Court Declines Question on Email Service, Leaving an International Arbitration Award Confirmation Intact

By Jacqueline Perrotta

Today, the Supreme Court declined to hear Grupo Cementos de Chihuahua S.A.B. de C.V., et al. v. Compañía de Inversiones Mercantiles S.A., No. 20-1033, an international arbitration case regarding a breached stock-purchase agreement. The petitioner had asked the Supreme Court whether service of process by email, in line with Federal Rules of Civil Procedure 4(f)(3), to a foreign entity’s U.S. counsel violates the Hague Service Convention.

This morning’s order list denying cert in Grupo Cementos can be found here.

The Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters, Nov. 15, 1965, 20 U.S.T. 361, better known as the Hague Service Convention, details what constitutes valid service on parties in another country. The petitioner argued that the dispute falls under the Hague Service Convention and “service,” as instructed by the convention, does not include service by email.

The parties are a Bolivian company, Compañía de Inversions Mercantiles S.A. (“Cimsa”), the respondent in the U.S. Supreme Court case and the original plaintiff, and Mexican companies Grupo Cementos de Chihuahua, S.A.B. de C.V. and GCC Latinoamerica, S.A. de C.V. (collectively “GCC”), which appealed the case to the Court (cert petition available here) and who are the original defendants.

GCC had agreed to give Cimsa a right of first refusal if GCC decided to sell shares it acquired in a third-party cement company. GCC sold shares to a Peruvian company, and Cimsa alleged the sale breached its right of first refusal.

The companies had agreed to arbitrate disagreements arising from the stock deal. In a Bolivian arbitration, Cimsa was awarded several million dollars for the breach of its right of first refusal. GCC challenged this decision; litigation over the arbitration damages award is continuing in Bolivia.

This case came before a Colorado U.S. District Court when Cimsa filed an arbitral award confirmation action through the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which recognizes and enforces foreign arbitral awards.

Cimsa received court permission to serve GCC through its U.S. counsel, which GCC claimed was improper service. The district court found that alternative service through the GGC’s U.S. Counsel was proper under the Hague Service Convention, and confirmed the award.

The Tenth U.S. Circuit Court of Appeals affirmed that service was proper, and also affirmed the district court’s decision to back the Bolivian arbitration tribunal’s decision. Compania De Inversiones v. Grupo Cementos de Chihuahua, No. 19-1151 (10th Cir. 2020) (available at https://bit.ly/3vBlh65).

In holding that the district court correctly confirmed the arbitration tribunal, the Tenth Circuit found that courts construe the New York Convention defenses to enforcing awards “`narrowly’ to ‘encourage recognition and enforcement of commercial arbitration contracts’ citing OJSC Ukrnafta v. Carpatsky Petroleum Corp., 957 F.3d 487, 497 (5th Cir. 2020).

By affirming the district court’s decision, the Tenth Circuit has found that proper service under the Hague Convention includes service by email. By this morning’s Supreme Court action, that case stands, and the arbitration award’s confirmation will not be affected.

At the same time, in its cert petition, GCC had challenged the U.S. award confirmation on the basis that the U.S. courts did not have sufficient contacts for personal jurisdiction, which was also the subject of then-pending U.S. Supreme Court cases, Ford Motor Co. v. Montana Eighth Judicial District Court, No. 19-368 and Ford Motor Co. v. Bandemer, No. 19-369 (S. Ct.).  The Court decided the consolidated cases in Ford Motor Co. v. Montana Eighth Judicial District Court, No. 19-368 (March 25, 2021) (available at https://bit.ly/3wU5sbO).

With today’s cert denial, the Court also declined the petitioners’ suggestion to grant certiorari, vacate the matter, and remand for a decision on personal jurisdiction in accordance with the Ford Motor decision.

GCC’s Supreme Court cert petition can be found at https://bit.ly/2SOkTnl

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The Court today declined to hear a second arbitration case, Amazon.com Inc., et al. v. Bernard Waithaka, No. 20-1077.

Amazon had asked the Court to consider ” Whether the Federal Arbitration Act’s exemption for classes of workers engaged in foreign or interstate commerce, 9 U.S.C. 1, prevents the Act’s application to local transportation workers who, as a class, are not engaged to transport goods or passengers across state or national boundaries.”

Amazon had cited conflicting lower court authority on whether drivers who signed up for an Amazon distribution program and who stayed within state lines could avoid arbitration provisions under the FAA exemption in their disputes with online retailing giant.

Both the federal district court and appeals court declined to compel arbitration. Those decisions stand, with other cases still pending. Earlier this year, in a similar case Amazon linked to today’s decision, the Court declined cert in Amazon.com Inc. v. Rittmann, No. 20-622 (Feb. 22).

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The author, a J.D. student who will enter her second year this fall at Brooklyn Law School, is a 2021 CPR Summer Intern.

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Updating the Global Pound Conference: A Survey on Mediation in Cross-Border Disputes

By Angela Cipolla

The recent Report on International Mediation and Enforcement Mechanisms found that, while mediation survey respondents believe in the necessity of using the process for cross-border disputes, a lack of education about how mediation works is a problem.

The report’s results also strongly boost calls for an international mediation enforcement mechanism.

The recent report was issued by the Institute for Dispute Resolution, at New Jersey City University’s School of Business in Jersey City, N.J., to the International Mediation Institute for the benefit of delegates attending the UNCITRAL Working Group II (Dispute Settlement) 67th Session, on dispute settlement, which was held last month in Vienna. For more information, see www.imimediation.org.

The report follows and incorporates results of surveying done at the Global Pound Conference, which concluded a year of face-to-face meetings with practitioners worldwide in July. See http://globalpound.org; for a wrap-up of the GPC series, see CPR Speaks blog post at http://bit.ly/2vxV2P1.  The IMI and NJCU IDR surveys received responses from users in various fields and professions that represented, according to respondents who identified their locations, 24 countries.

The information was collected in the 28 GPC events held in 22 countries, as well as through online voting. Votes were categorized by stakeholders.

The report, written by David S. Weiss, director of the Institute for Dispute Resolution and a visiting scholar at the New Jersey City University’s business school, and New Jersey attorney Michael R. Griffith, analyzed views on establishing an international treaty for the enforcement of mediated settlements collected online from June 2016 to March 2017; it also analyzed responses from the Global Pound Conference Survey, which was available at IMI Global Pound Conference gatherings and online from March 2016 to September.

The report also expands upon how the international legal and business communities use mediation.  See S.I. Strong, “Use and Perception of International Commercial Mediation and Conciliation: A Preliminary Report on Issues Relating to the Proposed UNCITRAL Convention on International Commercial Mediation and Conciliation,” U. of Missouri School of Law Legal Studies Research Paper (Nov. 17, 2014)(available at http://bit.ly/2yAzUhp).

Overview

Weiss and Griffith gathered the opinions of “those who are most likely affected by the adoption of any prospective drafts or proposals by Working Group II (Dispute Settlement) with emphasis on the users.” The views, reflecting 103 survey responses, reflect the “wider business community, their advisors, providers, and those that may influence the mediation space,” they write. The GPC conference and online surveying produced responses from about 2,500 stakeholders.

The report follows the same pedagogical and methodological process as Strong’s article, presenting research “gathered by an international quantitative-qualitative study of users’ assessments of the enforcement of international commercial settlement agreements resulting from conciliation.”

The Report’s Findings

With regard to the report’s own survey questions, the study brought to light a lack of education regarding the benefits and uses of mediation in cross-border disputes. It found that 40% of the respondents said they use or have been advised to use mediation in a cross-border dispute as a best practice in business “infrequently,” and 24% answered “not at all.”

When users were asked why they thought parties do not resolve their commercial cross-border disputes through mediation, the most frequent answer at 57% of the responses was that “they are unfamiliar with mediation.”

The study called the result “a surprisingly [sic] lack of knowledge about mediation among users.”

These results demonstrate a need for more education about mediation. Interestingly, the second highest-ranked reason in response to the question was that no universal mechanism to enforce a mediated settlement exists.

While the IMI and NJCU survey also showed “a general positive direction of users to incorporate mediation clauses into cross-border contracts,” 80% of users were even more apt to participate in mediation if there was a uniform global mechanism to enforce mediation settlements in place.

This demonstrates the incentive that such a mechanism would provide and the possible positive effects it would have on mediation use in cross-border disputes.

Accordingly, the report found that the majority of users and stakeholders in both the study conducted for the report and the GPC surveying “believe that a uniform global mechanism to enforce mediation settlements would improve commercial dispute resolution.”

Some concerns regarding faith and trust in the mediation process were raised in the IMI and NJCU study’s comments, suggesting that more confidence in the process needs to be built as the use of mediation becomes more prevalent.

The report also looked to whether a treaty should include provisions similar to the longstanding Convention on the Recognition and Enforcement of Foreign Arbitral Awards, better known as the New York Convention.

This idea was well received. An overwhelming 84% of users stated that they would be “more likely” to use or increase their use of mediation in a cross-border dispute if there were a uniform global mechanism in place, similar to the New York Convention, which would ensure enforcements of settlement agreements.

The report speculates that a majority of users would like to use the uniform mechanism as a “bargaining chip;” 60% of users stated that they would prefer an “opt-in” system.

Additionally, the report examined the challenges users faced in mediation. When asked whether users faced any post-mediation challenges to settlement agreements in cross-border disputes on the grounds of capacity, duress, or fraud, the two largest recorded answers were 47%, responding “never,” and 36% responding, “sometimes.”

The report also asked users whether they would be less likely to use mediation if a uniform global mechanism of enforcement included any defenses.  The question didn’t show that defenses would have a significant impact on a user’s willingness. Forty-four percent of the users responded “no,” while 27% responded “yes.”

When asked if the users would prefer a uniform global mechanism that limited defenses, similar to the New York Convention’s Article V, 54% of users responded “yes,” while 22% responded “no.”

The report also revealed that though re-litigating settlements doesn’t occur often, the rate was high.  The study found that 35% of users answered “infrequently” when asked if they have ever were required to re-litigate on general contract defense a mediation settlement agreement that was not honored. “If this was not a problem,” the authors wrote, “we would expect to see user’s answering ‘infrequently’ at a much lower percentage.”

This indicates a problem that a global enforcement mechanism might help alleviate. Additionally, regarding the availability of mediators, the report showed that “[w]hile it is generally positive that 61% of users are generally able to find qualified mediators, there [is] a vast amount of room for improvement.”

In addition to its own questions, the report also analyzed the GPC Series Questions. The report found that just like the users in its study, a majority of GPC stakeholders “believe that a uniform global mechanism to enforce mediation settlements would improve commercial dispute resolution, with 51% [of users concurring.]”

Overall, the GPC Series Questions had a positive view of taking action on mediation settlement enforcement.  Those conference and web survey questions found 51% of users “clearly supporting a uniform global mechanism to enforce mediation settlements as their first preference.”

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The report concludes that global enforcement of mediation settlement agreements is a “necessary tool for encouraging mediation,” and that such an enforcement mechanism should be “congruent with the methodological approach that was adopted by the arbitration community through the New York Convention.”

The report further emphasizes that “practical certainty” in mediated settlement agreements will (1) improve access to justice and (2) “increase efficiency for the wider business community,” and that both of these benefits are crucial to advance trading systems and aide businesses.

UNCITRAL’s Working Group II’s 68th session, expected to consider a mediation enforcement convention further, is scheduled to be held in New York, from Feb. 5 – 9.

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The author is a Fall 2017 CPR Institute Intern.