In the United States, the Federal Arbitration Act (“FAA”) provides the rules that govern most arbitrations, and is binding on both state and federal courts. See 9 U.S.C. § 1 et seq. But the FAA is “something of an anomaly” in federal legislation as it “bestow[s] no federal jurisdiction.” Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 582 (2008). So motions to compel arbitration or enforcement proceedings must be brought in state courts unless there is some independent basis to assert jurisdiction (such as federal diversity jurisdiction).
But international commercial arbitration is different. In 1970, the United States acceded to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), which requires all of its 157 State-Parties to enforce arbitration agreements and awards rendered in other countries or which are non-domestic. In the implementing legislation, Congress established that any arbitration agreement or award that was commercial and international in nature fell under the New York Convention. 9 U.S.C. § 202.
Congress also provided that “An action or proceeding falling under the Convention shall be deemed to arise under the laws and treaties of the United States.” 9 U.S.C. § 203. This confers federal jurisdiction on any motion to compel arbitration or any enforcement action regarding an international arbitration.
Congress also provided extremely broad removal powers whenever a state court action “relates to” an international arbitration agreement or award. 9 U.S.C. § 205 allows for removal “at any time before the trial” and says that the grounds for removal “need not appear on the face of the complaint but may be shown in the petition for removal.”
Every circuit that has analyzed this has found that it confers broad jurisdiction on the federal courts to hear claims “whenever an [international] arbitration agreement . . . could conceivably affect the outcome of the plaintiff’s case.” Infuturia Global Ltd. v. Sequus Pharaceuticals, Inc., 631 F.3d 1133, 1138 (9th Cir. 2011); Reid v. Doe Run Resources Corp., 701 F.3d 840, 844 (8th Cir. 2012); Beiser v. Weyler, 284 F.3d 665, 669 (5th Cir. 2002).
The Beiser case from the Fifth Circuit is the key case on this issue, and explains in depth just how broad this jurisdiction is: “[T]he district court will have jurisdiction under § 205 over just about any suit in which a defendant contends that an arbitration clause falling under the Convention provides a defense. As long as the defendant’s assertion is not completely absurd or impossible, it is at least conceivable that the arbitration clause will impact the disposition of the case.” Beiser, 284 F.3d at 669.
Therefore, under the implementing legislation for the New York Convention, virtually any case where there is an international arbitration agreement or award involved will be heard in federal court, rather than state court. The only exception will be cases where the parties have explicitly provided in their agreement for a state court to have jurisdiction, but such waiver of federal jurisdiction are extraordinarily rare, and in any event must be “clear and unambiguous.” See Suter v. Munich Reinsurance Co., 223 F.3d 150, 158 (3d Cir. 2000).