U.S. Supreme Court Denies Certiorari In Beijing Shougang Mining Inv. Co. Ltd. v. Mongolia, Leaving In Place The Second Circuit's Expansion Of "Clear And Unmistakable" Delegation Standard

• Published date: 18 August 2022
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution, Trials & Appeals & Compensation
• Law Firm: Debevoise & Plimpton
• Author: Ms Catherine Amirfar, Mark W. Friedman, Ina C. Popova, Dietmar W. Prager, Natalie L. Reid, David W. Rivkin, Laura Sinisterra, William H. Taft V, Christopher K. Tahbaz, Deborah Enix-Ross, Michelle Huang, Jonathan Mangel, Nawi Ukabiala and Raimundo Vives López

Key takeaways:

• The Supreme Court has left in place a Second Circuit decision expanding the standard for determining whether the parties' conduct demonstrates "clear and unmistakable" evidence that they intended to delegate the issue of arbitrability exclusively to an arbitral forum.
• Parties should carefully consider whether their conduct in arbitration proceedings could result in a waiver of the right to de novo, post-award judicial review of arbitrability.

On June 27, 2022, the Supreme Court denied certiorari in Beijing Shougang Mining Inv. Co., Ltd. v. Mongolia, leaving in place a Second Circuit Court of Appeals decision that expands the standard for determining whether parties intended to delegate the issue of arbitrability exclusively to an arbitral forum based on conduct rather than on the terms of the arbitration agreement.

Background. Under the U.S. Federal Arbitration Act (the "FAA"), parties have significant discretion to define the terms and scope of arbitration agreements. However, U.S. courts have found that issues of arbitrability, gateway issues relating to the enforceability of the arbitration agreement, typically remain subject to independent judicial review. Notwithstanding this general presumption, in First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995), the Supreme Court held that parties may agree to "delegate" to arbitral tribunals exclusive authority to determine issues of arbitrability that are typically reserved for judicial determination under the FAA, if there is "clear and unmistakable" evidence that they intended to do so.

First Options arose out of a dispute between First Options of Chicago, a financial clearing house, and an investment company wholly owned by two individuals, the Kaplans, over several agreements to pay stock purchase obligations. Those agreements also provided for arbitration of any disputes arising out of them. When the Kaplans did not pay, First Options sought to arbitrate the dispute. The arbitration panel overruled the Kaplans' jurisdictional objections and awarded damages to First Options. The Kaplans petitioned a federal district court to vacate the award. The district court confirmed the award, concluding that by submitting their jurisdictional objections to the tribunal, the Kaplans waived their right to post-award judicial review of arbitrability. The Third Circuit reversed, finding that submitting jurisdictional objections to an arbitration tribunal did not constitute a waiver. The court...