Brittania-U Nigeria, Ltd. v. Chevron USA, Inc., No. 16-20690 (5th Cir. Aug. 9, 2017) [click for opinion]
In 2013, Plaintiff Brittania-U Nigeria Limited (“Brittania-U”) was invited to participate in the bidding for interests in oil leases in Nigeria held by Chevron Nigeria, Limited, a division of Defendant Chevron U.S.A. Inc. (“Chevron”). Brittania-U signed a confidentiality agreement with Chevron that specified that “arbitration shall be conducted in accordance with the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules.” The confidentiality agreement also stated that the arbitrator would have the power “to rule on objections concerning jurisdiction, including the existence or validity of this arbitration provision and existence or the validity of this Agreement.”
Brittania-U did not win the bid and filed suit in Texas state court against Chevron, Ali Moshiri (a former employee of Chevron’s financial advisor who invited Brittania-U to participate in the bidding process), and Moncef Attia (a Chevron employee involved in the negotiations), alleging claims of fraudulent inducement and tortious interference. Chevron removed the case to federal court, where the district court denied Brittania-U’s motion to remand and granted Defendants’ motions to dismiss in favor of arbitration. Brittania-U appealed, claiming the district court lacked jurisdiction and thus improperly denied its motion to remand, and erred in dismissing its case because arbitrability was not validly delegated to the arbitrators.
On appeal, the Fifth Circuit explained that jurisdiction under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention“), 9 U.S.C. § 203, ordinarily requires (1) the existence of a written agreement to arbitrate the matter; (2) the agreement provides for arbitration in a Convention signatory nation; (3) the agreement arises out of a commercial legal relationship; and (4) a party to the agreement is not an American citizen. Here, while Defendants were citizens of the United States, the citizenship of Brittania-U was unclear. Yet the court noted that the presence of a non-U.S. party is not required in all circumstances. Instead, jurisdiction exists under the Convention when the arbitration agreement involves reasonable relations to foreign states, like property, performance, or enforcement abroad. Such was the case here: the disputed transaction and related written arbitration provisions involve property located abroad and envisage performance abroad—the leases were for sale in Nigeria and all performance was to occur in Nigeria.
The court also found that removal was proper under the Convention. The Convention’s removal provision, 9 U.S.C. § 205, allows for removal to a district court when the action relates to the arbitration agreement. This provision is read broadly, and the court noted that if an arbitration agreement falling under the Convention could conceivably affect the outcome of the plaintiff’s case, the agreement would “relate to” the action. Since Defendants’ arguments were all attempts to get Brittania-U to submit to arbitration, the agreement related to Brittania-U’s suit and removal was proper.
Brittania-U also argued that the district court erred in dismissing its case after concluding that the arbitration provisions delegated the gateway issues of the validity and enforcement of the arbitration provision to the arbitrators. The court held that the intent to delegate was clear and unmistakable because the arbitration provisions specifically stated that the arbitration would be conducted in accordance with UNCITRAL Rules. Even though the agreement did not discuss arbitrability directly, the agreement to incorporate the UNCITRAL Rules, which grant UNCITRAL the power to decide its own jurisdiction, was a clear delegation, so that dismissal of the case for arbitration was proper.
Finally, the court determined that the delegation could extend to all three Defendants, although only Chevron signed the confidentiality agreement. The court held that delegation of arbitrability applied to the two non-signatories because the arbitration provisions were being enforced against Brittania-U, a signatory: when Brittania-U signed the delegation clause, Brittania-U had the intent to be bound. Therefore, all Defendants could enforce the delegation of arbitrability against Brittania-U and the motions to dismiss were properly granted.
A version of this post originally appeared in the November 2017 edition of Baker McKenzie’s International Litigation & Arbitration Newsletter, which is edited by David Zaslowsky and Grant Hanessian.