When Non-NY Companies Have Arbitrability Decided by New York's Courts
Strange as it may sound, there are circumstances where New York's trial courts may be called upon to decide whether the arbitration clause between two companies is valid and enforceable - even where the two companies weren't incorporated in New York - or even the United States.
"How is that possible?" you ask.
Pursuant to 9 USC § 202, an arbitration agreement between companies incorporated outside of the United States that relates to a commercial transaction is governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958 (the Convention). U.S. Titan, Inc. v Guangzhou Zhen Hua Shipping Co., 241 F3d 135, 146 (2d Cir 2001). "In a judicial proceeding to compel arbitration under the [Convention], questions of arbitrability are presumptively to be decided by courts, not the arbitrators themselves. This presumption can be rebutted only by clear and unmistakable evidence from the arbitration agreement, as construed by the relevant state law, that the parties intended that the question of arbitrability shall be decided by the arbitrator." The Republic of Iraq v BNP Paribas USA, 472 FedAppx 11, 12 (2d Cir 2012) (emphasis in original; internal citations and quotation marks omitted).
Pursuant to Article II, § 2 of the Convention, a dispute is only subject to arbitration if there is a written agreement to arbitrate that is either (1) signed by the parties or (2) "contained in an exchange of letters or telegrams." Gabriel Capital, L.P. v Caib Investmentbank Aktiengesellschaft, 28 AD3d 376, 377 (1st Dept 2006).
To that end, there is an important caveat to the latter category:
"A mere exchange of forms, without any substantive discussions over their terms does not constitute an "exchange of letters or telegrams." Glencore Ltd. v Degussa Engineered Carbons L.P., 848 FSupp2d 410, 436 (SDNY 2012) (citing AGP Industries SA, (PERU) v JPS Elastromerics Corp., 511 FSupp2d 212, 215 (D Mass 2007) ("The phrase exchange of letters or telegrams' suggests a level of interchange that is not present during a mere exchange of forms.")); see also Bothell v Hitachi Zosen Corp., 97 FSupp2d 1048, 1053 (WD Wash 2000) (denying motion to compel arbitration under Convention where buyers sent purchase orders to seller that attached "General Terms and Conditions" that included mandatory arbitration provision, to which seller never responded).
Clearly, the ins and outs as to whether a particular arbitration clause is enforceable or not is rather complicated, and is not without risk (see, e.g., "One Danger of Challenging an Arbitration Award in New York"). Therefore, although there are many types of issues that do not require the assistance or analysis of a lawyer, this is not one of them.