however, and appellate decisions in the past several years have drawn even the existence of that doctrine into question.
The manifest disregard doctrine was born from Supreme Court dicta in 1953: '[T]he interpretations of the law by the arbitrators in contrast to manifest disregard [of the law], are not subject, in the federal courts, to judicial review for error in interpretation'.52 Over the years since, this passive reference grew in the lower courts into what was commonly considered an additional ground for vacatur of arbitral awards, at least in a domestic context, where arbitrators wilfully ignore clearly applicable law in reaching an erroneous result.53 In 2008 in the Hall Street case, the Supreme Court – again in dicta – questioned the validity of the manifest disregard ground:
Maybe the term 'manifest disregard' was meant to name a new ground for review, but maybe it merely referred to the [FAA] [Section] 10 grounds collectively, rather than adding to them. Or, as some courts have thought, 'manifest disregard' may have been shorthand for [Section] 10(a)(3) or [Section] 10(a)(4), the paragraphs authorizing vacatur when the arbitrators were 'guilty of misconduct' or 'exceeded their powers'. We, when speaking as a Court, have merely taken the Wilko language as we found it, without embellishment and now that its meaning is implicated, we see no reason to accord it the significance that [petitioner] urges.54
While this criticism of manifest disregard is itself merely dicta, the court was clearly sceptical of merits-based review that threatened to turn arbitration into a mere 'prelude' to a 'more cumbersome and time-consuming judicial review process'.55 It has declined, however, to use opportunities in later decisions to state explicitly whether manifest disregard survived Hall Street.56
As a result of the Supreme Court's lack of clear direction, a circuit split has arisen over the continuing vitality of the manifest disregard doctrine post-Hall Street. The Fifth, Eighth and Eleventh Circuits (which include much of the American South) have interpreted Hall Street as an express rejection of the manifest disregard doctrine.57 The Second and Ninth Circuits (which include New York and California), meanwhile, have held that manifest disregard is simply a judicial gloss on the FAA's statutory grounds for vacatur and have continued to apply their manifest disregard jurisprudence.58 Both circuits have found that a high standard must be met for the doctrine to apply.59 The Fourth Circuit has ruled that the manifest disregard doctrine is still viable,60 while the Seventh Circuit stated that 'manifest disregard of the law is not a ground on which a court may reject an arbitrator's award unless it orders parties to do something that they could not otherwise do legally (e.g., form a cartel to fix prices)'.61 The Sixth Circuit found that, in addition to the grounds provided by the FAA, a court can vacate an arbitral award 'in the rare situation in which the arbitrators 'dispense [their] own brand of industrial justice', by engaging in manifest disregard of the law'.62 Most of the remaining circuits have produced contradictory or non-committal manifest disregard jurisprudence.63 For example, the First Circuit acknowledged that there is a circuit split on whether manifest disregard is a viable doctrine and also noted that, while it had previously stated in dicta that the doctrine is no longer available, it had not squarely addressed the issue.64
The lack of clarity over the validity of the 'manifest disregard of the law' standard again manifested itself in 2017. In Mesa Power Group LLC v. Canada,65 a District of Columbia court continued that Circuit's approach of 'assum[ing] without decid[ing] that 'manifest disregard of the law' is a valid ground for vacatur under the FAA', but nevertheless resisted the claimant's attempt to annul the NAFTA award at issue.
In the underlying arbitration, Mesa Power, a US energy company, asserted claims against Canada for violations of NAFTA Chapter 11. Mesa alleged that it had invested in renewable energy production in Ontario, with the goal of obtaining a contract through the government's feed-in-tarif (FIT) programme. According to Mesa, Ontario announced it would obtain its renewable energy exclusively through FIT and that the programme would guarantee producers a price premium and market for such energy. Mesa claimed that, after announcing the FIT programme, the government of Ontario entered into a contract with a Korean consortium, of which it required lesser obligations than those required of companies participating in FIT. Mesa argued that these actions violated NAFTA's National Treatment and most favoured nation treatment clauses.
The tribunal ruled in Canada's favour on all claims and awarded more than C$3 million in costs to Canada. The tribunal found that the FIT programme was 'procurement', as defined by NAFTA Article 1108, and therefore the protections of Articles 1102 (national treatment), 1103 (most favoured nation treatment) and 1106 (performance requirements) did not apply. Canada moved to confirm the award, while Mesa moved to vacate on the ground that the tribunal had acted in manifest disregard of the law because its interpretation of the term 'procurement' under NAFTA Article 1108 was unjustifiable.
The district court identified the uncertainty, in light of Hall Street, over whether manifest disregard of the law is a ground for vacatur and stated that it would follow the DC Circuit Court's approach of 'assum[ing] without deciding that 'manifest disregard of the law' is a valid ground for vacatur under the FAA'.66 The court, however, rejected Mesa's argument that the tribunal manifestly disregarded the law in deciding that the FIT programme amounted to procurement. While the court noted that 'Federal courts can vacate arbitration awards where the tribunal's decision 'disregard[s] or modif[ies] unambiguous contract provisions' and thus exceeds its authority', 67 there could 'be no serious debate that the tribunal was interpreting the text of NAFTA to reach its conclusion'.68 For similar reasons, the court rejected Mesa's other arguments for vacatur, including that the tribunal's alleged refusal to interpret NAFTA's text amounted to misbehaviour and that the arbitrators' alleged deference to Canada was evidence of bias. The court found that the alleged deference was simply an acknowledgement that governments are entitled to discretion in their policy choices.69
The party seeking vacatur on grounds of 'manifest disregard of the law' had better luck in Daesang Corp v. NutraSweet Co,70 in which a New York state court vacated a US$100 million arbitration award against NutraSweet. The dispute arose from a contract that NutraSweet (US) entered into to buy Daesang's (Korean) aspartame business. The contract gave NutraSweet a five-year window within which to rescind the contract in the event a large aspartame customer (defined as requiring more than 1 million pounds of aspartame annually) alleged that the transaction violated antitrust laws. Three years after entering the contract, NutraSweet notified Daesang that it would rescind the purchase in light of an antitrust action brought against NutraSweet by a class of aspartame purchasers. While no named plaintiff in the class met the definition of a large purchaser as required for rescission under the contract, NutraSweet argued that the class itself did include such customers. Daesang rejected NutraSweet's rescission notice and initiated arbitration against NutraSweet for defaulting on scheduled payments. NutraSweet in turn countered with its own claims for rescission and breach of contract. An ICC tribunal found in favour of Daesang and dismissed all of NutraSweet's defences and counterclaims. The tribunal found in a pair of awards, inter alia, that the plaintiffs in the antitrust action against NutraSweet failed to meet the purchase requirements for rescission and that NutraSweet had waived its counterclaims during closing arguments. The tribunal ordered NutraSweet to pay US$100 million in damages.
In an unusual choice of forum, Daesang moved to enforce the awards in the New York state (rather than federal) court. NutraSweet in turned moved to vacate the awards on grounds that the arbitrators engaged in a manifest disregard of the law by failing to apply US Supreme Court precedent in American Pipe,71 which provides that a putative class action includes all asserted members of a proposed class unless they choose not to participate and until class certification is resolved. NutraSweet also argued that the tribunal manifestly disregarded the law by misapplying New York law on fraudulent misrepresentation and by failing to consider NutraSweet's counterclaims.
The court rejected NutraSweet's first argument but accepted its other two. With respect to NutraSweet's first argument, the court appeared to differentiate between a disregard of law directly applicable to the dispute between the parties and a disregard of law that could serve more generally as guidance to the interpretation of contract terms. The court found that the tribunal's alleged failure to apply American Pipe fell into the latter category. At most, failing to consider American Pipe when assessing whether the class action plaintiffs met the large purchaser requirement amounted to a misinterpretation of the contract, which is not a basis for vacatur. While the court implied that it would have reached a different conclusion, there was a colourable basis for the tribunal's decision, and the tribunal was within its discretion to interpret the contract as it did.
The court came to the opposite conclusion with respect to NutraSweet's other arguments. In the arbitration, NutraSweet had claimed that Daesang had engaged in a criminal antitrust conspiracy prior to the sale, in direct contradiction to the representations of entirely lawful conduct made in the contract. The tribunal, however, found that NutraSweet's counterclaim only alleged an insincere promise of future performance, which was not actionable. According to the court, that conclusion amounted to a manifest disregard of New York law, which the court held provides that 'a warranty is not a promise of performance, but a statement of present fact', and that false representations are actionable.72
Finally, the court ruled that the tribunal's finding that NutraSweet had waived other counterclaims related to performance of the contract in closing arguments was unsupported by the transcript. It concluded that '[t]he refusal to consider the merits of NutraSweet's breach of contract counterclaim and the baseless determination of waiver goes beyond a mere error in law or facts, and amounts to an egregious dereliction of duty on the party of the Tribunal'.73
The case is now being appealed.
Parties seeking to vacate an award often attempt to raise the four grounds for vacatur contained in Section 10 of the FAA in novel ways when attempting to overturn an unfavourable award, including sometimes seeking discovery of arbitrator conduct in vacatur proceedings.
In Shepherd v. LPL Financial LLC, a federal district court in North Carolina found that an arbitrator's failure to disclose that counsel for the defendants had represented parties in two previous arbitrations before her did not constitute 'clear evidence of impropriety' justifying post-award discovery from the arbitrator. The court reasoned that there was no clear evidence of impropriety because (1) the contact between the arbitrator and counsel in the other two arbitrations was 'strictly professional – a lawyer appearing before an arbitrator', (2) the interactions between the arbitrator and counsel had no impact on the result because the arbitration award was a unanimous award from all three panellists, and (3) in any event, the arbitrator eventually disclosed the interactions six months before petitioners began alleging that the conduct constituted impropriety.74 The court cautioned that '[t]o allow discovery of an arbitrator under these circumstances would encourage the losing party to every arbitration to conduct a background investigation of each of the arbitrators in an effort to uncover evidence of a former relationship' and thus 'increase the cost and undermine the finality of arbitration'.75
Claims against arbitral institutions
The past year has seen two cases in which arbitral institutions were involved as parties, Al Azzawi v. International Center for Dispute Resolution Organization and Salsas Castillo v. Sicana. This is unusual because the institutions enjoy the broad immunity granted to arbitrators under US laws when they are acting in their arbitral capacity. As events transpired, neither case led to a holding diluting that immunity.
Al Azzawi involved an Iraqi contractor who alleged misconduct in an American Arbitration Association and ICDR arbitration he brought against Kellogg Brown & Root Services Inc (KBR), an engineering and construction company, involving a US State Department project. Mr Al Azzawi first sought to bring his claims against KBR in a federal district court in California, alleging that he had sought to initiate an arbitration against KBR with the ICDR over alleged misconduct in a prior ICDR arbitration stemming from the State Department project. However, the documents clearly showed that the claimant in that arbitration was Al Farez, the construction company Mr Al Azzawi managed, not Mr Al Azzawi himself. The California district court therefore dismissed the suit.76
The case was then transferred to a federal district court in New York. The district judge in New York similarly concluded that Mr Al Azzawi lacked standing to bring claims against KBR and the ICDR (which was not a defendant in the suit dismissed in federal district court in California).77 The Second Circuit affirmed, noting that the appeal 'lacks an arguable basis either in law or in fact'.78
Salsas Castillo involved a dispute relating to an arbitration administered by SICANA, the North American provider of ICC arbitration services. Tralje International Finance BV (Tralje) initiated an ICC arbitration against Salsas Castillo, and a Mexican court thereafter issued an initial order directing that the ICC arbitration be suspended until the resolution of a lawsuit that Salsas Castillo filed in Mexico disputing the validity of the companies' shareholders agreement, which contains the arbitration clause at issue. The ICC nonetheless proceeded with the arbitration and appointed Victor M Ruiz as the arbitrator. Tralje successfully appealed the suspension order, but in June 2017, Salsas Castillo convinced a Mexican court to issue a final suspension order. Despite this, the ICC and arbitrator Ruiz continued with the arbitration, leading Salsas Castillo to seek enforcement of the final Mexican suspension order in New York court.
In October 2017, a New York state court judge ordered SICANA and Tralje to show cause why he should not issue an injunction preventing them from proceeding with an ICC arbitration.79 Following this order the case was removed to a New York federal court, where Salsas Castillo renewed its motion for a preliminary injunction to enforce the Mexican court order suspending the arbitration proceedings. However, before the New York federal court could issue a decision, the motion was rendered moot by the arbitrator's issuance of a ruling in the arbitration.80
Section 1782: taking of evidence in aid of arbitrations abroad
Pursuant to 28 USC Section 1782(a), US federal district courts may order discovery for use in a proceeding in a 'foreign or international tribunal'.81 Four statutory requirements must be met for a court to grant discovery under Section 1782: '(1) the request must be made 'by a foreign or international tribunal', or by 'any interested person'; (2) the request must seek evidence, whether it be 'testimony or statement' of a person or the production of 'a document or other thing'; (3) the evidence must be 'for use in a proceeding in a foreign or international tribunal'; and (4) the person from whom discovery is sought must reside or be found in the district of the district court ruling on the application for assistance.'82
Older cases suggested that a foreign arbitration did not fall within the statute's purview, which was thought only to include foreign judicial proceedings.83 Those cases were thrown into doubt, however, with the US Supreme Court's decision in Intel Corp v. Advanced Micro Devices, Inc, which found that the Directorate General for Competition of the European Commission was a 'tribunal' under Section 1782.84 In so finding, the Court noted that in 1964 Congress had replaced the term 'judicial proceeding' in the statute with 'tribunal'. The Court quoted approvingly from the related legislative history, which 'explain[ed] that Congress introduced the word 'tribunal' to ensure that 'assistance is not confined to proceedings before conventional courts', but extends also to 'administrative and quasi-judicial proceedings'.85 The Court also relied on a definition of 'tribunal' that included arbitral tribunals.86
Since Intel, courts have split on whether Section 1782 permits discovery in aid of a foreign arbitration. The key issue has been whether a foreign arbitration constitutes a 'proceeding in a foreign or international tribunal' for purposes of the statute. Some precedents distinguish investment treaty arbitration, which arguably falls within the statute because the fora are state-sponsored, from 'purely private' commercial arbitration, which arguably does not come within the statute.87
Until recently, the Second Circuit had held that international arbitration tribunals did not constitute 'foreign tribunals' within Section 1782.88 Following Intel several judges in the Southern District of New York ruled that foreign arbitrations do fall within Section 1782. This year the Southern District Court clarified, however, that in addition to the express requirements of Section 1782 the court must also have personal jurisdiction over the subject of the request as a basis for issuing a discovery order. This newly announced requirement is likely to pose a significant obstacle to arbitral parties seeking discovery in the aid of foreign arbitrations.
In Australia & New Zealand Banking Group Ltd v. APR Energy Holding Ltd the court found that Section 1782 could apply only where the court had personal jurisdiction over the target pursuant to the due process requirements of the US Constitution. As noted above, one of the statutory requirements of Section 1782 is that 'the person from whom discovery is sought must reside or be found in the district of the district court ruling on the application for assistance'. The court noted that there was a lack of clarity over whether that requirement was equivalent to personal jurisdiction but held that '[r]egardless of what section 1782 requires, the Constitution's due process protections apply'.89
The court proceeded to examine whether it had personal jurisdiction over ANZ Bank by virtue of the bank's New York office and found that, in spite of the office, the court lacked both general and specific personal jurisdiction over ANZ Bank. It lacked general personal jurisdiction under the standard established by the Supreme Court in Daimler AG v. Bauman,90 which requires contacts so 'continuous and systematic as to render [a corporation] essentially at home in the forum [s]tate'.91 While the court acknowledged that the standard for specific personal jurisdiction in the context of non-party discovery requests was unsettled, it followed the guidance of one circuit, which focused on the nexus between the discovery requests and the non-party's contacts with the forum.92 Finding no nexus between the subject matter of the discovery sought by the petitioner and ANZ Bank's New York contacts, the court quashed the subpoena.
ii Class action waivers in arbitration clauses in the financial industry
Since the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, the Consumer Financial Protection Bureau (CFPB) has been studying pre-dispute arbitration agreements and considering whether to issue regulations restricting the use of such arbitration agreements.
In May 2016, the CFPB published for comment proposed rules that would prohibit financial products and services providers from using a pre-dispute arbitration agreement to block consumer class actions in court. In July 2017, the CFPB issued its final rule,93 which (1) prohibited financial products and services providers from using new pre-dispute arbitration agreements entered into after 19 March 2018 to block consumer class actions in court, and (2) required financial products and services providers to submit to the CFPB certain records of arbitral and court proceedings, regardless of whether there are any class action proceedings involved. The CFPB intended to publish (with redactions) these records on its website, to provide greater transparency into the arbitration of consumer disputes.94
However, under the Congressional Review Act, Congress had 60 legislative days after the final rule was published to overturn the rule by adopting a 'joint resolution of disapproval', which requires a simple majority in both chambers. Acting thereunder, Congress voted to reject the rule, and the President signed the joint resolution of disapproval on 1 November 2017, thereby nullifying the CFPB rule.95
The CFPB is now prohibited under the Congressional Review Act from issuing the rule 'in substantially the same form' or to make a new rule that is 'substantially the same as' the disapproved rule, unless Congress passes a new law authorising the CFPB to do so.96
iii NAFTA re-negotiations and the dispute resolution mechanism
On 18 May 2017 President Trump announced his intention to begin renegotiating NAFTA, and renegotiation talks began in August 2017 and continued in 2018. One key issue is the investor–state dispute settlement (ISDS) mechanism contained in Chapter 11 of NAFTA. The US has pushed for an amendment that would allow the US to 'opt out' of ISDS. Canada and Mexico opposed this proposal, and they have suggested a number of alternatives, including (1) drafting a new annex to NAFTA that would create a bilateral Canada–Mexico ISDS mechanism that would exclude the US;97 or (2) creating a public 'investment court system' akin to the system included in the Comprehensive Economic and Trade Agreement negotiated with the European Union.98 It remains to be seen whether Canada, Mexico and the US will be able to reach agreement on the dispute resolution mechanism, which is among many issues that are currently unresolved as of the time of publication.
iv Investment treaty cases involving the United States or US nationals
A NAFTA Chapter 11 claim brought by a US pulp and paper manufacturer against Canada survived a jurisdictional challenge and is proceeding to a hearing on the merits. The US manufacturer, Resolute Forest Products Inc, asserts US$70 million in claims against Canada for expropriation and violations of Chapter 11's National Treatment and Minimum Standard of Treatment clauses. Resolute alleges that the government of Nova Scotia discriminated against it by offering improper assistance, including approximately C$120 in loans, tax advantages and discounts, to a competing plant. Canada challenged the tribunal's jurisdiction on the grounds that Resolute's plant was located in Quebec, not Nova Scotia, and therefore the Nova Scotia government's actions could not have been meant to target or affect Resolute. The tribunal, however, rejected that challenge because Nova Scotia's measures still could have been expected to advantage the local firm at the expense of competitors in other provinces.
Separately, the NAFTA claims of a different US pulp and paper manufacturer against Canada failed on a combination of jurisdictional and merits defects, according to reports of the yet-to-be published decision. Mercer International asserted claims for US$180 million against Canada based on allegedly discriminatory treatment of its pulp mill by energy regulators. Mercer alleged that electricity purchase agreements offered to local firms were more favourable than the agreements offered to Mercer. According to reports, the tribunal rejected at least some of Mercer's claims on jurisdictional grounds because the tribunal found that the electricity purchase agreements amounted to 'procurement' and not 'investment' under Chapter 11.
According to reports of another unpublished award, US pharmaceutical company Merck prevailed in an investment claim arbitration against Ecuador. Merck asserted a claim for denial of justice against Ecuador arising out of a domestic civil litigation brought against Merck by a local competitor. The domestic civil litigation resulted in numerous adverse judgments that Merck alleged amounted to a denial of justice under international law and a breach of the US–Ecuador investment treaty. According to reports, the tribunal ruled in favour of Merck's claims on the merits.
Finally, US energy corporation ConocoPhillips prevailed in an ICC arbitration against Venezuela's state-owned oil company over the 2007 nationalisation of ConocoPhillips' extra-heavy crude oil projects in the Orinoco region. According to reports analysing the unpublished award, the ICC tribunal held that the Venezuelan government's income tax hike in 2006 and expropriation of the claimants' investment in 2007 constituted breaches of association agreements providing that investors would be compensated for any 'discriminatory actions' taken by the government. The tribunal awarded US$2.04 billion in damages.
III OUTLOOK AND CONCLUSIONS
As a large country with a high volume of international arbitration, the US generates case law that sometimes shows differences among the various circuit courts in one aspect or another of the law. Despite some uncertainty regarding US policy on international investment arbitration under the Trump administration, US arbitration law nevertheless continues to develop in the context of a highly favourable judicial attitude.
1 James H Carter is senior counsel and Sabrina Lee and Stratos Pahis are counsel at Wilmer Cutler Pickering Hale and Dorr LLP.
2 9 USC Section 2.
3 9 USC Section 3.
4 An arbitral award may be vacated under the FAA where, for example, the parties or arbitrators behaved fraudulently or where the arbitrators 'exceeded their powers' as defined in the arbitration agreement. For a complete list of grounds of vacatur, see the FAA at Section 10.
5 See Moses H Cone Mem'l Hosp v. Mercury Constr Corp, 460 US 1, 24 (1983) ('Section 2 [of the FAA] is a congressional declaration of a liberal federal policy favouring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary').
6 See Mitsubishi Motors Corp v. Soler Chrysler-Plymouth, 473 US 614 (1985).
7 See FAA, 9 USC Sections 201–208, 301–307.
8 See Allied-Bruce Terminix Cos v. Dobson, 513 US 265, 281 (1995) (holding that the FAA pre-empts state policy that would put arbitration agreements on an 'unequal footing').
9 Some authorities argue that, to the extent manifest disregard exists as a judge-made ground for vacatur, it applies only to domestic cases and not to international arbitrations conducted in accordance with the New York Convention. For a more detailed discussion of developments in the case law concerning manifest disregard, see passages on 'manifest disregard', below.
10 The Supreme Court has ruled that the FAA does not provide an independent basis for subject matter jurisdiction over a motion to compel arbitration in potentially arbitrable disputes not governed by the New York Convention. See Vaden v. Discover Bank, 556 US 49 (2009).
11 See Jock v. Sterling Jewelers, Inc, 677 F Supp2d 661 (SDNY 2009); Jock v. Sterling Jewelers, Inc, 725 F Supp2d 444 (SDNY 2010); Jock v. Sterling Jewelers, Inc, 646 F3d 113 (2d Cir 2011).
12 Jock v. Sterling Jewelers, Inc, 284 F Supp3d 566 (SDNY 2018).
13 Jock v. Sterling Jewelers, Inc, 284 F Supp3d 566, 570-71 (internal quotations marks omitted) (alterations omitted) (quoting Oxford Health Plans LLC v. Sutter, 569 US 564 (2013)).
15 9 USC Section 2.
16 9 USC Section 1.
17 Oliveira v. New Prime, Inc, 857 F3d 7, 10 (1st Cir 2017), cert granted sub nom New Prime, Inc v. Oliveira, 138 S. Ct. 1164 (2016).
18 Oliveira v. New Prime, Inc, 141 F Supp3d 125, 128 (D Mass 2015).
19 Oliveira, 857 F3d at 15.
20 Id. at 22.
21 Meyer v. Uber Technologies, Inc, 868 F3d 66 (2d Cir 2017).
22 Id. at 71, 76.
23 Id. at 75.
25 Id. at 77.
26 Id. at 78.
28 Id. at 79.
29 864 F3d 172 (2d Cir 2017).
30 832 F3d 92 (2d Cir 2016).
31 Id. at 107.
32 864 F3d at 186.
33 Id. at 186.
34 Id. at 185.
35 Id. at 187.
36 Id. at 190.
37 863 F3d 96 (2d Cir 2017).
38 This includes the requirement that the petitioner mails notice of the filing to the debtor within 30 days of entry into judgment and the creditor does not collect on the award until 30 days after proof of service is provided.
39 863 F3d at 99.
40 714 F Appx 18 (2d Cir 2017) (holding that 'FSIA provides the exclusive mechanism for enforcement of ICSID awards against foreign sovereigns in federal court . . .').
41 No. 17-CV-3808, 2017 WL 5004846 (SDNY 23 May 2017).
42 Memorandum Endorsement of Notice of Motion to Vacate Ex Parte Judgment, EISER Infrastructure Limited v. Kingdom of Spain, No. 17-CV-3808 (SDNY Nov 13, 2017), ECF No. 27 (citing Mobil Cerro and Micula).
43 850 F3d 58 (2d Cir 2017).
44 850 F3d at 72.
45 863 F3d at 119-120.
46 879 F3d 79 (3d Cir 2018).
47 No. 17-1648, 2017 WL 5449805 (DDC Nov 13, 2017), appeal filed, No. 17-7158 (DC Cir Nov 16, 2017).
48 Id. at *9.
49 Id. at *10-11 (citing Bronner v. Duggan, 249 F Supp3d 27, 41 (DDC 2017)).
50 Id. at 10 (citing Roberts v. AT&T Mobility LLC, No. 15-cv-03418-EMC, 2016 WL 1660049, at *3 (ND Cal Apr 27, 2016); Davis v. Prudential Securities, Inc, 59 F3d 1186 (11th Cir 1995); Desiderio v. Nat'l Ass'n of Securities Dealers, Inc, 191 F3d 198, 207 (2d Cir 1999); Federal Deposit Insurance Corp v. Air Florida Sys, Inc, 822 F2d 833, 842 n9 (9th Cir 1987); United Egg Producers v. Standard Brands, Inc, 44 F3d 940, 943 (11th Cir 1995)).
51 Id. at *11 (quoting Edwards v. Habib, 397 F2d 687, 691 (DC Cir 1968)).
52 Wilko v. Swan, 346 US 427, 436-37 (1953), overruled in part on other grounds by Rodriguez de
Quijas v. Shearson/Am Express, Inc, 490 US 477 (1989).
53 See, e.g., Stolt-Nielsen SA v. AnimalFeeds Int'l Corp, 548 F3d 85, 91-93 (2d Cir 2008), rev'd, 559 US 662, 672-73 (2010).
54 Hall Street Assocs, LLC v. Mattel, Inc, 552 US 576, 585 (2008) (citations omitted). See also Gary Born, International Commercial Arbitration 1124-1206 (Second Edition 2014), discussing Hall Street and 'manifest disregard' under the FAA.
55 Hall Street, 552 US at 588.
56 See Stolt-Nielsen SA, 559 US at 672 n3.
57 See Citigroup Global Mkts Inc v. Bacon, 562 F3d 349, 355 (5th Cir 2009) ('Hall Street unequivocally held that the statutory grounds are the exclusive means for vacatur under the FAA. . . . Thus, to the extent that manifest disregard of the law constitutes a non-statutory ground for vacatur, it is no longer a basis for vacating awards under the FAA.'); AIG Baker Sterling Heights, LLC v. Am Multi-Cinema, Inc, 579 F3d 1268, 1271 (11th Cir 2009) (Hall Street 'confirmed [… that Sections] 10 and 11 of the FAA offer the exclusive grounds for expedited vacatur or modification of an award.'). The Eighth Circuit has stated that it had 'previously recognized the holding in Hall Street and similarly hold now that an arbitral award may be vacated only for the reasons enumerated in the FAA'. Med Shoppe Int'l, Inc v. Turner Invs, Inc, 614 F3d 485, 489 (8th Cir 2010). Lower courts have interpreted this statement as a repudiation of manifest disregard. See Jay Packaging Grp, Inc v. Mark Andy, Inc, No. 4:10MC00763, 2011 WL 208947, at *1 (ED Mo Jan 21, 2011) ('The Eighth Circuit has specifically address[ed] this issue, and concluded that a party's attempt to vacate or modify an arbitration award on the basis of an alleged manifest disregard of the law is not a cognizable claim'.).
58 See Stolt-Nielsen SA, 548 F3d at 94–95 (noting that the Hall Street court speculated that manifest disregard was 'shorthand' for the FAA's statutory grounds for vacatur); Comedy Club, Inc v. Improv West Assocs, 553 F3d 1277, 1290 (9th Cir 2009) (Hall Street listed several possible readings of manifest disregard, including the Ninth Circuit's long-standing interpretation that it is equivalent to Section 10(a)(4) of the FAA).
59 See Biller v. Toyota Motor Corp, 668 F3d 655 (9th Cir 2012); AZ Holding, LLC v. Frederick, 473 F Appx 776 (9th Cir 2012); Goldman Sachs Execution & Clearing, LP v. Official Unsecured Creditors' Comm of Bayou Group, LLC, 491 F Appx 201 (2d Cir 2012).
60 Wachovia Sec, LLC v. Brand, 671 F3d 472 (4th Cir 2012).
61 Johnson Controls, Inc v. Edman Controls, Inc, 712 F3d 1021, 1026 (7th Cir 2013) (internal quotation marks omitted).
62 Physicians Insurance Capital v. Praesidium Alliance Group, 562 F Appx 421, 423 (6th Cir 2014). The Sixth Circuit noted that manifest disregard is a 'limited review'.
A mere error in interpretation or application of the law is insufficient. Rather, the decision must fly in the face of clearly established legal precedent. As long as a court can find any line of argument that is legally plausible and supports the award then it must be confirmed. It is only when no judge or group of judges could conceivably come to the same determination as the arbitrators must the award be set aside.).
Id. (citations omitted) (internal quotation marks omitted).
63 For the First Circuit, compare Ramos-Santiago v. United Parcel Service, 524 F3d 120, 124 n3 (1st
Cir 2008) ('[M]anifest disregard of the law is not a valid ground for vacating or modifying an arbitral award . . . under the [FAA]'), with Kashner Davidson Sec Corp v. Mscisz, 601 F3d 19, 22 (1st Cir 2010) ('[We] have not squarely determined whether our manifest disregard case law can be reconciled with Hall Street'.). See also Republic of Argentina v. BG Grp PLC, 715 F Supp2d 108, 116 n7 (DDC 2010) ('A question remains, however, as to whether this basis [manifest disregard] for vacating an arbitral award survived the Supreme Court's recent decision in Hall Street . . .'), rev'd, 665 F3d 1363 (DC Cir 2012); Paul Green Sch of Rock Music Franchising, LLC v. Smith, 389 F Appx 172, 177 (3d Cir 2010) ('Based on the facts of this case, we need not decide whether manifest disregard of the law remains, after Hall Street, a valid ground for vacatur'.); Hicks v. Cadle Co, 355 F Appx 186 (10th Cir 2009) (no need to decide whether manifest disregard survives Hall Street because petitioners have not demonstrated it).
64 Raymond James Fin Servs, Inc v. Fenyk, 780 F3d 59, 64-65 (1st Cir 2015).
65 255 F Supp3d 175 (DDC 2017).
66 Id. at 184.
67 Id. at 186 (alterations in original).
68 Id. at 185.
69 Id. at 187.
70 55 Misc.3d 1218(A), 2017 WL 2126684 (NY Sup Ct May 15, 2017).
71 American Pipe & Constr Co v. Utah, 414 US 538, 551 (1974).
72 2017 WL 2126684, at *6 (internal quotation marks omitted).
73 2017 WL 2126684, at *7.
74 Order 9-10, Shepherd v. LPL Financial LLC, No. 5:17-CV-00150-D (EDNC Nov 1, 2017), ECF No 45.
75 Id. at 10 (quoting Merit Insurance Co. v. Leatherby Insurance Co., 714 F2d 673, 683 (7th Cir 1983)).
76 Order 2-3, Al Azzawi v. Kellogg Brown & Root, No. 2:15-cv-1468 (ED Cal June 16, 2016), ECF No 37.
77 Al Azzawi v. Int'l Centre for Dispute Res, No. 16 Civ 548 (KPF), 2016 WL 6775437 (SDNY Nov 14, 2016).
78 Al Azzawi v. Int'l Centre for Dispute Res Org, No. 16-3965, 2017 WL 5891591 (2d Cir June 20, 2017).
79 Order to Show Cause, Salsas Castillo SAPI de CV v. SICANA, Inc, No. 0656384/2017 (NY Sup Ct Oct 16, 2017).
80 Order, Salsas Castillo SAPI de CV v. SICANA, Inc , No. 17-cv-08554, (SDNY, Dec 18, 2017), ECF No 35.
81 'The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal'. 28 USC Section 1782(a).
82 Consorcio Ecuatoriano de Telecomunicacions SA v. JAS Forwarding (USA), Inc, 747 F3d 1262, 1269 (11th Cir 2014).
83 See NBC v. Bear Stearns & Co, 165 F3d 184, 188 (2d Cir 1999) ('[T]he fact that the term 'foreign or international tribunals' is broad enough to include both state-sponsored and private tribunals fails to mandate a conclusion that that the term, as used in [Section] 1782, does include both.'). See also Republic of Kazakhstan v. Biedermann Int'l, 168 F3d 880 (5th Cir 1999); In re Medway Power Ltd, 985 F Supp 402 (SDNY 1997).
84 Intel Corp v. Advanced Micro Devices, Inc, 542 US 241 (2004). See also Born, International Commercial Arbitration 1933–37 (2009), discussing the use of Section 1782 under US law to obtain evidence for use in international arbitration.
85 Intel, 542 US at 248-49.
86 Id. at 258.
87 For a recent discussion of this issue see In re Gov't of Lao People's Democratic Republic, No. 1:15-MC-00018, 2016 WL 1389764 (D N Mar I Apr 7, 2016).
88 See NBC v. Bear Stearns & Co, 165 F3d 184, 188 (2d Cir 1999).
89 No. 17-MC-00216, 2017 WL 3841874, at *3 (SDNY Sept 1, 2017).
90 571 US 117 (2014).
91 Id. at 139.
92 2017 WL 3841874, at *5 (citing Gucci Am Inc v. Weixing Li, 768 F3d 122, 141 (2d Cir 2014) (citing Application to Enforce Admin Subpoenas Duces Tecum of the SEC v. Knowles, 87 F3d 413, 418 (10th Cir 1996))).
93 See Bureau of Consumer Financial Protection, Arbitration Agreements, 82 Fed. Reg. 33210 (July 19, 2017) (12 CFR Pt. 1040).
95 See Bureau of Consumer Financial Protection; Arbitration Agreements, 82 Fed. Reg. 55500 (Nov 22, 2017) (12 CFR Pt. 1040).
96 See 5 USC Section 801(b)(2).
97 See, e.g., Adam Behsudi and Doug Palmer, investor dispute provision in NAFTA still at impasse ahead of Washington meeting, Politico (Feb 21, 2018); Josh Wingrove and Eric Martin, Canada, Mexico May Keep Nafta Investor Dispute System Without U.S., Bloomberg (Jan 25, 2018).
98 See, e.g., Canada, Mexico tell U.S.: Decide whether you want a NAFTA dispute settlement process, CBC
(Jan 28, 2018); Cosmo Sanderson, Mexico proposes permanent dispute resolution body for NAFTA, Global Arbitration Review (Nov 30, 2017).