Beijing Shougang Mining v. Mongolia ( 2021 )

19-4191
Beijing Shougang Mining v. Mongolia
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term 2020
(Argued: February 18, 2021 Decided: August 26, 2021)
No. 19-4191
––––––––––––––––––––––––––––––––––––
BEIJING SHOUGANG MINING INV. CO., LTD., CHINA HEILONGJIANG INT’L ECON. &
TECH. COOP. CORP., QINHUANGDAOSHI QINLONG INT’L INDUS. CO. LTD.,
Petitioners-Appellants,
-v.-
MONGOLIA,
Respondent-Appellee.
––––––––––––––––––––––––––––––––––––
Before: LIVINGSTON, Chief Judge, CHIN, and BIANCO, Circuit Judges.
Beijing Shougang Mining Investment Company, Ltd., China Heilongjiang
International Economic & Technical Cooperative Corporation, and
Qinhuangdaoshi Qinlong International Industrial Company Ltd. (collectively,
“Petitioners-Appellants”) appeal from the November 25, 2019 order of the U.S.
District Court for the Southern District of New York (Ramos, J.) denying their
petition to set aside an arbitral award issued by an ad hoc arbitral tribunal
constituted under a bilateral investment treaty between Mongolia and the People’s
1
Republic of China, and granting Respondent-Appellee Mongolia’s cross-petition
to confirm the award. Petitioners-Appellants further challenge the district
court’s rejection of their petition to compel arbitration on the merits. On appeal,
Petitioners-Appellants’ primary argument is that the district court erred by
declining to review the arbitrability of their investment claims de novo before
rejecting Petitioners-Appellants’ petitions and confirming the arbitral award.
We reject the appeal and hold that Petitioners-Appellants were not entitled
to de novo review of the arbitrability of their investment claims. While the
bilateral investment treaty in this case does not contain a clear statement
empowering arbitrators to decide issues of arbitrability, we hold that Petitioners-
Appellants and Respondent-Appellee Mongolia (collectively, the “Parties”)
nonetheless “clear[ly] and unmistakabl[y]” agreed to submit questions of
arbitrability to the arbitral tribunal in the course of the dispute between them. See
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995) (alterations and
internal quotation marks omitted). First, the Parties reached an agreement at the
outset of the arbitration, as confirmed by the arbitral tribunal in its first procedural
order, providing that the tribunal would hear jurisdictional issues during a
combined jurisdictional and liability phase. In doing so, the Parties agreed to
submit issues of arbitrability to the arbitral tribunal in the first instance. Second,
Petitioners-Appellants’ conduct throughout the remainder of the arbitration
further confirms, and in no way casts doubt on, their intent as expressed in that
agreement to submit arbitrability issues to the arbitral tribunal. We therefore
conclude that the district court properly declined to determine independently the
arbitrability of Petitioners-Appellants’ investment claims. We further conclude
that in reaching their decision on arbitrability, the arbitrators did not exceed their
powers, and thus agree with the district court’s decision to confirm the award.
Accordingly, we AFFIRM.
FOR PETITIONERS-APPELLANTS: S. CHRISTOPHER PROVENZANO (Michael A.
Granne, J.J. Gass, on the brief), Provenzano
Granne & Bader LLP, New York, NY.
FOR RESPONDENT-APPELLEE: MICHAEL NOLAN (Kamel Aitelaj, on the
brief), Milbank LLP, Washington, D.C.
2
DEBRA ANN LIVINGSTON, Chief Judge:
Beijing Shougang Mining Investment Company, Ltd., China Heilongjiang
International Economic & Technical Cooperative Corporation, and
Qinhuangdaoshi Qinlong International Industrial Company Ltd. (collectively,
“Petitioners-Appellants”) filed a petition in the U.S. District Court for the Southern
District of New York in September 2017 seeking to set aside an arbitral award (the
“Award”) resulting from an arbitration initiated by Petitioners-Appellants against
Respondent-Appellee Mongolia (“Mongolia”) under the 1991 bilateral investment
treaty (the “Treaty”) between Mongolia and the People’s Republic of China (the
“PRC”). 1 The subject of the arbitration was the alleged expropriation by
Mongolia of certain investments made by Petitioners-Appellants prior to 2006 in
an iron-ore mine located in a north-central province of Mongolia. After more
than seven years of proceedings, an ad hoc arbitral tribunal constituted under the
Treaty, and seated in New York, determined that it lacked jurisdiction over
Petitioners-Appellants’ claims of expropriation, bringing the arbitration to a close.
Shortly thereafter, Petitioners-Appellants proceeded to the Southern District,
1 See Agreement Between the Government of the People’s Republic of China and
the Government of the Mongolian People’s Republic Concerning the Encouragement and
Reciprocal Protection of Investments, Aug. 26, 1991.
3
where they petitioned the district court to set aside the Award and to compel a
return to arbitration. On November 19, 2019, the district court (Ramos, J.) denied
Petitioners-Appellants’ petition to vacate the Award and motion to compel
arbitration, and granted Mongolia’s cross-petition to confirm the Award.
On appeal, Petitioners-Appellants argue that Mongolia and Petitioners-
Appellants themselves (collectively, the “Parties”) did not “clearly and
unmistakably” agree to submit issues of “arbitrability” to arbitration and,
therefore, that the district court erred by failing to conduct a de novo review of the
arbitral tribunal’s decision on arbitrability. They further argue that the
arbitrators exceeded their powers and that the district court should not have
confirmed the Award under the Convention on the Recognition and Enforcement
of Foreign Arbitral Awards art. IV, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38
(“New York Convention”), and the Federal Arbitration Act (“FAA”), 9 U.S.C. § 201et seq.
For the reasons stated below, we disagree. The arbitral agreement at issue
in this case—a bilateral investment treaty between Mongolia and the PRC—does
not itself contain a clear statement empowering arbitrators to decide issues of
arbitrability. Nonetheless, we hold that Petitioners-Appellants indisputably put
4
the issue of the arbitrability of their claims to the arbitral tribunal when they
consented, along with Mongolia, to the arbitration proceeding in two phases, with
a combined jurisdictional and liability phase and, if necessary, a quantum phase.
In doing so, the Parties agreed to submit arguments as to the appropriate reach of
the arbitrators’ jurisdiction over Petitioners-Appellants’ claims under the Treaty
to the arbitral tribunal. The Parties reached such agreement, moreover, after it
had already become clear that the key jurisdictional issue to be argued during the
first phase was the scope of the arbitration clause provided in the Treaty, and
whether that clause is limited to disputes about compensation, a question clearly
implicating “arbitrability.” Consequently, we hold that the record supplies
“clear and unmistakable” evidence of the Parties’ intent to arbitrate issues of
arbitrability.
In light of this determination, we decline independent review of the arbitral
tribunal’s determination as to the appropriate interpretation of Article 8(3) of the
Treaty, and instead review the Award with deference. We conclude that the
arbitrators did not exceed their powers in construing the scope of the arbitral
agreement, and thus that the Award is not subject to vacatur under the New York
Convention or the FAA. We also find no error in the district court’s decision to
5
deny Petitioners-Appellants’ request to compel arbitration on the merits.
Accordingly, we AFFIRM the order of the district court.
BACKGROUND
I.
In 1991, Mongolia (then known as the “Mongolian People’s Republic”) and
the PRC concluded a bilateral investment agreement concerning “the
encouragement and reciprocal protection of investments.” 2 J. App’x at 16. This
agreement provides certain guarantees for the investors of each country when
making investments in the other, including fair and equitable treatment and most
favorable treatment for investments, restrictions on expropriation, and guarantees
for the cross-border transfer of investments. Article 8 of the Treaty contains a
dispute-resolution provision applicable to disputes between one of the sovereign
states and investors from the other. Specifically, Article 8(3) provides that “[i]f a
dispute involving the amount of compensation for expropriation cannot be settled
within six months after resort to negotiations . . . , it may be submitted at the
request of either party to an ad hoc arbitral tribunal.” Treaty art. 8(3).
2 We draw the following factual background from the Award.
6
Petitioners-Appellants are state-owned and private enterprises
incorporated in the PRC. In 2002, Qinhuangdaoshi Qinlong International
Industrial Company Ltd. (“Qinlong”) formed a joint venture with a Mongolian
partner to develop an iron-ore mine in north-central Mongolia. Beijing Shougang
Mining Investment Company, Ltd. and China Heilongjiang International
Economic & Technical Cooperative Corp. purchased equity in the joint venture
from Qinlong in 2004, and the joint venture acquired the Mongolian partner’s
license to exploit iron ore at the mine in 2005.
Beginning in the early 2000s, Mongolia undertook a series of measures in
relation to the joint venture’s operations, ultimately leading to the revocation of
the venture’s extracting license in 2006. The joint venture thereafter sued in the
Mongolian courts, appealing its case as far as the Supreme Court of Mongolia,
where it ultimately lost. After a series of additional lawsuits against the
Mongolian government, the license and land-use rights to the iron-ore deposit
were granted to a Mongolian corporation.
In 2010, Petitioners-Appellants initiated arbitration against Mongolia under
Article 8 of the Treaty, claiming that Mongolia had interfered with their
investment in the mine, and that such interference amounted to expropriation. In
7
their request for arbitration, served on Mongolia in February 2010, Petitioners-
Appellants set out their claims under the Treaty as well as under Mongolia’s
foreign investment law, 3 arguing that both sets of claims were subject to arbitral
jurisdiction. In particular, Petitioners-Appellants maintained that jurisdiction
under Article 8(3) was “not limited to an assessment of the compensation due for
an expropriation,” but instead, that the provision “g[ave] the Arbitral Tribunal
jurisdiction to determine the existence of an expropriation under Article 4 of the
Treaty and its lawfulness as well as any compensation due.” J. App’x at 186.
The Parties thereafter made their respective arbitrator appointments, and the
International Centre for Settlement of Investment Disputes (“ICSID”) appointed
the president of the arbitral tribunal, in accordance with the procedures set out in
the Treaty.
Shortly after the tribunal was constituted, the arbitrators called for a
procedural meeting to discuss the organization of the arbitral proceedings.
According to the terms of the Treaty, arbitrations under Article 8(3) are “ad hoc,”
meaning that no arbitral institution is selected for administration of the arbitration,
3 Petitioners-Appellants later limited their claims to those under the Treaty,
dropping their reliance on Mongolia’s foreign investment law.
8
and that arrangements as to procedures must be made during the arbitration
itself. 4 Counsel for the Parties were present at that meeting, which was held by
the tribunal on October 1, 2010 in New York. On November 2, 2010, the tribunal
issued its “Procedural Order No. 1,” which set out a number of key provisions of
the arbitration, as well as recounted key aspects of the first procedural meeting
and agreements reached at it. The procedural order began by recounting that the
“parties confirmed that the Tribunal had been properly constituted” under the
Treaty. J. App’x at 195. The order then indicated that, in the absence of any
language in the Treaty specifying the juridical seat of the arbitration, the seat of
the arbitration would be New York, New York, a designation to which both Parties
consented. J. App’x at 198.
With respect to the rules governing the arbitration, the procedural order
further recounted that Article 8(5) of the Treaty “authorizes the Tribunal to
determine its own procedure” and that, at the same time, “‘the Tribunal may, in
4 As a leading treatise explains, “[a]d hoc arbitrations are not conducted under the
auspices or supervision of an arbitral institution. Instead, parties simply agree to
arbitrate, without designating any institution to administer their arbitration.” 1 Gary
Born, International Commercial Arbitration 149 (2009). Nonetheless, the parties may select
a preexisting set of procedural rules to govern the arbitration, such as the United Nations
Commission on International Trade Law (“UNCITRAL”) Arbitration Rules. Id. at 149-
50.
9
the course of determination of procedure, take as guidance the [ICSID’s]
Arbitration Rules . . . .’” J. App’x at 199. In relation to the issue of procedures,
Petitioners-Appellants proposed, but Mongolia did not agree, that the tribunal
should adopt the revised United Nations Commission on International Trade Law
(“UNCITRAL”) Arbitration Rules to govern the proceedings. The tribunal
resolved this disagreement by explaining that, “given the statement in the Treaty
that the tribunal may, if it thinks it appropriate, refer to the ICSID Rules as
guidance on questions of procedure,” it “s[aw] no reason” to adopt a set of
institutional rules at the outset of the proceedings. J. App’x at 199. Instead, the
tribunal noted that it “expect[ed] that should it be called upon to rule on any
procedural issue, the parties will bring to its attention such guidance from the
ICSID Rules, the UNCITRAL Rules, or other authorities as they deem
appropriate.” 5 Id.Finally, and most importantly in the context of the present dispute, the
procedural order also set out key parameters for how the arbitration would
proceed. With respect to written submissions to be made before the arbitral
5Procedural Order No. 1 also indicated that the Parties consented to appoint the
Permanent Court of Arbitration as the administrator of the arbitral proceedings for
purposes of assisting with the financial aspects of the arbitration proceedings, as well as
with hosting hearings.
10
hearing, the tribunal recounted that “[t]he parties have agreed that the
proceedings shall be divided into two phases, the first covering jurisdiction and
liability, the second, if necessary, quantum.” J. App’x at 199. The tribunal
thereafter set out dates for the submission of briefs (“memorials”) and exhibits
prior to the first hearing.
The arbitration continued for seven years. In March 2011, Petitioners-
Appellants submitted their memorial in which they invoked the jurisdiction of the
tribunal under Article 8(3) of the Treaty and argued that, under their
interpretation, the tribunal possessed jurisdiction over their claims. Specifically,
they argued that Article 8(3) confers subject matter jurisdiction (referred to as
jurisdiction “ratione materiae”) “over disputes involving the existence and
lawfulness of the expropriation of [their] investments, as well as the reparation to
be granted to [them].” J. App’x at 231. Petitioners-Appellants further argued
that a narrow reading of Article 8(3), requiring Petitioners-Appellants to first
obtain a decision as to Mongolia’s liability for the alleged expropriation from a
national court or administrative tribunal before resorting to arbitration, is
inconsistent with other features of Article 8, including a fork-in-the-road provision
11
in Article 8(3). In their view, the tribunal must have jurisdiction to decide both
whether an expropriation took place and the amount of any resulting reparations.
Mongolia took the opposite tack in its counter-memorial filed in September
2011, objecting to the tribunal’s jurisdiction over Petitioners-Appellants’ claims on
the ground that, in its view, Article 8(3) confers jurisdiction only over disputes
about the “quantum of compensation for expropriation” after an expropriation has
been determined outside of arbitration. 6 J. App’x 406. Petitioners-Appellants
filed a reply memorial in June 2012, responding to Mongolia’s jurisdictional
objections and reiterating its argument as to the scope of Article 8(3), while
Mongolia filed a rejoinder in December 2012.
In September 2015, the tribunal held hearings at the Permanent Court of
Arbitration in The Hague, Netherlands. 7 On June 30, 2017, the tribunal rendered
6 Mongolia further argued, inter alia, that the tribunal lacked jurisdiction because,
in its view, Petitioners-Appellants’ investment was procured by theft, embezzlement, and
fraud, Petitioners-Appellants’ claims amounted to an “impermissible appeal” of
Mongolian judicial decisions finding corruption and fraud, J. App’x at 400, the
investment at issue did not incur a “real investment risk” and therefore fell outside the
protection of the Treaty, J. App’x at 419, and Petitioners-Appellants had already availed
themselves of judicial resolution in Mongolian courts. Mongolia also made
counterclaims against Petitioners-Appellants relating to these issues.
As discussed in Part I.B, the tribunal also issued its “Procedural Order No. 5” on
7
October 6, 2012. In this order, the tribunal recounted that Petitioners-Appellants
12
its award in New York. The tribunal held that it lacked subject matter jurisdiction
under the Treaty to entertain Petitioners-Appellants’ claims. Award at 140-148,
152. The tribunal began its reasoning by observing that the entirety of its
jurisdiction was founded on Article 8(3), which conferred jurisdiction over
“dispute[s] involving the amount of compensation for expropriation.” Id. at 143.
Looking to the ordinary meaning of that clause and its place within the Treaty, the
tribunal concluded that Article 8 did not require Mongolia to arbitrate the issue of
whether an expropriation had occurred, but only the amount of compensation
due. In its view, the clause “dispute involving the amount of compensation for
expropriation” limits the jurisdiction of an arbitral tribunal to disputes over
whether compensation owed “is equivalent to the value of the expropriated
investments at the time when expropriation is proclaimed.” Id. at 145. In other
words, arbitral jurisdiction extends only to “cases where an expropriation has been
formally proclaimed” and the amount to be paid is disputed. Id. at 146.
submitted a letter to the tribunal on August 31, 2012, toward the close of briefing,
requesting that the tribunal “remind the parties that any award rendered by the Tribunal
is final and binding and that the parties should not, directly or indirectly, take any steps
that may undermine or affect the enforceability of the award.” Mem. of Law in Opp’n
to (1) Pet’rs’ Pet. to Vacate Arbitral Award & (2) In Supp. of Resp’ts’ Cross-Pet. to Confirm
Arbitration Award, Attach. 8. The tribunal ultimately declined to issue such a
“reminder” on the basis that Petitioners-Appellants had not presented the tribunal with
a specific dispute or issue requiring it to do so. Id.13
The tribunal therefore held that it lacked jurisdiction over Petitioners-
Appellants’ claims in the absence of any documentation from a Mongolian court
or other administrative body that an expropriation had occurred. The arbitration
thus reached its end.
II.
On September 28, 2017, Petitioners-Appellants filed a petition in the U.S.
District Court for the Southern District of New York seeking to set aside the
Award, see 9 U.S.C. § 10(a)(4) (providing that a federal court may vacate an arbitral
award “where the arbitrators exceeded their powers”), and compel arbitration of
the merits of the dispute, see id. § 4. Mongolia opposed the petition and cross-
petitioned to confirm the Award. See id. §§ 204, 207 (providing that a party may
move “for an order confirming [an arbitral] award,” id. § 207, in a federal court of
the “place designated in the agreement as the place of arbitration if such place is
within the United States,” id. § 204); New York Convention art. IV (providing that
a party may apply “for recognition and enforcement” of an arbitral award subject
to the Convention). Petitioners-Appellants’ main argument was that the district
court should review the arbitral tribunal’s decision as to jurisdiction de novo
“[b]ecause the Treaty does not explicitly assign the question of arbitrability to the
14
Tribunal.” Pet. to Vacate Arbitral Award Declining to Exercise Arbitral
Jurisdiction and Compel Arbitration, at 2. In their view, “unless the relevant
arbitration agreement . . . clearly and unmistakably commits the question of an
arbitral tribunal’s jurisdiction to that tribunal, the arbitrability of a claim is a matter
of law for a court to determine independently, without deference to the arbitrators’
decision.” Id. Petitioners-Appellants further argued that upon review of the
tribunal’s decision on jurisdiction, the court should vacate the Award because the
arbitrators arrived at an incorrect interpretation of the scope of Article 8(3) of the
Treaty. They maintained that the tribunal’s interpretation was “an extremely
narrow construction” of Article 8(3) of the Treaty that “defeats the purpose of
investor-state arbitration.” Id. at 10.
Mongolia responded that the dispute over Article 8(3) did not concern a
question of arbitrability mandating de novo review and that, in the alternative, the
Parties agreed to submit the issue to the arbitrators. Mongolia pointed to
Petitioners-Appellants’ submissions before the tribunal arguing for their preferred
interpretation of Article 8(3), as well as Petitioners-Appellants’ failure to argue
during the arbitration that the tribunal lacked the competence to determine its own
jurisdiction. Mongolia concluded that because Petitioners-Appellants also did
15
not meet their burden of proving that the Award should be vacated under the New
York Convention or the FAA, the district court should confirm the Award.
On November 19, 2019, the district court (Ramos, J.) denied Petitioners-
Appellants’ petition to vacate the Award and motion to compel arbitration, and
granted Mongolia’s cross-petition to confirm the Award. In explaining its
decision not to review the Award’s decision on jurisdiction de novo, the district
court reasoned that “the treaty itself does not contain clear and unmistakable
evidence that the parties intended to place the question of arbitrability before the
arbitrators,” particularly because it does not designate arbitral rules to govern the
arbitration that suggest arbitrators have the power to rule on objections that they
have no jurisdiction. Sp. App’x at 6. Nonetheless, the district court explained
that “the [Petitioners-Appellants’] behavior during the arbitration d[id]” provide
“clear and unmistakable” evidence of Petitioners-Appellants’ intent to arbitrate
issues of arbitrability. Id. As the district court recognized, Petitioners-
Appellants “initiated the arbitration and argued for the arbitrators’ jurisdiction
from their very first submission.” Id. at 8. On that basis, the district court held
that Petitioners-Appellants were not entitled to independent review of the Award.
16
Proceeding to deferential review, the district court confirmed the Award.
Construing Petitioners-Appellants’ arguments concerning the accuracy of the
arbitrators’ interpretation of Article 8(3) as a petition to vacate the award under
§ 10(a)(4) of the FAA, the district court concluded that Petitioners-Appellants had
not met their burden to show that the arbitrators “exceeded their powers.” Id. at
10. This appeal followed.
DISCUSSION
Petitioners-Appellants argue that the district court erred by failing to
independently review the arbitral tribunal’s decision on jurisdiction before
rejecting their petitions and confirming the Award. Mongolia, for its part,
contends that the district court properly engaged in deferential review of the
Award. For the reasons stated below, we reject Petitioners-Appellants’
arguments. We agree with the district court that the Treaty in this case does not
supply “clear and unmistakable” evidence that the Parties intended to submit
arbitrability issues to arbitration. Nonetheless, we find that the Parties “clearly
and unmistakably” expressed their intent to submit issues of arbitrability to
arbitration. The Parties agreed at the outset of the arbitration that the tribunal
would hear jurisdictional issues in the first phase of the arbitration, after it had
17
become clear that the key jurisdictional issue to be argued was the scope of the
Treaty’s arbitration clause, a question clearly implicating “arbitrability.” This
agreement “clearly and unmistakably” evidences the Parties’ intent. Petitioners-
Appellants’ conduct during the remainder of the arbitration, moreover, confirms
their intent as expressed in that agreement, and in no way casts doubt on it. We
therefore review the Award with deference and affirm the district court’s decision
to confirm the Award, as well as its denial of Petitioners-Appellants’ request to
compel arbitration on the merits.
I.
We begin with the question of whether the district court was required to
independently review the tribunal’s determination of the arbitrability of the
dispute as expressed in the Award. We evaluate the district court’s decision on
this issue de novo. Schneider v. Kingdom of Thailand, 688 F.3d 68, 71 (2d Cir. 2012). 8
A.
“The question [of] whether the parties have submitted a particular dispute
to arbitration, i.e., the question of arbitrability, is an issue for judicial determination
8 We have jurisdiction over this matter pursuant to 28 U.S.C. § 1291.
18
unless the parties clearly and unmistakably provide otherwise.” Howsam v. Dean
Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) (internal quotation marks, emphasis,
and alteration omitted); Granite Rock Co. v. Int’l Brotherhood of Teamsters, 561 U.S.
287, 296 (2010). The concept of “arbitrability” “include[s] questions such as
‘whether the parties are bound by a given arbitration clause,’ or ‘whether an
arbitration clause in a concededly binding contract applies to a particular type of
controversy.’” BG Grp. PLC v. Republic of Argentina, 572 U.S. 25, 34 (2014)
(quoting Howsam, 537 U.S. at 84)); AT&T Techs., Inc. v. Commc’ns Workers of Am.,
475 U.S. 643, 651 (1986) (holding that it was for the court to decide whether a
particular labor dispute fell within the arbitration clause of a collective-bargaining
agreement); Schneider, 688 F.3d at 71 (“‘Question[] of arbitrability’ is a term of art
covering ‘dispute[s] about whether the parties are bound by a given arbitration
clause’ [i.e., formation] as well as ‘disagreement[s] about whether an arbitration
clause in a concededly binding contract applies to a particular type of controversy’
[i.e., scope].” (quoting Republic of Ecuador v. Chevron Corp, 638 F.3d 384, 393 (2d Cir.
2011) (alterations in original))). 9
9 For purposes of clarity, and in response to confusion revealed in the briefing, we
note that the definition of “arbitrability” in our case law differs from that of some foreign
jurisdictions, where “arbitrability” may refer to whether an issue is permitted by law to
be resolved by arbitration, notwithstanding the agreement of the parties. See 1 Born,
19
At the start, Petitioners-Appellants maintain that the question of whether
Article 8(3) of the Treaty provides jurisdiction over their claims constitutes a
dispute about “arbitrability.” Mongolia, on the other hand, objects that the
dispute over jurisdiction addressed by the tribunal was not in fact a dispute about
“arbitrability,” as the Parties had already consented to arbitration under the
Treaty, and that in any case, the matter was put to the arbitrators.
We agree with Petitioners-Appellants that the issue of whether Article 8(3)
of the Treaty reaches Petitioners-Appellants’ claims for expropriation does in fact
constitute a dispute about “arbitrability.” In this case, the core dispute between
the Parties, and on which the tribunal concluded that it lacked jurisdiction over
Petitioners-Appellants’ claims, concerns the appropriate reading of the language
“dispute[s] involving the amount of compensation for expropriation,” and in
particular, whether that clause provides arbitral jurisdiction over only disputes
about the amount of compensation rather than whether compensation is owed.
As Petitioners-Appellants’ claims are not viable unless they fall within this clause,
this issue undoubtedly concerns arbitrability. Schneider, 688 F.3d at 71
International Commercial Arbitration, at 766-68 (suggesting that in certain foreign
jurisdictions, disputes involving criminal matters and domestic relations subjects are
often deemed “nonarbitrable”).
20
(explaining that the concept of “arbitrability” includes “disagreements about
whether an arbitration clause in a concededly binding contract applies to a
particular type of controversy” (internal quotation marks and alterations
omitted)). Under our case law, the district court was therefore required to review
the tribunal’s decision de novo unless the record supplies “clear and unmistakable
evidence” that the Parties agreed to submit the issue to arbitration. First Options
of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995) (internal quotation marks and
alterations omitted); see also BG Grp., 572 U.S. at 34 (“[C]ourts presume that the
parties intend courts, not arbitrators, to decide . . . disputes about ‘arbitrability.’”).
Unlike several of our prior cases, as the district court recognized, the arbitral
agreement at issue in this case—a bilateral investment treaty—does not itself
contain a clear statement empowering arbitrators to decide issues of arbitrability.
We have previously concluded that where “parties explicitly incorporate rules that
empower an arbitrator to decide issues of arbitrability, th[at] incorporation serves
as clear and unmistakable evidence of the parties’ intent to delegate such issues to
an arbitrator.” Contec Corp. v. Remote Sol. Co., Ltd., 398 F.3d 205, 208 (2d Cir. 2005).
For example, in Republic of Ecuador we held that a bilateral investment treaty’s
incorporation of the UNCITRAL Rules supplied “clear and unmistakable
21
evidence” that the parties intended questions of arbitrability to be decided by the
arbitral panel. 638 F.3d at 394 (relying on UNCITRAL Article 21, which states
that the arbitrator “shall have the power to rule on objections that it has no
jurisdiction, including any objections with respect to the existence or validity of
the . . . arbitration agreement” (quoting UNCITRAL Arbitration Rules art. 21, ¶ 1,
G.A. Res. 31/98, U.N. Doc. A/RES/31/98 (Dec. 15, 1976)); see also Schneider, 688 F.3d
at 72–73 (same). In this case, however, the Treaty did not adopt such arbitral
rules (as it instead called for “ad hoc” arbitration), and no other clause appears to
commit the issue of arbitrability to the arbitrators. Consequently, because the
question of arbitrability is not subject to our presumption in favor of arbitration,
we cannot assume that the Parties intended to leave the issue to arbitration.
Nonetheless, we find “clear and unmistakable” evidence of intent to submit
issues of arbitrability to arbitration in another location: an agreement reached by
the Parties at the outset of the arbitration. As recounted above, at the start of the
arbitral process, the Parties met and conferred on several procedural aspects of the
arbitration. In doing so, as reported in Procedural Order No. 1, the Parties agreed
that the first phase of the arbitration would cover jurisdictional and liability
disputes. We now hold that this agreement was sufficient in the context of the
22
present arbitration to evidence the Parties’ intent to submit arbitrability issues to
arbitration.
In explaining our decision, we first emphasize the fact that the Parties made
this agreement with respect to jurisdictional arguments after it had already become
clear that the key jurisdictional issue in dispute was the proper interpretation of
Article 8(3) of the Treaty, an arbitrability issue. Cf. First Options, 514 U.S. at 945(explaining that a concern animating the presumption in favor of judicial review
is the fact that “[a] party often might not focus upon [the “who should decide
arbitrability”] question or upon the significance of having arbitrators decide the
scope of their own powers” (emphasis added)). For example, in Petitioners-
Appellants’ Request for Arbitration served on Mongolia nearly nine months prior
to the first procedural meeting, Petitioners-Appellants argued that the “true
interpretation” of Article 8 provides that jurisdiction of the arbitral tribunal is not
“limited to an assessment of the compensation due for an expropriation,” and that
“[a]ny other interpretation would render the standard of protection under the
Treaty purely formal and would thus defeat the purpose of the Treaty.” Request
for Arbitration ¶¶ 68–69. Considered in this context, we have little doubt then
that in agreeing that the tribunal would hear jurisdictional issues, Petitioners-
23
Appellants knew that they were submitting the key issue of arbitrability to
resolution by the tribunal. Moreover, as we have previously explained, the fact
that the Parties to the arbitration are not the same “parties” as those who signed
the bilateral investment treaty is immaterial, given that bilateral investment
treaties “merely create[] a framework through which foreign investors . . . can
initiate arbitration against parties to the Treaty.” Republic of Ecuador, 638 F.3d at
392 (explaining that a bilateral investment agreement is an agreement between two
sovereign states that in effect constitutes a unilateral standing offer to submit to
arbitration with investors of the other sovereign when certain conditions are met);
see also BG Grp., 572 U.S. at 53 (Roberts, C.J., dissenting). Mongolia, “’by signing
the [1991 Treaty], and [Petitioners-Appellants], by consenting to arbitration, have
created a separate binding agreement to arbitrate.’” Schneider, 688 F.3d at 71
(quoting Republic of Ecuador, 638 F.3d at 392).
Second, we discern no reason to conclude that evidence of intent to submit
arbitrability issues to arbitration may be found only in arbitral agreements, and
not in subsequent agreements reached by parties during an arbitration. While
we have previously stated that “the issue of arbitrability may only be referred to
the arbitrator if ‘there is clear and unmistakable evidence from the arbitration
24
agreement, as construed by the relevant state law, that the parties intended that the
question of arbitrability shall be decided by the arbitrator,’” Shaw Grp. Inc. v.
Triplefine Int’l Corp., 322 F.3d 115, 121 (2d Cir. 2003) (quoting Bell v. Cendant Corp.,
293 F.3d 563, 566 (2d Cir. 2002) (internal quotation marks and emphasis omitted)
(emphasis added)), we have previously relied, at least in part, on an agreement
reached during an arbitration as evidence of intent to submit arbitrability issues to
arbitration. In Schneider, we found that an investor and sovereign state had
clearly and unmistakably agreed to arbitrate questions of arbitrability where the
parties signed, after the tribunal was constituted, “Terms of Reference”
empowering the tribunal to “consider . . . objections to jurisdiction.” 688 F.3d at
70. While in that case we had the benefit of relying on both those Terms of
Reference and the bilateral investment treaty’s adoption of the UNCITRAL arbitral
rules, we “consider[ed] both . . . the agreed Terms of Reference and the
incorporation of Article 21 of the UNCITRAL rules,” in arriving at our conclusion
as to arbitrability. Id. at 73.
We have also previously accepted adoptions of procedures by one party
during the course of arbitration as evidence of intent with respect to arbitrability,
particularly where the relevant treaty explicitly delegated the decision as to the
25
applicable arbitral rules to that party. See Republic of Ecuador, 638 F.3d at 395(finding that Chevron “consented to sending . . . threshold issues to the arbitrator”
where the U.S.-Ecuador bilateral investment treaty provided that an investor
initiating arbitration could choose, as one option, to submit the dispute for
settlement by binding arbitration under the UNCITRAL rules, and Chevron
invoked those rules in its notice of arbitration); cf. Howsam, 537 U.S. at 82 (relying
on the fact that the party initiating arbitration was entitled under the arbitral
agreement to select the arbitration forum, and the relevant party chose National
Association of Securities Dealers (“NASD”) arbitration by signing an agreement
with the NASD that submitted the matter to arbitration in accordance with NASD
rules). In this case, the Treaty in effect delegated certain questions about
arbitrability to both Parties when it called for “ad hoc” arbitration, 10 the terms of
10 In this case, while the Treaty does not expressly adopt rules dealing with
arbitrability, Article 8(5) of the Treaty indicates that “[t]he tribunal shall determine its
own procedure,” and that “the tribunal may, in the course of determination of procedure,
take as guidance the [ICSID] Arbitration Rules . . . .” Treaty art. 8(5). The 1984 version
of those rules, which were operative at the time the Treaty was concluded, provide that
an arbitral tribunal is to decide objections to whether a dispute is within its jurisdiction
raised by the parties, and that, further, a tribunal “may on its own initiative consider . . .
whether the dispute or any ancillary claims before it is within the jurisdiction of the
Centre and within its own competence.” International Centre for Settlement of
Investment Disputes, Rules of Procedure for Arbitration Proceedings, Rule 41 (1984).
Accordingly, the Treaty in no way forecloses the possibility of the Parties sending
arbitrability issues to the arbitrators, and references as a possible source of guidance rules
26
which would need to be worked out by them.
Petitioners-Appellants nonetheless object that even if they argued
arbitrability issues to the arbitrators, de novo review is still required because they
did not give the tribunal “primary power” over arbitrability issues. In making
this argument, Petitioners-Appellants attempt to draw a distinction between
intending to submit arbitrability issues to arbitration and intending to submit
arbitrability issues to arbitration without the possibility of independent judicial review.
We have, however, previously rejected this argument. In Republic of Ecuador, we
found “clear and unmistakable” evidence of intent to arbitrate arbitrability issues
where the relevant treaty adopted UNCITRAL Article 21, which provides that the
arbitrator “shall have the power to rule on objections that it has no jurisdiction.”
638 F.3d at 394. As we explained, these rules clearly indicate that arbitrability
issues are to be “decided by the arbitral panel in the first instance.” Id. Then in
Schneider, we rejected Thailand’s suggestion that our language “in the first
instance” somehow suggested that the “arbitrators [had the] power to decide their
jurisdiction at the outset of the arbitration without delay,” but that adoption of
that expressly provide for such an approach.
27
such rules did not “preclude[] independent judicial review at the later
confirmation stage.” 688 F.3d at 73. We concluded that “[o]nce the parties have
agreed that an arbitrator may decide questions regarding the scope of arbitrable
issues in the first instance,” federal courts are indeed required to afford deference
to the arbitral tribunal’s decision as to that scope. Id.; see also id. at 74 (explaining
that adoption of the UNCITRAL Rules “necessarily means that a district court
considering whether to confirm the award must review the arbitrators’ resolution
of such questions with deference”).
Along similar lines, the fact that the Parties in this case agreed that the
arbitrators would hear “jurisdictional” arguments, but did not expressly state that
the arbitrators “have the power to” rule on jurisdictional issues, does not change
our analysis. While we have often relied on arbitral rules with language of the
latter sort, see, e.g., Contec Corp., 398 F.3d at 208 (relying on Rule 7 of the American
Arbitration Association (“AAA”) Rules, stating that with respect to jurisdiction
“[t]he arbitrator shall have the power to rule on his or her own jurisdiction,
including any objections with respect to the existence, scope or validity of the
arbitration agreement”); Schneider, 688 F.3d at 72-73 (relying on similar language
in UNCITRAL Article 21); All. Bernstein Inv. Rsch. & Mgmt., 445 F.3d 121, 127 (2d
28
Cir. 2006) (relying on NASD Code Rule 10324, which provides that “[t]he
arbitrators shall be empowered to interpret and determine the applicability of all
provisions under this Code . . . . Such interpretations . . . shall be final and binding
upon the parties”), this phrasing is hardly mandatory. For example, we have
previously cited language in the International Chamber of Commerce Rules as
evidence of the parties’ clear and unmistakable intent to submit the issue of
arbitrability to the arbitrators, where the relevant language in those rules suggests
that an arbitral tribunal “may decide” issues of jurisdiction raised by the parties. 11
Shaw Grp., 322 F.3d at 122. Similarly, in Schneider, we explained that language in
the parties’ Terms of Reference indicating that “’[t]he Tribunal may consider . . .
objections to jurisdiction’ . . . [wa]s entirely consistent with and parallel to the
language in Article 21” of the UNCITRAL Arbitration Rules, 688 F.3d at 73, even
though the language of those rules provided that “[t]he arbitral tribunal shall have
the power to rule on objections that it has no jurisdiction, including any objections
with respect to the existence or validity of the arbitration clause or of the separate
arbitration agreement,” UNCITRAL Arbitration Rules art. 21, ¶ 1, G.A. Res. 31/98,
11 See International Chamber of Commerce, Arbitration Rules, Rule 6.2 (1998)
(since revised on 1 Jan. 2021).
29
U.N. Doc. A/RES/31/98 (Dec. 15, 1976); see also Schneider, 688 F.3d at 73–74 (relying
on the parties’ adoption of both the UNCITRAL Rules and the Terms of Reference
as evidence of intent and referring to the language in the Terms of Reference as
“substantially similar” to the language of the UNCITRAL Rules, id. at 74).
Accordingly, we conclude that the Parties “clearly and unmistakably”
evidenced their intent to submit arbitrability issues to arbitration where they
agreed to submit jurisdictional issues to the arbitrator during the first phase of the
arbitration.
B.
Our conclusion that Petitioners-Appellants “clearly and unmistakably”
intended to submit issues of arbitrability to the arbitrators is only reinforced by
consideration of their conduct during the arbitration. See Republic of Ecuador, 638
F.3d at 395 (noting that in addition to invoking the UNCITRAL Rules, Chevron
“argued that questions of arbitrability are for the arbitral panel”). In this case,
after agreeing that the arbitrators would hear jurisdictional arguments,
Petitioners-Appellants proceeded to affirmatively argue their case for the
tribunal’s jurisdiction over their claims both in their written memorial and at the
hearing. See Claimants’ Memorial (Mar. 1, 2011) at 16–25 (analyzing competing
30
interpretations of the scope of Article 8(3) and arguing that the tribunal should
adopt their reading and “assume jurisdiction over the[ir] claim for expropriation,”
id. at 25). 12 Petitioners-Appellants also submitted a letter to the tribunal on
August 31, 2012, towards the close of briefing, requesting that the tribunal issue
an order specifically for the purpose of “remind[ing] the parties that any award
rendered by the Tribunal is final and binding and that the parties should not,
directly or indirectly, take any steps that may undermine or affect the
enforceability of the award,” which strongly belies their argument on appeal that
they did not believe that the tribunal had authority to conclusively determine
jurisdictional issues. Mem. of Law in Opp’n to (1) Pet’rs’ Pet. to Vacate Arbitral
Award & (2) In Supp. of Resp’ts’ Cross-Pet. to Confirm Arbitration Award, Attach.
8 at 2 (“Procedural Order No. 5”) (emphasis added). Moreover, at no point in the
arbitration did Petitioners-Appellants object to the arbitrators resolving
arbitrability issues.
As such, we find nothing in Petitioners-Appellants’ conduct during the
arbitration that runs counter to our conclusion that Petitioners-Appellants
12 Moreover, contrary to Petitioners-Appellants’ claim, considerably before the
Parties submitted these jurisdictional arguments, New York was selected as the seat of
the arbitration, putting the Parties on notice as to New York and federal arbitration law.
31
intended to submit arbitrability issues to arbitration, as evidenced by their
agreement with respect to jurisdictional issues. Instead, such conduct reinforces
our conclusion. We therefore affirm the district court’s decision declining de novo
review of the Award.
II.
Having determined that independent review of the Award is not warranted,
we review the Award only with deference. See BG Grp., 572 U.S. at 33, 41; E.
Associated Coal Corp. v. United Mine Workers of Am., Dist. 17, 531 U.S. 57, 62 (2000)
(explaining that where parties send a matter to arbitration, “courts will set aside
the arbitrator’s interpretation of what [an] agreement means only in rare
instances”); Schneider, 688 F.3d at 73–74 (explaining that where there is clear and
unmistakable evidence of intent to arbitrate arbitrability issues, “[t]his necessarily
means that a district court considering whether to confirm the award must review
the arbitrators’ resolution of such questions with deference”). We hold that the
district court did not abuse its discretion in concluding that Petitioners-Appellants
failed to meet their burden with respect to vacatur under the FAA or the New York
Convention. We further reject Petitioners-Appellants’ challenge that the district
court was required to compel arbitration on the merits.
32
A.
On appeal from an order by the district court confirming an arbitral award,
we review legal conclusions and interpretations de novo, and findings of fact for
clear error. See VRG Linhas Aereas S.A. v. MatlinPatterson Glob. Opportunities
Partners II L.P., 717 F.3d 322, 325 (2d Cir. 2013). As the law applicable to review
of arbitral awards with foreign connections has proven prone to confusion, 13 we
begin with a short explanation of the law relevant to the district court’s review.
1.
Our starting point with respect to the confirmation of investor-state arbitral
awards is the New York Convention, which applies to “the recognition and
enforcement of arbitral awards made in the territory of a State other than the State
where the recognition and enforcement of such awards are sought,” as well as to
“arbitral awards not considered as domestic awards in the State where their
recognition and enforcement are sought.” New York Convention art. 1(1)
(emphasis added). While the Convention does not define awards “not
considered as domestic,” see Bergesen v. Joseph Muller Corp., 710 F.2d 928, 932 (2d
13 See CBF Indústria de Gusa S/A v. AMCI Holdings, Inc., 850 F.3d 58, 75 (2d Cir. 2017)
(encouraging courts to “take care to specify explicitly the type of arbitral award the
district court is evaluating,” namely whether an award is “foreign,” “nondomestic,” or
“domestic,” and their jurisdictional posture in reviewing the award); see infra note 15.
33
Cir. 1983) (explaining that “[t]he definition appears to have been left out
deliberately in order to cover as wide a variety of eligible awards as possible, while
permitting the enforcing authority to supply its own definition of ‘nondomestic’
in conformity with its own national law”), this Circuit has adopted a “broad[]
construction” of that language, id. As we explained in Bergesen, for purposes of
the reach of the Convention in our courts, awards “not considered as domestic”
denotes awards that are subject to the Convention not because they were “made
abroad,” but because they are “made within the legal framework of another
country.” Id.; see CBF Indústria de Gusa S/A v. AMCI Holdings, Inc., 850 F.3d 58, 70
(2d Cir. 2017) (explaining that for purposes of the New York Convention, an award
is “‘made’ in the country of the ‘arbitral seat,’” which is “‘the jurisdiction
designated by the parties or by an entity empowered to do so on their behalf to be
the juridical home of the arbitration’” (quoting Restatement (Third) of the U.S. Law
of International Commercial and Investor-State Arbitration § 1-1 (Am. L. Inst.
2012)). Such “nondomestic” awards include those that are “pronounced in
accordance with foreign law or [which] involv[e] parties domiciled or having their
principal place of business outside the enforcing jurisdiction.” Bergesen, 710 F.2d
34at 932. 14 Accordingly, as we have summarized, the New York Convention
applies to three types of arbitral awards: (1) “arbitral awards ‘made’ in a foreign
country that a party seeks to enforce in the United States (known as foreign arbitral
awards)”; (2) “arbitral awards ‘made’ in the United States that a party seeks to
enforce in a different country”; and (3) “nondomestic arbitral awards that a party
seeks to enforce in the United States,” where such awards are “nondomestic” on
account of their connections with a foreign legal framework. CBF, 850 F.3d at 70;
see also id. at 73.
The present case involves an arbitral award of the third type. Though the
Parties agreed to seat the arbitration in New York, New York in the absence of a
designated seat for the arbitration in the Treaty, the Award at issue qualifies as
“nondomestic” as Petitioners-Appellants are all non-U.S. citizens disputing with
a foreign sovereign over investments made in the territory of that foreign
14 In light of Chapter 2 of the FAA, 9 U.S.C. § 201 et seq., which implements the
New York Convention, arbitral awards thus “fall[] under the [New York] Convention,”
9 U.S.C. § 202, “unless both parties are citizens of the United States and” the legal
relationship giving rise to the arbitration “‘involves [neither] property located abroad,
[nor] envisages performance or enforcement abroad, [n]or has some other reasonable
relation with one or more foreign states,’” CBF, 850 F.3d at 71 (quoting 9 U.S.C. § 202)
(emphases and alterations in original)); see also Yusuf Ahmed Alghanim & Sons v. Toys “R”
Us, Inc., 126 F.3d 15, 19 (2d Cir. 1997).
35
sovereign. See Yusuf Ahmed Alghanim & Sons v. Toys “R” Us, Inc., 126 F.3d 15, 19
(2d Cir. 1997).
Application of the New York Convention does not, however, limit the
application of the FAA in the present case. Id. at 20. To the contrary, while
Article V of the New York Convention provides “the exclusive grounds for
refusing confirmation under the Convention,” we have previously explained that
“one of those exclusive grounds is where ‘[t]he 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.’” Id. (quoting New York Convention art. V(1)(e)).
The inclusion of this grounds means that “the state in which, or under the law of
which, [an] award is made, [is] free to set aside or modify an award in accordance
with its domestic arbitral law and its full panoply of express and implied grounds
for relief.” Id. at 23. Consequently, because the Parties elected to seat the
arbitration in New York, the “available grounds for vacatur include all the express
grounds for vacating an award under the FAA.” Zurich Am. Ins. Co. v. Team
Tankers A.S., 811 F.3d 584, 588 (2d Cir. 2016).15
15 We have previously referred to federal courts sitting in this posture—reviewing
a request under the New York Convention for confirmation or vacatur of a nondomestic
award rendered in the United States—as exercising “primary jurisdiction,” as compared
to “secondary jurisdiction.” CBF, 850 F.3d at 71. We have used the latter term to refer
36
2.
Having recounted the law applicable to petitions to confirm or set aside the
Award in this case, we proceed to the merits of Petitioners-Appellants’ claims for
vacatur. We reach our conclusion in short order.
“The confirmation of an arbitration award is a summary proceeding that
merely makes what is already a final arbitration award a judgment of the court.”
Toys “R” Us, 126 F.3d at 23 (quoting Florasynth, Inc. v. Pickholz, 750 F.2d 171, 176
(2d Cir. 1984) (alterations omitted)). “The review of arbitration awards is ‘very
limited . . . in order to avoid undermining the twin goals of arbitration, namely,
settling disputes efficiently and avoiding long and expensive litigation.’” Id.(quoting Folkways Music Publishers, Inc. v. Weiss, 989 F.2d 108, 111 (2d Cir. 1993)).
Moreover, petitioners “must clear a high hurdle” to successfully contend that the
decision of an arbitral tribunal must be vacated. Stolt-Nielsen S.A. v. AnimalFeeds
Int’l Corp., 559 U.S. 662, 671 (2010).
to the situation where courts are asked to enforce an award rendered abroad, meaning
that, in accordance with the New York Convention, they may refuse enforcement only on
the limited grounds specified in Article V. Id. To be certain, then, in this case the
district court exercised “primary jurisdiction” over the Award on account of the Parties
having elected to seat the arbitration in New York. Id. at 73.
37
In this case, as the district court recognized, Petitioners-Appellants did not
clearly indicate in their filings below any provision of the FAA or the New York
Convention providing grounds to grant vacatur of the Award. They also did not
reply with any specificity to Mongolia’s arguments against vacatur under the
FAA. Accordingly, the district court would have been on firm ground had it
rejected Petitioners-Appellants’ arguments on this basis. See Willemijn
Houdstermaatschappij, BV v. Standard Microsystems Corp., 103 F.3d 9, 12 (2d Cir.
1997) (explaining that a party seeking to avoid summary confirmation of an
arbitral award and seeking vacatur has the burden of proof). Nonetheless,
because the district court construed Petitioners-Appellants’ arguments as a
petition to vacate the Award on the ground that the Award resulted from an excess
of arbitral power, see 9 U.S.C. § 10(a)(4), we review its analysis of that issue. We
agree that Petitioners-Appellants have not met their burden of showing that
vacatur is warranted on this ground.
Under Section 10(a)(4) of the FAA, an arbitral decision may be vacated
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.” 9 U.S.C. § 10(a)(4). In our case law, “[w]e have consistently accorded
38
the narrowest of readings to the [FAA’s] authorization to vacate awards pursuant
to § 10(a)(4).” Westerbeke Corp. v. Daihatsu Motor Co., Ltd., 304 F.3d 200, 220 (2d
Cir. 2002) (quoting In re Andros Campania Maritima, S.A., 579 F.2d 691, 703 (2d Cir.
1978) (alterations omitted)). Our analysis under Section 10(a)(4) therefore
“focuses on whether the arbitrators had the power, based on the parties’
submissions or the arbitration agreement, to reach a certain issue, not whether the
arbitrators correctly decided that issue.” Id. (quoting DiRussa v. Dean Witter
Reynolds Inc., 121 F.3d 818, 824 (2d Cir. 1997)); see also In re Fahnestock & Co., Inc.,
935 F.2d 512, 515 (2d Cir. 1991). Indeed, only where an arbitrator “‘act[s] outside
the scope of his contractually delegated authority’—issuing an award that ‘simply
reflect[s] [his] own notions of [economic] justice’ rather than ‘draw[ing] its essence
from the contract’—may a court overturn his determination.” Oxford Health Plans
LLC v. Sutter, 569 U.S. 564, 569 (2013) (quoting E. Associated Coal Corp., 531 U.S. at
62).
As established in Part I of this opinion, the Parties “clearly and
unmistakably” submitted the issue of the scope of the arbitrators’ jurisdiction
under Article 8(3) of the Treaty to the tribunal. Therefore, “the sole question for
us is whether the arbitrator[s] (even arguably) interpreted the parties’ contract, not
39
whether [they] got its meaning right or wrong.” Id. Here, the tribunal’s
determination that it lacked jurisdiction under a reasonable reading of Article 8(3)
fell well within its interpretative authority. Cf. BG Grp., 572 U.S. at 44 (finding
that the arbitration panel’s determination that a local litigation requirement did
not impede arbitration fell “well within the arbitrators’ interpretive authority”).
The tribunal’s reasoning also drew “its essence from the agreement to arbitrate,”
see ReliaStar Life Ins. Co. of N.Y. v. EMC Nat’l Life Co., 564 F.3d 81, 85 (2d Cir. 2009),
as indeed the arbitrators looked closely at the text of the Treaty in arriving at their
decision, in line with customary approaches to treaty interpretation, while
distinguishing competing interpretations in their analysis. As such, even if we
would not necessarily reach the same interpretation, 16 any difference in opinion is
not enough to conclude that the arbitrators “stray[ed] from interpretation and
application of the agreement and effectively dispense[d] [their] own brand of . . .
justice.” Stolt-Nielsen, S.A., 559 U.S. at 671 (internal quotation marks and
alterations omitted); BG Grp., 572 U.S. at 45.
16 In reaching our decision, we do not express an opinion on the correctness of the
arbitral tribunal’s decision on jurisdiction. See Banco de Seguros del Estado v. Mut. Marine
Off., Inc., 344 F.3d 255, 262 (2d Cir. 2003) (cautioning that when reviewing arbitral awards
under the FAA, courts are not to determine whether the arbitrators “correctly” decided
issues put to them (quoting DiRussa, 121 F.3d at 824)).
40
We are also not persuaded that the tribunal’s decision not to exercise
jurisdiction somehow merits a different analysis. As we have previously
recognized, the fact that there is a “sufficient relationship” between the parties and
“the rights created under [an] agreement” to justify the initiation of arbitration by
no means precludes an arbitrator from later deciding, in the course of that
arbitration, “that the dispute itself [is] not arbitrable.” Republic of Ecuador, 638
F.3d at 395 (internal quotation marks and alterations omitted).
We therefore find no evidence that the arbitrators “exceeded their powers”
and affirm the district court’s confirmation of the Award. 9 U.S.C. § 10(a)(4).
B.
Finally, we reject Petitioners-Appellants’ challenge to the district court’s
denial of their motion to compel arbitration under Section 4 of the FAA.
9 U.S.C. § 4. We review the district court’s decision on this issue de novo. See
LAIF X SPRL v. Axtel, S.A. de C.V., 390 F.3d 194, 198 (2d Cir. 2004).
In deciding a motion to compel arbitration, 17 “the role of courts is limited to
determining two issues: i) whether a valid agreement or obligation to arbitrate
17 Section 4 of the FAA provides in relevant part:
A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate
under a written agreement for arbitration may petition any United States district
41
exists, and ii) whether one party to the agreement has failed, neglected or refused
to arbitrate.” Id. (quoting Jacobs v. U.S.A. Track & Field, 374 F.3d 85, 88 (2d Cir.
2004)). “A party has refused to arbitrate if it ‘commences litigation or is ordered
to arbitrate th[e] dispute [by the relevant arbitral authority] and fails to do so.’”
Id. (quoting Jacobs, 374 F.3d at 89 (alteration in original)). Once a party petitions
to compel arbitration, “[t]he court shall hear the parties, and upon being satisfied
that the making of the agreement for arbitration or the failure to comply therewith
is not in issue, the court shall make an order directing the parties to proceed to
arbitration in accordance with the terms of the agreement.” 9 U.S.C. § 4.
Applying these principles, Petitioners-Appellants have no claim under
Section 4 of the FAA to compel arbitration. Mongolia neither commenced
litigation in lieu of arbitration, nor refused to comply with an order to arbitrate the
dispute issued by the arbitrators. See Jacobs, 374 F.3d at 89. Mongolia instead
answered the arbitral demand, here styled as a “request for arbitration,” duly
appointed its arbitrator, participated in the selection of the president of the arbitral
court which, save for such agreement, would have jurisdiction under title 28, in a
civil action or in admiralty of the subject matter of a suit arising out of the
controversy between the parties, for an order directing that such arbitration
proceed in the manner provided for in such agreement.
9 U.S.C. § 4.
42
tribunal, was present at meetings to decide the procedures and organization of the
arbitration, fully pursued its defense, and complied with the demands of the
tribunal. See LAIF X, 390 F.3d at 199. Moreover, Mongolia’s challenge to the
arbitrability of Petitioners-Appellants’ claims before the tribunal, i.e., its argument
that the tribunal lacked jurisdiction under Article 8(3), in no way constituted a
refusal to arbitrate such that Petitioners-Appellants accrued a claim under Section
4 of the FAA for the district court to compel arbitration. See Jacobs, 374 F.3d at 89(“The fact that respondents raised before the AAA an objection to petitioner’s
Demand for Arbitration . . . does not constitute a ‘refusal to arbitrate’ on the part
of respondents.”). Accordingly, we find no basis on which to accept Petitioners-
Appellants’ contentions and we affirm the district court’s denial of their petition
to compel arbitration.
* * *
In the absence of “clear and unmistakable” evidence that the parties to an
arbitration have agreed to allow arbitrators to decide arbitrability issues, district
courts are required to independently review those issues. Owing to preferences
for efficiency, or the specialized expertise of arbitrators, parties may nonetheless
decide to reverse this presumption and submit arbitrability issues to the
43
determination of arbitrators. We affirm today that in the context of bilateral
investment treaty arbitration, courts may find evidence of parties’ intent to submit
arbitrability issues to arbitration in subsequent agreements reached by parties
during the course of an arbitration.
CONCLUSION
For the foregoing reasons, we AFFIRM the order of the district court.
44