MOTION FOR LEAVE TO FILE AMICUS CURIAE BRIEF
IN SUPPORT OF PETITIONERS
Pursuant to Rule 37.2(b) of the Rules of this Court, Professor George A. Bermann moves this Court for leave to file the attached amicus curiae brief in support of Petitioners.
All parties were timely notified of the intent of Professor Bermann to file the attached brief as re- quired by Rule 37.2(a). On March 18, 2022, Petitioners filed a blanket consent to the filing of amicus curiae briefs in support of either party or neither party, in ac- cordance with Rule 37.2(a). Respondent Mongolia has withheld consent.
Amicus curiae George A. Bermann is the Jean Monnet Professor of EU Law, Walter Gellhorn Professor of Law, and the Director of the Center for International Commercial and Investment Arbitration (CICIA) at Columbia Law School. Professor Bermann is also an active international arbitrator in commercial and investment disputes; chief reporter of the ALI's Restatement of the U.S. Law of International Commercial and Investor-State Arbitration; co-author of the UNCITRAL Guide to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards; chair of the Global Advisory Board of the New York International Arbitration Center (NYIAC); co-editor-in-chief of the American Review of International Arbitration; and founding member of the governing body of the ICC International Court of Arbitration.
The Second Circuit's holding in this case is of interest to Professor Bermann because it severely undermines one of the most fundamental decisions of this Court in the area of arbitration. That decision is First Options of Chi., Inc. v. Kaplan, 514 U.S. 938 (1995).
There, the Court underscored the vital importance of courts, rather than arbitral tribunals, having primary authority to determine the arbitrability of a dispute if called into question. It did so by holding that parties may not be deprived of access to a court for independent, i.e., de novo, judicial review of arbitrability unless it is shown by "clear and unmistakable" evidence that the parties so agreed. Underlying First Options is the conviction that the principle of party consent, embodied in the Federal Arbitration Act and this Court's consistent case law, is the cornerstone upon which the entire edifice of arbitration, and its legitimacy, is built.
The present case requires the Court's attention because it has the effect of stripping this Court's "clear and unmistakable" test of any meaning, by essentially depriving a claimant of de novo court review merely because it replies to a respondent's challenge to arbitrability.
For the foregoing reasons, Professor Bermann respectfully requests that the Court grant the motion for leave to file an amicus curiae brief.
TABLE OF CONTENTS
TABLE OF CONTENTS
TABLE OF AUTHORITIES
INTEREST OF AMICUS CURIAE
SUMMARY OF ARGUMENT
I. BY ADDRESSING MONGOLIA'S JURISDICTIONAL OBJECTION, BEIJING SHOUGANG DID NOT CLEARLY AND UNMISTAKABLY DELEGATE TO THE TRIBUNAL PRIMARY AUTHORITY TO DETERMINE ARBITRAL JURISDICTION
A. Beijing Shougang Took No Action Suggestive of a Delegation
B. A Tribunal does not Derive its Authority to Determine its Own Jurisdiction from a Party's Arguing Jurisdiction Before it
C. The Second Circuit Went So Far as to Find Clear and Unmistakable Evidence of Delegation in a Claimant's Initiation of Arbitration and Assertion of Arbitral Jurisdiction
D. The Second Circuit's Reasoning Is in Direct Conflict with First Options in which this Court Expressly Held that Arguing Jurisdiction Before a Tribunal Is Not Clear and Unmistakable Evidence of a Delegation
E. The Fact that an Award is "Final" Does Not Bar a Party from Challenging Arbitral Jurisdiction in a Vacatur Action
II. THE DECISION BELOW IS HIGHLY CONSEQUENTIAL
III. BECAUSE U.S. LAW DOES NOT VIEW A TRIBUNAL'S AUTHORITY TO DETERMINE ITS JURISDICTION AS EXCLUSIVE, RECOURSE TO A TRIBUNAL FOR A JURISDICTIONAL DETERMINATION CANNOT BAR POST-AWARD JUDICIAL REVIEW OF THAT DETERMINATION
IV. TO TREAT CLAIMANTS AS HAVING RELINQUISHED THEIR RIGHT TO POST-AWARD REVIEW OF ARBITRABILITY BY SUBMITTING TO A TRIBUNAL'S EXERCISE OF COMPETENCECOMPETENCE CREATES AN UNACCEPTABLE ASYMMETRY BETWEEN THE PARTIES
V. A PARTY CANNOT BE DEEMED TO HAVE CLEARLY AND UNMISTAKABLY EVIDENCED AN INTENTION TO RELINQUISH ITS PRESUMPTIVE RIGHT TO DE NOVO REVIEW BY TAKING THE ONLY ACTION IN THE PROCEEDING AVAILABLE TO IT
TABLE OF AUTHORITIES
SUMMARY OF ARGUMENT
The issue at the heart of this case is among the most fundamental in both domestic and international arbitration. This Court has repeatedly and forcefully acknowledged that the foundation of arbitration is party consent and that neither arbitration agreements nor arbitral awards deserve recognition or enforcement unless they are the product of such consent.2 Among the most salient of the Court's iterations of this principle is its decision in First Options, Inc. of Chicago v. Kaplan. There, the Court unanimously ruled that, because certain issues, denominated by the Court as issues of "arbitrability," so implicate the principle of consent, a party seeking vacatur of an award on arbitrability grounds is entitled to independent judicial review of a tribunal's arbitrability determination.3
The Court in First Options went on to allow that parties may forego their right to have a court primarily decide issues of arbitrability if they agree that a tribunal instead should have primary authority over the matter.4 (In the usual parlance, when parties forego their right to independent judicial determinations of arbitrability, they make a "delegation" of authority to the arbitral tribunal.) However, the Court very deliberately subjected the showing of a delegation to an exacting standard of proof. A court may find that the parties made a delegation only if presented with "clear and unmistakable" evidence that the parties agreed to that effect.5 In sum, First Options laid down a powerful presumption of independent judicial review, rebuttable only by a showing in no uncertain terms that the parties had agreed otherwise. It considered that the principle of party consent required nothing less.
For the several reasons set out in this brief, the decision of the Court of Appeals in this case strikes at the very core of First Options and should not be allowed to stand.
It is important at the outset to appreciate what an inquiry into arbitrability does and does not entail. Issues of arbitrability, which nowadays commonly also go by the name of "gateway issues,"6 are very few in number. Essentially, they comprise the following:
(a) was an arbitration agreement formed?;
(b) is the arbitration agreement valid?;
(c) can a non-signatory to an arbitration agreement be treated as if it were a signatory?; and
(d) does the dispute fall within the scope of the agreement to arbitrate?
This is a highly select list of issues, whose common feature is that they directly implicate the fundamental principle of party consent. In addressing these matters, a court is steering entirely clear of the merits of the dispute. Its sole concern is whether the parties actually conferred authority on an arbitral tribunal, rather than a court, to adjudicate their dispute and render an award binding on them.
In the present case, the lower courts found clear and unmistakable evidence of a delegation in a specific procedural incident in the arbitral proceeding. When claimant, Beijing Shougang, initiated arbitration against the Republic of Mongolia, the latter challenged arbitral jurisdiction on the ground that the claim against it fell outside the scope of the parties' agreement to arbitrate. The parties agreed, as parties commonly do, that it would be more efficient for the tribunal to sequence the issues in the case by having the tribunal rule on the respondent's jurisdictional objection and liability before entertaining the question of damages or other relief. The proceeding was accordingly "bifurcated." Addressing jurisdiction first, the tribunal ruled in favor of Mongolia, finding that the dispute was not covered by the applicable investment treaty and dismissing the claim on that ground.7 Beijing Shougang unsuccessfully sought vacatur of the award in district court.8
On appeal, the Court of Appeals for the Second Circuit affirmed, holding that when (a) Beijing Shougang agreed with Mongolia that the proceedings should be bifurcated, (b) the tribunal decided to make its jurisdictional ruling in a first phase, and (c) Beijing Shougang then presented its jurisdictional arguments, it clearly and unmistakably forfeited its right to independent judicial review of the tribunal's jurisdictional determination that First Options promises.9
The logic of the Second Circuit is profoundly flawed and deprives the First Options test of any meaning, to the detriment of the fundamental principle of consent on which that decision rests.
First, Beijing Shougang did not, by its willingness to have the tribunal address the jurisdictional defense raised by the respondent, in any sense agree to delegate to the tribunal primary responsibility to determine its own authority. Under U.S. law, arbitral tribunals, once constituted, have "competence-competence," i.e., jurisdiction to determine their jurisdiction, as a matter of law.10 The tribunal had that authority whether a claimant, as the Second Circuit put it, "agreed" to it or not, and nothing Beijing Shougang (or, for that matter, Mongolia) did or said could alter that fact. Therefore, to say that upon "agreeing" that the tribunal would rule upon Mongolia's jurisdictional objection, Beijing Shougang relinquished its right under First Options to independent judicial review makes no sense.
Moreover, a tribunal does not actually exercise the competence-competence that it enjoys unless and until the respondent challenges its jurisdiction, as Mongolia did in this case. It is the respondent, and the respondent alone, that triggers a tribunal's exercise of its inherent jurisdiction to determine its own jurisdiction. Respondents in investor-State arbitrations frequently raise these jurisdictional objections, and regularly do so while seeking to bifurcate arbitral proceedings.
Second, the Court's error is highly consequential, since both jurisdictional objections and bifurcation are commonplace. This is especially so in investor-state arbitration, in which the questions of whether the claimant is an "investor" and whether it made an "investment," within the meaning of the applicable treaties, are considered to be fully jurisdictional in nature.11 If a claimant is deemed to have clearly and unmistakably made a delegation merely by seeking to refute the respondent's jurisdictional objections before the tribunal, then delegations will be found regularly and routinely. That cannot be what the Supreme Court intended when it propounded the "clear and unmistakable" evidence test.
Third, the notion that, when a party participates in a tribunal's exercise of competence-competence, it effectively forfeits its right to independent judicial review of arbitrability is flatly inconsistent with the very notion of competence-competence as understood in U.S. law. Under U.S. law, a tribunal enjoys competence-competence in the sense that, if its jurisdiction is challenged, it is empowered to address and decide the matter on its own.12 This has considerable value in that a tribunal whose jurisdiction is challenged is therefore not required to suspend proceedings and await a judicial determination of arbitral jurisdiction. Competence-competence is accordingly understood in U.S. law as having a so-called "positive" dimension.13 It empowers tribunals to determine arbitral jurisdiction. It does not, however, disempower courts to do so if presented with the question in post-arbitration proceedings. Competence-competence accordingly has no socalled "negative" effect.14
Fourth, the ruling below unjustifiably discriminates, in regard to delegation, between claimants and respondents. If a respondent has a jurisdictional objection, as Mongolia did, it presents that objection to the arbitral tribunal. Indeed, if it fails to do so, it will be deemed to have waived it.15 If the respondent then loses on the jurisdictional issue and also on the merits, it is entitled to seek vacatur of the award and in that proceeding the court, if asked to do so, will independently review the tribunal's jurisdictional finding.16 That is precisely what occurred in First Options: The Kaplans unsuccessfully objected to the tribunal's jurisdiction, preserved their objection, and proceeded to the merits. When they lost on the merits as well, this Court held that they were entitled to a de novo jurisdictional determination of arbitrability, and on that basis affirmed the vacatur of the award rendered against them.
There is no logical or policy justification for treating claimants and respondents differently in this important respect. If a respondent does not lose its right to a de novo judicial post-award determination of arbitrability by filing a jurisdictional objection, surely a claimant should not lose that right by responding to that objection.
Fifth, it is critical for a court, in finding clear and unmistakable evidence of an agreement based simply on party conduct, to consider the options that are available to that party in taking the act it did. Mongolia having raised a jurisdictional objection, what courses of action did Beijing Shougang have open to it? Surely, it cannot be expected to remain silent, essentially acquiescing in the objection and having its claim dismissed. Nor can it be expected to go first to court in quest of a declaratory judgment that its claim was arbitrable.
In short, Beijing Shougang had one and only one course of action available to it. Taking that only available course of action cannot constitute evidence of a delegation, much less clear and unmistakable evidence of one.