The U.S. Supreme Court is no stranger to arbitration issues. In 1925, Congress passed the Federal Arbitration Act to overcome widespread judicial hostility to arbitration agreements and establish a strong federal policy favoring arbitration. Since then, the Supreme Court has had many occasions to opine on the scope and effect of the FAA. In recent years, for example, the court has decided questions about which disputes are arbitrable, whether class arbitration is available, and how federal and state arbitration laws interact. Many of these cases were controversial, pro-arbitration, 5-to-4 rulings. And most arose in the same posture: a dispute between a U.S. business that wanted to arbitrate and a U.S. individual (usually a consumer or employee) who did not.
On June 1, the court issued a different kind of arbitration decision, in GE Energy v. Outokumpu. (Disclosure: Jones Day represented GE Energy.) The case was the court’s first in-depth engagement with the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. More commonly known as the New York Convention, it is a multilateral treaty adopted in 1958 to promote arbitration in the international context. The benefits of arbitration are even more pronounced for international commercial disputes than they are for domestic ones, given the uncertainty inherent in litigating before foreign courts. To ensure that international businesses can reliably realize those benefits, the convention requires signatory nations to enforce valid arbitration agreements and arbitral awards. More than 160 nations, including the United States, have signed on. And courts around the world have construed the convention to require that signatory nations provide at least as favorable treatment for agreements between businesses from different countries as they do for agreements between their own citizens.
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