GE France v. Outokumpu – Recently Argued Before the U.S. Supreme Court
We’ve blogged about legal translation services for international arbitration. The case of GE France v. Outokumpu has all the international intrigue you could hope for. The United States subsidiary of a massive Finnish steel-production company, Outokumpu, which was at the time owned by a German conglomerate, sought to build several steel mills in Alabama. Accordingly, Outokumpu entered into a contract with Fives St. Corp., a French engineering company to coordinate the construction of the mills. Significantly, that contract called for the arbitration of any disputes between the parties, and the disputes would be arbitrated in Germany.
So, already we have a case in which the parties have ties to at least four different countries, and an arbitration clause calling for arbitration to take place in Germany. But, the plot thickens.
To accomplish the electrical work for the steel mills, Fives St. Corp. subcontracted the work to GE France, a French subsidiary of the famous United States company, General Electric. Unfortunately, one of the electrical motors built by GE France failed “catastrophically,” causing tens of millions of dollars in damages to Outokumpu.
Outkumpu first looked to Fives St. Corp. for compensation. However, Fives St. responded that all liability falls onto GE France. Outkumpu then sued GE France in Alabama state court. In response, GE France removed the case to federal court and claimed that Outkumpu must arbitrate the claim.
Thus, even though GE France was not a signatory to the contract between Outkumpu and Fives St. Corp., GE France maintained that it could compel arbitration based on the arbitration clause in the Outkumpu-Fives contract.
Arguments of the Parties – Basic Contract Principles vs. Deeply Held Precedent
The arguments in this case are particularly interesting because each side has a very compelling, very reasonable argument to make.
For Outkumpu, the argument could not be simpler. There is no contract between Outkumpu and GE France. Therefore, Outkumpu cannot be compelled to arbitrate because it never agreed to arbitrate its disputes with GE France.
For GE France, long-held precedent is on its side. Under the Federal Arbitration Act (“FAA”), which governs domestic (United States) arbitration agreements, signatories to a contract with an arbitration clause must also arbitrate with subcontractors, or non-signatories, to the contract. That principle comes from application of the common-law doctrine of equitable estoppel. Thus, GE France argues that the same principle should exist with this international contract.
The only problem for GE France is that the Outkumpu-Fives contract is not a domestic agreement. Rather than the FAA, the arbitration agreement here falls under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (typically referred to as the “New York Convention”). GE France, however, makes the sound argument that since equitable estoppel is applied under FAA arbitration agreements, the same should hold true for New York Convention arbitration agreements.
The Case Makes it to the United States Supreme Court
This case has now reached the U.S. Supreme Court and was, in fact, argued before the justices on January 22, 2020. The one newsworthy takeaway from the argument is that, unlike most arbitration cases before the Court, not many of the justices here seemed eager to compel arbitration.
A little context is helpful here. In recent years, the Supreme Court has had a steady diet of arbitration cases on its docket. And with most of those cases – which typically involve disputes in which a consumer seeks to avoid the enforcement of a pre-dispute arbitration agreement between the consumer and a large corporation that provided goods or services – the Court is predisposed to compel arbitration.
That drive to favor arbitration comes from a general sense that courts are bogged down; arbitration is an effective, efficient alternative to lengthy court cases; and the agreement for arbitration between the parties should be honored.
However, during oral argument in this case, the justices seemed to be sharply split on which side had the more persuasive argument. Chief Justice Roberts, for example, seemed to be squarely on the side of rejecting GE France’s argument because no agreement existed between the parties, stating:
I thought it was one of the central propositions of our arbitration precedents that arbitration is based on agreement. And here somebody [Outokumpu] who never agreed to arbitration is being forced into arbitration, even though he has a clear right to take his dispute to court.
By contrast, Justice Gorsuch noted the importance of the fact that GE France, the non-signatory to the agreement, was the party seeking arbitration. Gorsuch opined that there is no real consent problem here because Outokumpu consented to arbitration with GE France’s general contractor, and therefore, GE France can compel arbitration. Also, the justices ruminated on the apparent inconsistency with allowing equitable estoppel principles to control domestic agreements, but not international ones.
In sum, oral argument did not reveal a clear winner in this case. It is very possible that the Court could be sharply divided in this case, because there is an “either-or” quality to the way in which the positions are presented.
Why Legal Translation Matters in a Case Like Outkumpu
One thing that appears clear in a case that involves Finnish, French, and American companies that agreed to arbitrate in Germany is that the firms litigating this case need professional legal translation services. Professional legal translators and arbitration interpreters can translate from one language to another, but they are well-versed in legal terminology and legal process. The kinds of terms of art – such as equitable estoppel – that are crucial to cases like GE France are things that cannot be easily translated by translators who do not know the law. Thus, in international matters like GE France a qualified legal translation service is the only way that litigation can be handled properly.
If you are a multi-national corporation, or you litigate international law cases, then we invite you to contact us at All Language Alliance, Inc., the reliable legal translation service you need to get accurate, professional translations for your litigation documents. We pride ourselves on getting it right the first time, and providing excellent customer service. Call us at 303-470-9555 for more information on hiring international arbitration interpreters in Scandinavian, European and Asian languages, and on obtaining certified translation of legal documents from any language to English.
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