China Minmetals v. Chi Mei Corp ( 2003 )

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
6-26-2003
China Minmetals v. Chi Mei Corp
Precedential or Non-Precedential: Precedential
Docket No. 02-2897
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PRECEDENTIAL
Filed June 26, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 02-2897 and 02-3542
CHINA MINMETALS MATERIALS IMPORT
AND EXPORT CO., LTD.
v.
CHI MEI CORPORATION,
Appellant
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civ. No. 01-03481)
Honorable Dennis M. Cavanaugh, District Judge
Argued April 7, 2003
BEFORE: ALITO, FUENTES, and GREENBERG,
Circuit Judges
(Filed: June 26, 2003)
J. Jeffrey Weisenfeld (argued)
401 Broadway, Suite 306
New York, NY 10013
Attorney for Appellee
2
David L. Braverman
Robert C. Seiger, III, Esq.
Richard E. Miller (argued)
Braverman Kaskey & Caprara
One Liberty Place, 21st Floor
Philadelphia, PA 19103
Attorneys for Appellant
OPINION OF THE COURT
GREENBERG, Circuit Judge.
This matter comes on before this court on an appeal by
the Chi Mei Corporation (“Chi Mei”) from the district court’s
order entered June 11, 2002, granting the motion of China
Minmetals Import & Export Co. (“Minmetals”) to confirm
and enforce a foreign arbitration award and from the
judgment entered on August 26, 2002, in favor of
Minmetals and against Chi Mei in the amount of
$4,040,850.41. For the reasons stated herein, we will
vacate the district court’s order and judgment and will
remand the case for further proceedings.
I. BACKGROUND
Chi Mei is a New Jersey corporation and Minmetals is a
corporation formed and existing under the laws of the
People’s Republic of China (“PRC”).1 Production Goods and
Materials Trading Corp. of Shantou S.E.Z. (“Shantou”),
which also is implicated in this action, likewise is a
corporation formed and existing under the laws of the PRC.
This dispute arises out of a transaction involving Chi Mei,
Minmetals, and Shantou. The parties dispute almost every
detail of the transaction; for example, Chi Mei refers to it as
a “currency conversion transaction”2 while Minmetals calls
1. Inasmuch as the district court enforced the arbitration award without
opinion, it did not explicitly find any facts in this case. Nevertheless, the
facts we summarize are undisputed except as noted.
2. The PRC imposes strict restrictions on foreign currency transactions,
allowing only authorized parties to convert PRC currency (“RMB”) into
United States dollars.
3
it a contract for purchase by Minmetals of electrolytic
nickel cathode. Moreover, we do not find the parties’
descriptions of the transactions to be completely clear, a
problem that fortunately does not impede our ability to
decide this case. Chi Mei argues that it never intended nor
agreed to sell anything to Minmetals and alleges that the
contracts on which Minmetals relies were forged. On the
other hand, Minmetals argues that Chi Mei failed to deliver
the goods it promised to sell after receiving payment by
drawing on a line of credit of several million dollars.
According to Chi Mei, on or about June 12, 1997,
Shantou sought out Chi Mei to discount a certain sum of
US dollars. J.A. at 119.3 Chi Mei orally agreed to provide
discounting services for a .7% commission of the amount of
US dollars before discount. Minmetals was to obtain the
funds by way of a letter of credit obtained from the Bank of
China, as the PRC apparently authorized Minmetals to
engage in currency conversion transactions. Chi Mei
asserts, however, that Shantou did not disclose its
relationship with Minmetals to it and that it was unaware
of Minmetals’ role in the transaction until after the delivery
of the proceeds of the letter of credit to Shantou. Chi Mei
subsequently was to transfer the funds to accounts
Shantou designated, and Chi Mei did so. By contrast,
Minmetals asserts that the transaction involved an
agreement to purchase electrolytic nickel cathode alloy, it
issued letters of credit worth several million dollars to Chi
Mei, and Chi Mei knowingly submitted to a New York bank
numerous false documents evidencing the sale, including
an invoice, weight packing list, quality certificate, and bill
of lading, in order to collect funds under the letters of
credit. Minmetals contends that Chi Mei did not deliver the
goods described in the contracts.
Two contracts submitted to a bank in the PRC that
purport to be contracts for the sale of nickel by Chi Mei to
3. Chi Mei sets forth its version of the facts primarily in the affidavit of
Jiaxiang Luo, its president during the relevant period, which it
submitted to the district court in opposition to Minmetals’ motion to
enforce and in support of Chi Mei’s motion to dismiss. See J.A. at 115-
26.
4
Minmetals for a sum equal to the amount of the letters of
credit (the “Sale of Goods contracts”) are central to this
dispute. Chi Mei alleges that the two contracts were entirely
fraudulent, containing a forged signature of a nonexistent
Chi Mei employee as well as a forged corporate stamp. Chi
Mei further alleges that it was unaware of the existence of
these contracts until it appeared at the arbitration that is
the subject of this dispute. The contracts provide for
binding arbitration of any disputes in connection with the
contracts before the China International Economic and
Trade Arbitration Commission (“CIETAC”). App. at 33.
According to Chi Mei, it performed its duties under the
oral agreement governing the currency discounting
transaction and delivered the funds to Shantou after
collecting its .7% commission.4 Shantou then allegedly
misappropriated the funds, refusing to remit any of them to
Minmetals.5
On or about November 14, 1997, Minmetals initiated an
arbitration proceeding before CIETAC against Chi Mei
pursuant to the arbitration clauses contained in the Sale of
Goods contracts.6 Chi Mei repeatedly objected to CIETAC’s
jurisdiction but, nevertheless, appeared before it,
submitting evidence that the contracts which contained the
arbitration clause on which Minmetals relied were forged.
Chi Mei also argued that Minmetals’ flouting of Chinese law
should prevent its recovery in the arbitration. Id. at 44-45.
4. At oral argument on the appeal, counsel for Chi Mei suggested for the
first time that insofar as there may have been some agreement to sell
goods, that agreement involved a company called Hexin (Far East)
Development Ltd., not Chi Mei. This alternative argument does not affect
our analysis in this opinion.
5. Chi Mei indicates that Minmetals filed criminal complaints in the PRC
against Chi Mei and Shantou. Chi Mei was exonerated after a formal
inquiry by the Beijing Police Department, which did not result in a
criminal charge, while Weizhe Lin, the president of Shantou, was
convicted of the criminal offense of conversion in connection with this
matter. Id. at 122.
6. According to Jiaxiang Luo, the Chi Mei president, the contracts
submitted by Minmetals to CIETAC were in fact different from the two
contracts presented to the Bank of China. App. at 124-25. According to
him, all four contracts were forged and fraudulent. Id.
5
The arbitration tribunal held that Chi Mei failed to meet its
burden of showing that the contracts at issue were forged,
and that even if Chi Mei’s signature and stamp had been
forged, its actions, such as providing documents to the New
York bank and drawing on the letters of credit, constituted
“confirmation of the validity of the contracts.” Id. at 49. On
August 30, 2000, the CIETAC panel awarded Minmetals an
amount in excess of $4 million.
In July 2001, Minmetals moved in the district court for
an order confirming and enforcing the arbitration award.
Chi Mei opposed the motion and filed a cross-motion to
deny the relief Minmetals sought, submitting numerous
documents and affidavits, including the affidavit of Jiaxiang
Luo, the Chi Mei president. Minmetals did not submit any
contrary affidavits. The district court heard oral argument
on the motions and, without conducting an evidentiary
hearing, on June 11, 2002, entered an order granting
Minmetals’ motion to confirm and enforce the award and
denying Chi Mei’s cross-motion. The court, however, did
not file an opinion explaining its decision and, accordingly,
we do not know the basis for its entry of the order. On
August 26, 2002, the district court entered judgment in
favor of Minmetals in the amount of $4,040,850.41. This
appeal followed.
II. JURISDICTION AND STANDARD OF REVIEW
The district court had jurisdiction pursuant to 9 U.S.C.
§ 203 and 28 U.S.C. § 1331, and we have jurisdiction
pursuant to 28 U.S.C. § 1291.7 Ordinarily, in reviewing a
district court’s order confirming an arbitration award, we
would review the district court’s factual findings for clear
error and its legal conclusions de novo. First Options of
Chicago, Inc. v. Kaplan, 514 U.S. 938, 947-48, 115 S.Ct.
1920, 1926 (1995). Here, however, inasmuch as the court,
7. Chi Mei filed two notices of appeal, the first following the June 11,
2002 order and the second following entry of the judgment. Because the
second notice of appeal supplies a jurisdictional basis for us to consider
all the issues, we need not consider the effect of the first notice of
appeal. See Livera v. First Nat’l State Bank, 879 F.2d 1186, 1190 (3d Cir.
1989).
6
at least explicitly, did not make findings of fact, and we, in
any event, are deciding the case on a legal basis, our entire
review is plenary.
III. DISCUSSION
A. FORGERY ALLEGATIONS
The primary issue in this case is whether the district
court properly enforced the foreign arbitration panel’s
award where that panel, in finding that it had jurisdiction,
rejected Chi Mei’s argument that the documents providing
for arbitration were forged so that there was not any valid
writing exhibiting an intent to arbitrate. This issue actually
involves two distinct questions. First, we must consider
whether a foreign arbitration award might be enforceable
regardless of the validity of the arbitration clause on which
the foreign body rested its jurisdiction. In this regard,
Minmetals points out that the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards
(the “Convention”) differs somewhat from the general
provisions of the Federal Arbitration Act (“FAA”), and
particularly argues that Article V of the Convention requires
enforcement of foreign awards in all but a handful of very
limited circumstances, one of which is not the necessity for
there to be a valid written agreement providing for
arbitration. If we conclude, however, that only those awards
based on a valid agreement to arbitrate are enforceable, we
also must consider who makes the ultimate determination
of the validity of the clause at issue. Thus, in considering
the second question, we must examine the district court’s
role, if any, in reviewing the foreign arbitral panel’s finding
that there was a valid agreement to arbitrate.
9 U.S.C. § 207 provides:
Within three years after an arbitral award falling under
the Convention is made, any party to the arbitration
may apply to any court having jurisdiction under this
chapter for an order confirming the award as against
any other party to the arbitration. The court shall
confirm the award unless it finds one of the grounds
for refusal or deferral of recognition or enforcement of
the award specified in the said Convention.
7
The Convention is incorporated into the FAA in 9 U.S.C.
§ 207 and appears at 9 U.S.C.A. § 201 historical n. Article
V of the Convention provides:
1. Recognition and enforcement of the award may be
refused, at the request of the party against whom it is
invoked, only if that party furnishes to the competent
authority where the recognition and enforcement is
sought, proof that:
(a) The parties to the agreement referred to in article
II were, under the law applicable to them, under
some incapacity, or the said agreement is not valid
under the law to which the parties have subjected it
or, failing any indication thereon, under the law of
the country where the award was made; or
. . . .
(c) The award deals with a difference not
contemplated by or not falling within the terms of
the submission to arbitration, or it contains
decisions on matters beyond the scope of the
submission to arbitration, provided that, if the
decisions on matters submitted to arbitration can be
separated from those not so submitted, that part of
the award which contains decisions on matters
submitted to arbitration may be recognized and
enforced; or
(d) The composition of the arbitral authority or the
arbitral procedure was not in accordance with the
agreement of the parties, or, failing such agreement,
was not in accordance with the law of the country
where the arbitration took place; or
. . . .
2. Recognition and enforcement of an arbitral award
may also be refused if the competent authority in the
country where recognition and enforcement is sought
finds that:
(a) The subject matter of the difference is not capable
of settlement by arbitration under the law of that
country; or
8
(b) The recognition or enforcement of the award
would be contrary to the public policy of that
country.
Article IV establishes the procedure for seeking
enforcement of an award under Article V:
1. To obtain the recognition and enforcement
mentioned in the preceding article, the party applying
for recognition and enforcement shall, at the time of
the application, supply:
(a) The duly authenticated original award or a duly
certified copy thereof;
(b) The original agreement referred to in article II or
a duly certified copy thereof.
. . . .
Article II provides:
1. Each Contracting State shall recognize an agreement
in writing under which the parties undertake to submit
to arbitration all or any differences which have arisen
or which may arise between them in respect of a
defined legal relationship, whether contractual or not,
concerning a subject matter capable of settlement by
arbitration.
2. The term ‘agreement in writing’ shall include an
arbitral clause in a contract or an arbitration
agreement, signed by the parties or contained in an
exchange of letters or telegrams.
3. The court of a Contracting State, when seized of an
action in a matter in respect to which the parties have
made an agreement within the meaning of this article,
shall, at the request of one of the parties, refer the
parties to arbitration, unless it finds that the said
agreement is null and void, inoperative or incapable of
being performed.
Minmetals argues that each article of the Convention
governs a different aspect of arbitration procedure—Article
II sets forth the grounds for compelling arbitration, Article
IV describes the procedure required for seeking
9
enforcement of an award, and Article V provides that once
an award is made, the courts of a contracting state must
enforce that award unless one of the narrow grounds for
nonenforcement is proven. This case, according to
Minmetals, therefore involves only Article V, under which in
its view “the requirement of a valid written agreement is not
necessary for enforcement.” Appellee’s Br. at 6. Chi Mei, on
the other hand, argues that the Convention must be read
as a whole and that Article V both explicitly and implicitly
incorporates Article II’s valid written agreement
requirement. In addition, Minmetals argues that the
arbitration panel’s decision as to the validity of the
arbitration agreement is conclusive unless an Article V
exception applies, which, it argues, is not the case here.
Chi Mei, for its part, argues that the district court had an
obligation to determine independently the validity of the
agreement.
Because the domestic FAA (chapter 1 of the FAA) is
applicable to actions brought under the Convention
(chapter 2 of the FAA) to the extent they are not in conflict,
9 U.S.C. § 208, Chi Mei relies heavily on the Supreme
Court’s decision in First Options of Chicago, Inc. v. Kaplan,
514 U.S. 938, 115 S.Ct. 1920. First Options involved the
domestic FAA, not the Convention, but involved facts
similar to those in this case. In First Options, as here, the
district court confirmed an arbitration award where the
parties against whom the award was enforced had argued
both in the arbitration proceedings and before the district
court that they had not signed the document containing the
arbitration clause. Id. at 941, 115 S.Ct. at 1922. In that
case, the Court held that the district court and not the
arbitration panel must decide the question of arbitrability—
that is, the question whether a certain dispute is subject to
arbitration under the terms of a given agreement—unless
the parties clearly and unmistakably have agreed that the
arbitrator should decide arbitrability. Id. at 943, 115 S.Ct.
at 1923-24. In other words, the Court, relying on the
principle that “a party can be forced to arbitrate only those
issues it specifically has agreed to submit to arbitration,”
id. at 945, 115 S.Ct. at 1925, held that, unless the district
court found that there was clear and unmistakable
evidence that the parties agreed to arbitrate arbitrability,
10
the district court independently must determine whether
the parties agreed to arbitrate the merits of the dispute, id.
at 943-45, 115 S.Ct. at 1923-25.
Chi Mei therefore argues that, under First Options, the
district court should have concluded that the parties did
not agree to arbitrate arbitrability8 and, faced with the
evidence presented by Chi Mei in opposition to enforcement
and the lack of evidence submitted in response by
Minmetals, the district court should have found that the
dispute was not arbitrable because the contract had been
forged, or at least should have conducted a hearing to
resolve that issue. If this case had arisen under the
domestic FAA, First Options clearly would have settled in
Chi Mei’s favor both the question of the need for a valid
agreement to arbitrate and the question of the district
court’s role in reviewing an arbitrator’s determination of
arbitrability when an award is sought to be enforced. We,
therefore, must determine whether First Options provides
the rule of decision in a case involving enforcement of a
foreign arbitration award under the Convention.
Our cases involving enforcement under the Convention
largely have arisen under Article II, with one party seeking
an order compelling another party to arbitrate a dispute.
Under those cases, it is clear that if Minmetals had initiated
proceedings in the district court to compel arbitration, the
court would have been obligated to consider Chi Mei’s
allegations that the arbitration clause was void because the
underlying contract was forged. See Sandvik v. Advent Int’l
Corp., 220 F.3d 99, 104-07 (3d Cir. 2000). It is, of course,
true that the FAA, of which the Convention is a part,
establishes a strong federal policy in favor of arbitration
and that the presumption in favor of arbitration carries
“ ‘special force’ ” when international commerce is involved.
Id. at 104 (quoting Mitsubishi Motors Corp. v. Soler Chrysler-
Plymouth, Inc., 473 U.S. 614, 631, 105 S.Ct. 3346, 3356
(1985)). Nonetheless, we have stated that the “ ‘liberal
federal policy favoring arbitration agreements . . . is at
bottom a policy guaranteeing the enforcement of private
8. Minmetals does not point to any evidence supporting a conclusion
that the parties manifested an intent to arbitrate arbitrability.
11
contractual arrangements,’ ” id. at 105 (quoting Mitsubishi,
473 U.S. at 625, 105 S.Ct. at 3353), and that because
“arbitration is a matter of contract, . . . no arbitration may
be compelled in the absence of an agreement to arbitrate,”
id. at 107-08 (citing AT&T Techs, Inc. v. Communications
Workers of Am., 475 U.S. 643, 648, 106 S.Ct. 1415, 1418
(1986)).
In Sandvik, we affirmed the district court’s denial of a
motion to compel arbitration where the district court had
concluded that it had to determine whether the parties in
fact had entered into a binding agreement to arbitrate
before it could compel arbitration. Id. at 104-07. In that
case, there was a dispute as to whether the agreement
containing the arbitration agreement was binding on the
defendant corporation where it alleged that its attorney
signed the contract without proper authorization. Id. at
101-02. We relied on our decision in Par-Knit Mills, Inc. v.
Stockbridge Fabrics Co., 636 F.2d 51 (3d Cir. 1980), in
which we stated:
Before a party to a lawsuit can be ordered to arbitrate
and thus be deprived of a day in court, there should be
an express, unequivocal agreement to that effect. If
there is doubt as to whether such an agreement exists,
the matter, upon a proper and timely demand, should
be submitted to a jury. Only when there is no genuine
issue of fact concerning the formation of the agreement
should the court decide as a matter of law that the
parties did or did not enter into such an agreement.
Id. at 106 (quoting Par-Knit Mills, 636 F.2d at 54).
In Sandvik, we drew a distinction between contracts
asserted to be void or nonexistent, as was the case there
and is the case here, and contracts alleged to be voidable,
in which case arbitration, including arbitration of the fraud
question, may be appropriate under Prima Paint Corp. v.
Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801 (1967).9
9. In Prima Paint, the plaintiff brought an action to rescind a contract
with the defendant on the basis of fraud in the inducement. The
defendant moved to arbitrate the dispute on the basis of an arbitration
clause contained in the contract alleged to have been induced
fraudulently. The Supreme Court held that the arbitrator should decide
the challenge based on fraud in the inducement of the entire contract.
Prima Paint, 388 U.S. at 403-04, 87 S.Ct. at 1806.
12
We concluded that “[b]ecause under both the [Convention]
and the FAA a court must decide whether an agreement to
arbitrate exists before it may order arbitration, the District
Court was correct in determining that it must decide
whether [the attorney’s] signature bound Advent before it
could order arbitration.” Id. at 107; see also Gen. Elec. Co.
v. Deutz AG, 270 F.3d 144, 152-56 (3d Cir. 2001) (affirming
district court’s decision in case to compel an international
arbitration to submit arbitrability question to jury after
finding arbitration clause’s application to defendant
ambiguous). Notably, although we supported our
conclusion with references to the “null and void” language
in Article II of the Convention, we based our decision on
straightforward notions of contract law rather than on any
technical interpretation of the language of the treaty. See
Sandvik, 220 F.3d at 105-10.
In this case, however, an arbitral tribunal already has
rendered a decision, and has made explicit findings
concerning the alleged forgery of the contract, including the
arbitration clause. “The goal of the Convention, and the
principal purpose underlying American adoption and
implementation of it, was to encourage the recognition and
enforcement of commercial arbitration agreements in
international contracts and to unify the standards by which
agreements to arbitrate are observed and arbitral awards
are enforced in the signatory countries.” Scherk v. Alberto-
Culver Co., 417 U.S. 506, 520 n.15, 94 S.Ct. 2449, 2457
n.15 (1974). In an oft-cited opinion concerning enforcement
of a foreign arbitration award, the Court of Appeals for the
Second Circuit noted the “general pro-enforcement bias
informing the Convention,” explaining that the Convention’s
“basic thrust was to liberalize procedures for enforcing
foreign arbitral awards.” Parsons & Whittemore Overseas
Co. v. Societe Generale de l’Industrie du Papier, 508 F.2d
969, 973 (2d Cir. 1974).
Consistently with the policy favoring enforcement of
foreign arbitration awards, courts strictly have limited
defenses to enforcement to the defenses set forth in Article
V of the Convention, and generally have construed those
exceptions narrowly. See, e.g., id. at 973-77; see also
Biotronik Mess-und Therapiegeraete GmbH & Co. v. Medrord
13
Med. Instrument Co., 415 F. Supp. 133, 136, 140-41 (D.N.J.
1976). As the Court of Appeals for the Second Circuit has
noted, “[t]here is now considerable caselaw holding that, in
an action to confirm an award rendered in, or under the
law of, a foreign jurisdiction, the grounds for relief
enumerated in Article V of the Convention are the only
grounds available for setting aside an arbitral award.” Yusuf
Ahmed Alghanim & Sons, W.L.L. v. Toys ‘R’ Us, Inc., 126
F.3d 15, 20 (2d Cir. 1997) (emphasis added) (citing M&C
Corp. v. Erwin Behr GmbH & Co., 87 F.3d 844, 851 (6th
Cir. 1996); Int’l Standard Elec. Corp. v. Bridas Sociedad
Anonima Petrolera, Industrial y Comercial, 745 F. Supp.
172, 181-82 (S.D.N.Y. 1990); Brandeis Intsel Ltd. v.
Calabrian Chems. Corp., 656 F. Supp. 160, 167 (S.D.N.Y.
1987); Albert Jan van den Berg, The New York Arbitration
Convention of 1958: Towards a Uniform Judicial
Interpretation 265 (1981)).
This narrow interpretation of the Convention is in
keeping with 9 U.S.C. § 207 which unequivocally provides
that a court in which enforcement of a foreign arbitration
award is sought “shall confirm the award unless it finds one
of the grounds for refusal or deferral of recognition or
enforcement of the award specified in the said Convention.”
(emphasis added). The absence of a written agreement is
not articulated specifically as a ground for refusal to
enforce an award under Article V of the Convention. In fact,
the Convention only refers to an “agreement in writing” in
Article II, which requires a court of a contracting state to
order arbitration when presented with an agreement in
writing to arbitrate, unless it finds that agreement to be
void, inoperative, or incapable of being performed. This
distinction, according to Minmetals, is enough to
differentiate this case from cases like First Options, which
arose under the FAA,10 as well as from cases like Sandvik
and Deutz, which arose under Article II.
10. As Minmetals notes, the grounds for refusal to enforce an award are
broader under the FAA than under the Convention. Furthermore, the
FAA refers repeatedly to the need for a written agreement, see MCI
Telecommunications Corp. v. Exalon Indus., Inc., 138 F.3d 426, 429 (1st
Cir. 1998) (citing numerous provisions of the FAA that refer to a “writing”
14
On the other hand, the crucial principles common to all
of these decisions—that arbitration is a matter of contract
and that a party can be forced to arbitrate only those
issues it specifically agrees to submit to arbitration—
suggest that the district court here had an obligation to
determine independently the existence of an agreement to
arbitrate even though an arbitration panel in a foreign state
already had rendered an award, unless Minmetals’
argument concerning the exclusive nature of Article V or
some other principle provides a meaningful reason to
distinguish the cases we have cited. Thus, we consider
whether Convention cases cited by Minmetals, which
contrast Article II with the stricter Article V, provide a
compelling reason to distinguish this case from Sandvik
and Deutz. Furthermore, there is some question whether
the culture of international arbitration, which informs the
structure, history, and policy of the Convention, provides a
basis for distinguishing this case from First Options.
With regard to the first question, we are not convinced by
Slaney v. International Amateur Athletic Federation, 244
F.3d 580 (7th Cir. 2001), or by Yusuf Ahmed Alghanim,
both cited by Minmetals, that the absence from Article V of
the lack of a valid written agreement as a ground for refusal
to enforce an award is fatal to Chi Mei’s contention that
forgery of the arbitration agreement should preclude its
enforcement. In Slaney, the Court of Appeals for the
Seventh Circuit held that a foreign arbitration award
should be enforced against the plaintiff despite her
argument that there was not a valid “agreement in writing”
as required by Article II of the Convention. The court
explained:
and relying on that statutory language in holding that “determining
whether there is a written agreement to arbitrate the controversy in
question is a first and crucial step in any enforcement proceeding before
a district court”), while the Convention does not. Neither of these
distinctions in itself supplies a convincing reason to refuse to apply First
Options to a case under the Convention, however, inasmuch as neither
of these points played any role in the Supreme Court’s analysis in First
Options. The Court based its decision in that case largely on
straightforward contract principles rather than on a technical statutory
analysis.
15
Assuming that this case had come to the district court
and the IAAF had sought to compel Slaney to arbitrate
her claims, a determination as to whether there had
been a writing might pose a barrier to the IAAF ’s
position. However, that is not the case. Here, an
arbitration has already taken place in which, as we
have determined, Slaney freely participated. Thus, the
fact that Slaney suggests there is no written agreement
to arbitrate, as mandated by Article II of the New York
Convention is irrelevant. See, e.g., Coutinho Caro & Co.,
U.S.A., Inc. v. Marcus Trading Inc., Nos. 3:95CV2362
AWT, 3:96CV2218 AWT, 3:96CV2219 AWT, 2000 WL
435566 at *5 n.4 (D. Conn. March 14, 2000)
(recognizing a difference between the situation where a
party seeks to compel arbitration and a situation in
which one attempts to set aside an arbitral award that
has already been issued). What is highlighted here is
the difference between Article II of the Convention,
which dictates when a court should compel parties to
an arbitration, and Article V, which lists the narrow
circumstances in which an arbitration decision
between signatories to the Convention should not be
enforced.
Id. at 591. The court went on to apply ordinary rules of
contract law in holding that the plaintiff was estopped from
arguing that the lack of a binding written agreement
precluded enforcement because she had participated freely
in the arbitration proceeding, had not argued that she
never agreed to the arbitration clause during those
proceedings, and had let the opportunity to do so pass by
when she withdrew from those proceedings. Id. The court
also considered certain defenses to enforcement under
Article V but rejected all of them. Id. at 592-94.
Minmetals relies on Slaney for the proposition that lack
of a valid written agreement to arbitrate is irrelevant to
enforcement under Article V, which neither mentions such
an agreement nor explicitly incorporates the written
agreement requirement of Article II. We, however, will not
apply Slaney in the way Minmetals suggests. First, it
appears that the language in Slaney suggesting that lack of
a written agreement is irrelevant in an Article V case is
16
dicta. The court rested its decision primarily on an estoppel
theory because Slaney had participated freely in the
arbitration without arguing that lack of a written agreement
to arbitrate deprived the arbitral tribunal of jurisdiction. Id.In applying estoppel principles, the court stated: “We see no
reason why, even in the absence of a writing, ordinary rules
of contract law should not apply.” Id. In this case, as we
discuss below, Chi Mei continually objected to the
arbitration panel’s jurisdiction and always has maintained
that the purchase contracts were forged. Estoppel is
therefore not applicable in this case. Moreover, the court in
Slaney did not discuss First Options in considering Slaney’s
position with regard to the alleged lack of a written
agreement to arbitrate.11
Minmetals’ reliance on Yusuf Ahmed Alghanim likewise is
misplaced. In that case, the court distinguished between
awards rendered in a foreign state and awards rendered in
the state in which enforcement is sought, holding that a
court may consider implied grounds of relief under the FAA,
such as the arbitrator’s manifest disregard of the law, when
asked to enforce an award rendered in the United States
under the Convention. Yusuf Ahmed Alghanim, 126 F.3d at
20-23. The court stated:
In sum, we conclude that the Convention mandates
very different regimes for the review of arbitral awards
(1) in the state in which, or under the law of which, the
award was made, and (2) in other states where
recognition and enforcement are sought. The
Convention specifically contemplates that the state in
which, or under the law of which, the award is made,
will be free to set aside or modify an award in
11. We do not suggest that the court’s analysis was inconsistent with
First Options. The Supreme Court explicitly stated that “[w]hen deciding
whether the parties agreed to arbitrate a certain matter (including
arbitrability), courts generally . . . should apply ordinary state-law
principles that govern the formation of contracts.” First Options, 514 U.S.
at 944, 115 S.Ct. at 1924. On the facts of Slaney, therefore, the court’s
conclusion that “non-signatories to an arbitration agreement may
nevertheless be bound according to ordinary principles of contract and
agency, including estoppel” was consistent with the Court’s reasoning in
First Options.
17
accordance with its domestic arbitral law and its full
panoply of express and implied grounds for relief. See
Convention art. V(1)(e). However, the Convention is
equally clear that when an action for enforcement is
brought in a foreign state, the state may refuse to
enforce the award only on the grounds explicitly set
forth in Article V of the Convention.
Id. at 23.
At first blush, Yusef Ahmed Alghanim might appear to
support Minmetals’ position as it holds that awards
rendered in a foreign state must be enforced unless one of
the specific narrow exceptions in Article V is proven, while
a United States court may refuse to enforce an award
rendered in the United States or under United States law
on other grounds implied under the FAA. First Options is,
of course, a case under the FAA, and Minmetals suggests
that it is therefore irrelevant here as the award in this case
was made in a foreign state. First Options, however, did not
involve an implied ground for relief under the FAA. Rather,
it involved the more fundamental question of whether the
party opposing enforcement was ever a party to a valid
agreement to arbitrate. In Yusuf Ahmed Alghanim, there
was no challenge to the validity of the arbitration
agreement—only the arbitrator’s interpretation of contract
terms and application of New York law on lost profits were
disputed. Id. at 23-25.
We therefore find that the absence of any reference to a
valid written agreement to arbitrate in Article V does not
foreclose a defense to enforcement on the grounds that
there never was a valid agreement to arbitrate. Minmetals
cannot point to any case interpreting Article V of the
Convention so narrowly as to preclude that defense and we
are aware of none.12 Nor do the text and structure of the
12. At oral argument, counsel for Chi Mei for the first time urged that
Europcar Italia, SPA v. Maiellano Tours, Inc., 156 F.3d 310, 315-16 (2d
Cir. 1998), provided direct support for its reading of the Convention. In
that case, however, the party resisting enforcement did not argue that
the agreement containing the arbitration clause (which was executed in
1988) was forged or fraudulent; rather, it argued that one of the
agreements on which the arbitrators based their substantive decision
18
Convention compel such an interpretation. Indeed,
although only Article II contains an “agreement in writing”
requirement, Article IV requires a party seeking to enforce
an award under Article V to supply “[t]he original
agreement referred to in article II” along with its application
for enforcement. Furthermore, Article V expressly provides
that the party opposing enforcement may furnish “to the
competent authority where the recognition and enforcement
is sought proof that . . . the said agreement is not valid
. . . .” Read as a whole, therefore, the Convention
contemplates that a court should enforce only valid
agreements to arbitrate and only awards based on those
agreements. Thus, the concern we expressed in our
decisions in Article II cases like Sandvik and Deutz—that
parties only be required to arbitrate those disputes they
intended to arbitrate—is likewise present in this case. We
therefore hold that a district court should refuse to enforce
an arbitration award under the Convention where the
parties did not reach a valid agreement to arbitrate, at least
in the absence of a waiver of the objection to arbitration by
the party opposing enforcement.13
We therefore are left with the question whether the
international nature of this case distinguishes it from First
Options. Stated more precisely, we must ask whether the
(which was executed in 1979) was forged. Id. The court therefore
concluded that, inasmuch as the 1988 arbitration agreement explicitly
provided that the arbitrators would decide disputes involving the validity
of that agreement, the party resisting enforcement had the opportunity
to raise the issue of forgery of the 1979 agreement during the arbitration
proceedings, and, in any event, the existence of the 1979 agreement had
only a minor influence on the arbitrators’ substantive decision, enforcing
the award would not violate public policy under Article V(2)(b). Id. Here,
in the face of Chi Mei’s argument that the contract containing the
arbitration clause itself is forged Europcar is inapposite. We express no
opinion as to the applicability of Article V(2)(b) to this case.
13. We do not, however, hold, as Chi Mei urges, that Article V
“incorporates” Article II’s valid written agreement requirement. In this
respect, there is indeed some distinction between Article II and Article V.
The former explicitly requires an “agreement in writing” while the latter
requires only that the parties have reached an agreement as to
arbitrability under ordinary contract principles.
19
international context of the arbitration at issue affects the
principle that the district court should decide whether there
was a valid agreement to arbitrate. As already noted, First
Options held that, in a case arising under the domestic
FAA, the district court independently should make that
decision, even after the arbitrators have decided that they
did have jurisdiction, absent clear and unmistakable
evidence that the parties intended to leave that
determination to the arbitrators.
Preliminarily on the issue it is worth noting that we
previously have applied First Options in the international
context, albeit in a case seeking to compel arbitration
rather than to confirm an award. See Deutz, 270 F.3d at
155 (“We recognize that First Options is a domestic
arbitration case, but the international nature of the present
litigation does not affect the application of First Options’
principles.”). Furthermore, one district court in this circuit
has refused to distinguish international arbitration
proceedings from domestic arbitration proceedings, despite
the greater presumption in favor of arbitration in the
international context, in applying First Options to a case
involving the Inter-American Convention on International
Commercial Arbitration, which is implemented in Chapter 3
of the FAA, 9 U.S.C. § 301. Am. Life Ins. Co. v. Parra, 25 F.
Supp. 2d 467, 474, 476 (D. Del. 1998).
There nonetheless may be reason to think that the
international posture of this case removes it from the scope
of First Options. For example, international arbitration rules
tend to favor the rule of competence-competence
(sometimes known as kompetenz-kompetenz)—the principle
that gives arbitrators the power to decide their own
jurisdiction—more than American arbitration rules.14 One
14. Article 21 of the United Nations Commission on International Trade
Law (“UNCITRAL”) Rules of Arbitration states 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. The International Chamber of Commerce
(“ICC”) Rules of Arbitration allow a party that contests the existence,
validity, or scope of an arbitration agreement to ask a court to decide
20
commentator has opined that “international arbitration
rules normally provide explicitly that the arbitrators have
the power to determine their own jurisdiction,” so that
agreements incorporating international arbitration rules fall
within “the agreement of the parties exception of First
Options.” Ian R. MacNeil et al., IV Federal Arbitration Law:
Agreements, Awards And Remedies Under the Federal
Arbitration Act § 44.15.1 (Supp. 1996) (quoted in Parra, 25
F. Supp. 2d at 476. See also, Conrad K. Harper, The
Options in First Options: International Arbitration and
Arbitral Competence, 771 PLI/Comm 127, 141-43 (1998)
(noting that even prior to First Options some courts had
held that by incorporating ICC Arbitration Rules into an
arbitration agreement the parties clearly and unmistakably
had authorized the arbitral tribunal to determine its own
jurisdiction and arguing that incorporation of such rules is
too often overlooked by the courts). But see Parra, 25 F.
Supp. 2d at 476 (rejecting the suggestion that the parties
clearly and unmistakably agreed to submit arbitrability
disputes to the arbitral panel by submitting to an
arbitration proceeding governed by Inter-American
Commercial Arbitration Commission rules, which authorize
arbitrators to resolve such disputes). The contracts in this
case, for example, incorporate the rules of CIETAC. App. at
31. Those rules do indeed allow the arbitrators the power to
determine their own jurisdiction. China International
whether a valid agreement exists; if the court so finds, then the arbitral
tribunal rules on the arbitrability of the specific dispute before it. ICC
Rules of Arbitration Art. 6(2). The Arbitration Rules of the International
Center for Settlement of Investment Disputes (“ICSID”) as well as the
American Arbitration Association (“AAA”) International Arbitration Rules
likewise give arbitral tribunals the power to rule on their own
jurisdiction, including objections with respect to the existence, scope, or
validity of the arbitration agreement. ICSID Arbitration Rule 41(1); AAA
International Arbitration Rules Art. 15. The London Court of
International Arbitration (“LCIA”) Rules go one step further, granting the
arbitration tribunal the same power, and further providing that “[b]y
agreeing to arbitration under these Rules, the parties shall be treated as
having agreed not to apply to any state court or other judicial authority
for any relief regarding the Arbitral Tribunal’s jurisdiction or authority
. . . .” LCIA Rules of Arbitration Art. 23.4.
21
Economic and Trade Arbitration Commission, Arbitration
Rules Ch. I, § 1, Art. 4 (“The Arbitration Commission has
the power to decide on the existence and validity of an
arbitration agreement and on jurisdiction over an
arbitration case.”). Nonetheless, incorporation of this rule
into the contract is relevant only if the parties actually
agreed to its incorporation. After all, a contract cannot give
an arbitral body any power, much less the power to
determine its own jurisdiction, if the parties never entered
into it.
Although incorporation of CIETAC rules in an allegedly
forged contract is not enough in itself to require that Chi
Mei be bound by the arbitration clause in this case,
Minmetals nonetheless suggests that the international
nature of this dispute is sufficient to distinguish this case
from First Options. Thus, it could be argued that
international norms favoring competence-competence, as
well as American policy favoring arbitration particularly
strongly in international cases, are sufficient to render First
Options inapplicable in the international context.
Competence-competence is applied in slightly different ways
around the world. The one element common to all nations
is the conferral of the power to decide jurisdiction on the
arbitrators themselves. It is important to note, however,
that this principle says nothing about the role of judicial
review.
In its simplest form, competence-competence simply
means that the arbitrators can examine their own
jurisdiction without waiting for a court to do so; if one side
says the arbitration clause is invalid, there is no need to
adjourn arbitration proceedings to refer the matter to a
judge. William W. Park, Determining Arbitral Jurisdiction:
Allocation of Tasks Between Courts and Arbitrators, 8 Am.
Rev. Int’l Arb. 133, 140 (1997). Under this brand of
competence-competence, however, the arbitrators’
jurisdictional decision is subject to judicial review at any
time before, after, or during arbitration proceedings, as was
traditionally the case under English law. See id. at 140 &
n.22. The French form of competence-competence goes
somewhat further. A court only can decide arbitrability
before an arbitral panel has been constituted if the alleged
22
arbitration agreement is clearly void; otherwise, courts
must decline to hear the case until after an arbitral award
is rendered. Id. at 141. Finally, the strictest form of
competence-competence is the traditional German
kompetenz-kompetenz, under which an arbitral panel’s
jurisdictional decision in a case where the parties agreed to
a kompetenz-kompetenz clause essentially was insulated
from any form of judicial review. Id. at 141-42.
Despite these different formulations, however, and
despite the principle’s presumption in favor of allowing
arbitrators to decide their own jurisdiction, it appears that
every country adhering to the competence-competence
principle allows some form of judicial review of the
arbitrator’s jurisdictional decision where the party seeking
to avoid enforcement of an award argues that no valid
arbitration agreement ever existed. See id. at 140-42. Even
the traditional German model allowed for judicial review
when the very making of the competence-competence
agreement was challenged. See Adriana Dulic, First Options
of Chicago, Inc. v. Kaplan and the Kompetenz-Kompetenz
Principle, 2 Pepp. Disp. Resol. L.J. 77, 79 (2002).
Furthermore, in 1985, the United Nations Commission on
International Trade Law (“UNCITRAL”) proposed its Model
Law on International Commercial Arbitration, which
prohibits parties from limiting the power of the arbitral
tribunal to rule on its own jurisdiction, but which allows
substantial opportunity for judicial review of that ruling.
UNCITRAL Model Law on International Commercial
Arbitration Art. 16. If a jurisdictional challenge is made, the
arbitral panel either may issue a preliminary ruling on
jurisdiction or may defer that decision until issuance of its
final award. Id. In either case, the party challenging
jurisdiction may seek judicial review of a tribunal’s decision
that it has jurisdiction over the dispute. Id. Both England
and Germany, as well as nearly 40 other countries and
several states within the United States have enacted
legislation based on the Model Law. UNCITRAL, Status of
Conventions and Model Laws (last modified Mar. 20, 2003).
It therefore seems clear that international law
overwhelmingly favors some form of judicial review of an
arbitral tribunal’s decision that it has jurisdiction over a
23
dispute, at least where the challenging party claims that
the contract on which the tribunal rested its jurisdiction
was invalid. International norms of competence-competence
are therefore not inconsistent with the Supreme Court’s
holding in First Options, at least insofar as the holding is
applied in a case where, as here, the party resisting
enforcement alleges that the contract on which arbitral
jurisdiction was founded is and always has been void.
In sum, First Options holds that a court asked to enforce
an arbitration award, at the request of a party opposing
enforcement, may determine independently the arbitrability
of the dispute. Although First Options arose under the FAA,
the Court’s reasoning in the case is based on the principle
that “arbitration is simply a matter of contract between the
parties; it is a way to resolve those disputes—but only those
disputes—that the parties have agreed to submit to
arbitration.” First Options, 514 U.S. at 943, 115 S.Ct. at
1924. This rationale is not specific to the FAA. It is a
crucial principle of arbitration generally, including in the
international context. Indeed, even international laws and
rules of arbitration that traditionally grant arbitrators more
leeway to decide their own jurisdiction have allowed a party
objecting to the validity of the agreement to arbitrate to
seek judicial review of an arbitral panel’s decision that it
has jurisdiction under the alleged agreement. For these
reasons, we hold that, under the rule of First Options, a
party that opposes enforcement of a foreign arbitration
award under the Convention on the grounds that the
alleged agreement containing the arbitration clause on
which the arbitral panel rested its jurisdiction was void ab
initio is entitled to present evidence of such invalidity to the
district court, which must make an independent
determination of the agreement’s validity and therefore of
the arbitrability of the dispute, at least in the absence of a
waiver precluding the defense.
In this case, the district court confirmed and enforced the
arbitral award without opinion. Chi Mei asks us to reverse
the district court’s judgment and remand with instructions
to enter judgment in its favor denying Minmetals’ motion to
confirm and enforce and granting its motion to dismiss. On
this record, we cannot grant this relief. Although Chi Mei
24
proffered evidence suggesting that the contracts providing
for arbitration were forged, Minmetals presented the sale of
goods contracts and other documents evidencing the
existence of valid contracts to the district court. In the
alternative, Chi Mei asks that we remand the case to the
district court for further proceedings to ascertain the
validity of the contracts. Given the apparent dispute of
facts, we agree that a remand is appropriate. On remand,
the district court is free to treat Chi Mei’s motion to dismiss
as a motion for summary judgment, to entertain opposition
to it, and to conduct such further proceedings as may be
appropriate.
B. WAIVER
Minmetals also argues that Chi Mei has waived the
forgery/jurisdiction argument by participating voluntarily in
the arbitration proceedings rather than seeking a stay of
arbitration in the district court.15 Chi Mei counters by
arguing that it did not participate on the merits of the
arbitration, but rather appeared only to object to
jurisdiction and that, regardless of its participation on the
merits, it preserved its right to challenge jurisdiction by
properly objecting to jurisdiction and by arguing the forgery
issue before the arbitral panel. Although it did not issue a
written opinion, the district court plainly was concerned
with this issue as it asked counsel for both sides numerous
questions about waiver at oral argument.
We repeatedly have held under the FAA, including in our
opinion in First Options in which the Supreme Court
affirmed our judgment, that a party does not waive its
objection to arbitrability where it raises that objection in
arbitration: “A party does not have to try to enjoin or stay
an arbitration proceeding in order to preserve its objection
to jurisdiction. . . . A jurisdictional objection, once stated,
remains preserved for judicial review absent a clear and
unequivocal waiver. . . . Therefore, where a party objects to
15. We note that Minmetals contends that “Chi Mei waived its right to
claim a lack of a written arbitral agreement,” Appellee’s br. at 18, and
thus we do not consider the sometimes elusive distinction between the
application of principles of waiver and estoppel. See Slaney, 244 F.3d at
591.
25
arbitrability but nevertheless participates in the arbitration
proceedings, waiver of the challenge to arbitral jurisdiction
will not be inferred.” Kaplan v. First Options of Chicago, Inc.,
19 F.3d 1503, 1510 (3d Cir. 1994), aff ’d, 514 U.S. 938,
115 S.Ct. 1920; see also Pa. Power Co. v. Local Union #272,
IBEW, 886 F.2d 46, 50 (3d Cir. 1989).
Minmetals argues that this case is different from our
precedent under the domestic FAA because it arises under
the Convention. Yet the principle we state on the limitation
of waiver to jurisdiction of the arbitrators is well-settled in
this court and Minmetals offers no compelling reason to
ignore it here. There is, however, some question whether
federal or state law should govern the waiver issue. In
Deutz, we observed that “[f]ederal law applies to the
interpretation of arbitration agreements” and that “[t]hus,
‘whether a particular dispute is within the class of those
disputes governed by the arbitration and choice of law
clause is a matter of federal law.’ ” Deutz, 270 F.3d at 154(quoting Becker Autoradio U.S.A., Inc. v. Becker
Autoradiowerk GmbH, 585 F.2d 39, 43 (3d Cir. 1978)). We
recognized, however, that the Supreme Court in First
Options stated that a court deciding whether the parties
agreed to arbitrate a certain matter should apply “ordinary
state-law principles governing contract formation.” Id.(citing First Options, 514 U.S. at 944, 115 S.Ct. at 1924).
We went on to uphold the parties’ choice of law by applying
Pennsylvania law to the arbitrability dispute in that case,
noting that First Options’ principles concerning application
of state law were no less applicable in the international
context than under domestic arbitration law and that, in
any event, application of federal law would not have altered
the outcome of the case. Id. at 155.
In this case it appears that if state law is applicable it is
that of New Jersey, the state in which Chi Mei is
incorporated, has its offices, and does business.16 New
Jersey law may be somewhat more tolerant than federal law
of the notion that a party may waive its objection to an
arbitrator’s jurisdiction by participating in arbitration
16. We note that to the extent that the parties treat state law as
applicable they seem to assume that the law is that of New Jersey.
26
proceedings. In New Jersey Manufacturers Insurance Co. v.
Franklin, 389 A.2d 980 (N.J. Super. Ct. App. Div. 1978), the
New Jersey intermediate appellate court held that “[e]ven in
the absence of a contractual submission of an issue to
arbitration, a party may by conduct or agreement waive his
legal right to judicial determination,” but that “mere
participation in the arbitration does not conclusively bar a
party from seeking a judicial determination of arbitrability,
even as late as the time of the claimant’s application to
confirm the award.” Id. at 983, 984. On the other hand, the
same court has held that “mere assertion of an objection
does not dictate a finding of non-waiver.” Highgate Dev.
Corp. v. Kirsh, 540 A.2d 861, 863 (N.J. Super. Ct. App. Div.
1988). In Franklin, the court held that a party preserved its
objection to an arbitrator’s jurisdiction by clearly “flagging”
that issue in its memoranda to the arbitrator while
presenting what the court called a “mere alternative
argument on the merits” in the same memoranda. Franklin,
389 A.2d at 984-85. In Kirsh, the court found a waiver
where a party entered what the court suggested was a
“nominal objection to the arbitrator’s jurisdiction” and
proceeded to participate fully in the merits of the
arbitration and even filed its own counterdemand for
arbitration. Kirsh, 540 A.2d at 863-64. Finally, the New
Jersey Supreme Court, in dicta, has noted that a party may
preserve its objection to an arbitrator’s jurisdiction in an
uninsured motorist case by “making an objection to the
propriety of the arbitration on the ground of no coverage
and participating in the arbitration proceeding under
protest to decide the other . . . questions.” In re Arbitration
Between Wilmer Grover and Universal Underwriters Ins. Co.,
403 A.2d 448, 452 (N.J. 1979).
The record in this case makes clear that Chi Mei’s
participation in the CIETAC proceedings largely was limited
to arguing the forgery issue. Although it appears to have
presented at least one alternative argument, it consistently
objected to the arbitral panel’s jurisdiction both in the
arbitration proceedings and before the district court. App.
at 41-45. Furthermore, its decision to proceed with the
arbitration despite its jurisdictional objection was likely
necessary to prevent an award being entered against it in
its absence; it appears that Minmetals may not have had
27
sufficient contacts with New Jersey or the United States for
it to have been subject to the jurisdiction of the federal
district court in New Jersey or elsewhere, so that Chi Mei
likely would not have been able to initiate suit against it to
enjoin the arbitration, at least not in the United States.17
See id. at 212. Thus, whether we apply federal law or New
Jersey law, the result is the same: Chi Mei did not waive its
objection to CIETAC’s jurisdiction inasmuch as it
participated in the arbitration primarily to argue the
forgery/jurisdiction issue and consistently objected to
CIETAC’s jurisdiction throughout the proceedings.18
IV. CONCLUSION
For the foregoing reasons, we will vacate the order of the
district court entered June 11, 2002, and the judgment of
the district court entered August 22, 2002, and remand
this case to that court for further proceedings consistent
with this opinion.
17. Our result would not be different even if Chi Mei could have initiated
an action in the United States to enjoin arbitration and have obtained
jurisdiction over Minmetals in that action.
18. Because we hold that the district court has an obligation to
determine the validity of an agreement to arbitrate where a party raises
that point as an issue before it may enforce a CIETAC award, we need
not reach Chi Mei’s arguments raising defenses under Article V of the
Convention. If the court holds on remand that the agreements are valid,
Chi Mei’s arguments regarding defenses may require resolution.
28
ALITO, Circuit Judge, concurring:
I join the Court’s opinion but write separately to
elaborate on the importance of Article IV, Section 1(b) of the
Convention in this case. As the Court notes, “the crucial
principles . . . that arbitration is a matter of contract and
that a party can be forced to arbitrate only those issues it
specifically agrees to submit to arbitration . . . suggest that
the district court here had an obligation to determine
independently the existence of an agreement to arbitrate.”
Opinion of the Court at 14. These principles find expression
in Article IV, Section 1(b), which provides that a party
seeking to enforce an arbitral award must, “at the time of
the application, supply . . . [t]he original agreement referred
to in article II or a duly certified copy thereof.” Convention
at art. IV, § 1(b). Because a party seeking to enforce an
arbitral award cannot satisfy this obligation by proffering a
forged or fraudulent agreement, this provision required the
District Court to hold a hearing and make factual findings
on the genuineness of the agreement at issue here.
Article IV, Section 1(b), as noted, requires a party seeking
enforcement to supply the court with “[t]he original
agreement referred to in article II,” and it is apparent that
this means that the party seeking enforcement must
provide the court with either a duly signed written contract
containing an arbitration clause or an agreement to
arbitrate that is evidenced by an exchange of letters or
telegrams. Article II provides as follows:
1. Each Contracting State shall recognize an agreement
in writing under which the parties undertake to submit
to arbitration all or any differences which have arisen
or which may arise between them in respect of a
defined legal relationship, whether contractual or not,
concerning a subject matter capable of settlement by
arbitration.
2. The term ‘agreement in writing’ shall include an
arbitral clause in a contract or an arbitration agreement,
signed by the parties or contained in an exchange of
letters or telegrams.
3. The court of a Contracting State, when seized of an
action in a matter in respect of which the parties have
29
made an agreement within the meaning of this article,
shall, at the request of one of the parties, refer the
parties to arbitration, unless it finds that the said
agreement is null and void, inoperative or incapable of
being performed.
Id. at art. II (emphasis added). Article II thus refers to an
“agreement” on three occasions: (1) when discussing the
obligation of each “Contracting State” to “recognize an
agreement in writing”; (2) in defining an “agreement in
writing”; and (3) in requiring the court in which
enforcement is sought to compel arbitration when the
parties “have made an agreement within the meaning of ”
Article II. Both the first and second references concern an
“agreement in writing,” and the third reference merely
directs the reader to a definition of “agreement” set forth
elsewhere in Article II. Since an “agreement in writing” is
the only type of “agreement” discussed in Article II, it seems
clear that an “agreement referred to in article II” means an
“agreement in writing” as defined in that Article. Thus, a
party seeking enforcement of an arbitral award under
Article IV must supply the court with an “agreement in
writing” within the meaning of Article II.
An “agreement in writing,” Article II tells us, means “an
arbitral clause in a contract or an arbitration agreement,
signed by the parties or contained in an exchange of letters
or telegrams.” Id. at art. II, § 2. To enforce the award
granted by the arbitral tribunal, Minmetals was therefore
required to demonstrate to the District Court that it and
Chi Mei had agreed to arbitrate any dispute arising out of
the purported nickel contracts and that they had done so
by means of either (1) a written contract signed by both
parties or (2) an exchange of letters or telegrams between
them. Since Minmetals does not contend that Chi Mei
agreed to arbitrate disputes relating to the purported nickel
contracts by way of an exchange of letters or telegrams, it
follows that Minmetals was required to prove to the District
Court that Chi Mei signed a written agreement to arbitrate
the dispute adjudicated by the arbitral tribunal. Chi Mei
specifically disputes this issue, claiming that the signatures
of its officers on the purported nickel contracts were forged.
As a result, the Convention required the District Court to
30
inquire into whether Chi Mei’s officers signed the purported
nickel contracts.
Minmetals contends, however, that where an arbitral
tribunal has already determined that the parties entered
into a written agreement to arbitrate their dispute, the
Convention requires the District Court to assume that the
tribunal’s determination was correct. Minmetals’s reading of
the Convention, however, would render the prerequisites to
enforcement of an award set forth in Article IV superfluous.
It is well established that “ ‘courts should avoid a
construction of a statute that renders any provision
superfluous.’ ” United Steelworkers of Am. v. North Star
Steel Co., 5 F.3d 39, 42 (3d Cir. 1993) (quoting
Pennsylvania v. United States Dept. of Health and Human
Servs., 928 F.2d 1378, 1385 (3d Cir. 1991)). If Minmetals’s
reading were correct, there would be no purpose for Article
IV, Section 1(b)’s requirement that a party “applying for
recognition and enforcement” of an arbitral award supply
the court with the parties’ signed, written agreement or
exchange of letters or telegrams. On Minmetals’s view, the
existence of a valid agreement would be conclusively
established once the party seeking enforcement pointed out
the portion of the arbitral tribunal’s decision in which it
found that the parties had entered into a written agreement
to arbitrate, and therefore Minmetals’s position would make
the Convention’s requirement that the party seeking
enforcement submit the original agreement a meaningless
formality.
The better reading of Article IV — which comports with
fundamental principles of arbitration — requires that the
party seeking enforcement both (1) supply a document
purporting to be the agreement to arbitrate the parties’
dispute and (2) prove to the court where enforcement is
sought that such document is in fact an “agreement in
writing” within the meaning of Article II, Section 2. In the
present case, accordingly, Minmetals was required to
demonstrate to the District Court that an officer of Chi Mei
signed the purported nickel contracts. Because the District
Court ordered the award enforced without requiring
Minmetals to make that showing, its decision must be
vacated.
31
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit