The US Court of Appeals for the District of Columbia Circuit is poised to solidify its stance against foreign sovereigns contesting arbitrability determinations of arbitral tribunals. This move could significantly impact parties seeking to confirm arbitration awards against foreign sovereigns in the United States. Under the Foreign Sovereign Immunities Act, there is an exception that allows a party to confirm an arbitral award, provided the parties clearly agreed that the arbitral tribunal would decide on its own jurisdiction.
Historically, US courts have tended to afford sovereigns a de novo review in arbitrability disputes, particularly in investor-state arbitrations. However, the D.C. Circuit’s landmark decision in the 2021 case of Stileks v. Republic of Moldova signified a shift by respecting parties’ agreements to arbitrate, provided they had adopted the 1976 United Nations Commission trade rules, which state the tribunal’s authority to determine its own jurisdiction.
The D.C. Circuit now has another opportunity to reaffirm its Stileks decision. This is especially relevant in cases like Hulley, wherein the court decided against second-guessing the tribunal’s jurisdictional call due to the sovereign’s previous agreement. Similarly, in the cases of NextEra and 9REN, the district court also upheld that the tribunal should determine arbitrability, rebuffing Spain’s argument of its incapacity due to conflicting EU treaties.
Nonetheless, there remains an intra-district conflict as seen in the Blasket case, where the court opted not to follow Stileks based on differing interpretations of the parties’ contractual capacities. While Hulley reconciled this by rejecting Blasket‘s reasoning, the pending appeals for these cases represent a crucial moment for the D.C. Circuit to reinforce its precedent and conclusively bar foreign sovereigns from arbitrability defenses in US confirmation proceedings.
For further details on the ongoing developments, the original explanatory piece can be found on Bloomberg Law.