Beijing Shougang Mining v. Mongolia
11 F.4th 144
| 2d Cir. | 2021Background
- Petitioners (three PRC companies) invested in a Mongolian iron-ore mine; Mongolia revoked the venture's license and local litigation followed.
- Petitioners initiated ad hoc treaty arbitration in 2010 under the 1991 Mongolia–PRC BIT (Article 8(3) permits submission of disputes "involving the amount of compensation for expropriation" to an ad hoc tribunal).
- At the tribunal's initial procedural meeting (Procedural Order No. 1) the parties agreed to a two‑phase proceeding: phase one for jurisdiction and liability; phase two (if needed) for quantum.
- Petitioners argued Article 8(3) authorized the tribunal to decide existence/lawfulness of expropriation as well as compensation; Mongolia argued Article 8(3) was limited to disputes about quantum after expropriation was otherwise established.
- The tribunal concluded it lacked jurisdiction (interpreting Article 8(3) as limited to compensation disputes) and issued an award dismissing the claims; Petitioners then sought vacatur and to compel arbitration in SDNY; the district court confirmed the award and denied vacatur and the motion to compel.
- On appeal, the Second Circuit affirmed: it held the parties had "clear and unmistakable" intent to delegate arbitrability to the tribunal (based on the parties' procedural agreement and conduct), and the arbitrators did not exceed their powers.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court must review arbitrability de novo or defer to the tribunal | Treaty does not clearly delegate arbitrability to arbitrators, so court must decide arbitrability de novo | Parties clearly and unmistakably submitted arbitrability to the tribunal by agreeing to hear jurisdiction in phase one and by their subsequent conduct | Held: Delegation existed (procedural agreement + conduct); de novo review not required; deferential review applies |
| Whether the arbitrators exceeded their powers (FAA §10(a)(4)) by interpreting Article 8(3) too narrowly | Tribunal misread Article 8(3); its narrow construction defeats BIT protections and warrants vacatur | Even if the tribunal erred, interpreting the treaty was within its authority; vacatur requires exceeding delegated powers, not mere error | Held: Arbitrators did not exceed powers; award not vacated |
| Whether the district court erred in denying Petitioners' motion to compel arbitration on the merits (9 U.S.C. §4) | Court should order arbitration on merits (i.e., restore tribunal jurisdiction) | Mongolia did not refuse to arbitrate; it participated and litigated jurisdiction before the tribunal | Held: Denied—Mongolia did not refuse to arbitrate; §4 relief unavailable |
| Whether parties can create "clear and unmistakable" delegation by post‑formation procedural agreements | Petitioners: delegation must be in the original arbitration agreement/Treaty, not later procedural arrangements | Mongolia: procedural agreement (phase structure) and Petitioners' submissions supply clear and unmistakable evidence of delegation | Held: Subsequent procedural agreements and party conduct can supply "clear and unmistakable" evidence of delegation |
Key Cases Cited
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (establishes "clear and unmistakable" standard for delegating arbitrability to arbitrators)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) (arbitrability presumptively for courts absent clear delegation)
- BG Group PLC v. Republic of Argentina, 572 U.S. 25 (2014) (arbitrability includes whether an arbitration clause covers the dispute)
- Republic of Ecuador v. Chevron Corp., 638 F.3d 384 (2d Cir. 2011) (treaty incorporation of UNCITRAL rules can constitute clear delegation)
- Schneider v. Kingdom of Thailand, 688 F.3d 68 (2d Cir. 2012) (post‑constitution Terms of Reference can evidence delegation to arbitrators)
- Contec Corp. v. Remote Sol. Co., Ltd., 398 F.3d 205 (2d Cir. 2005) (incorporation of arbitral rules that empower arbitrators is clear evidence of delegation)
- Oxford Health Plans LLC v. Sutter, 569 U.S. 564 (2013) (courts overturn arbitrators only in narrow circumstances; inquiry is whether arbitrator arguably interpreted the contract)
- Stolt‑Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010) (highly deferential standard to arbitral decisions; narrow grounds for vacatur)
- Yusuf Ahmed Alghanim & Sons v. Toys "R" Us, Inc., 126 F.3d 15 (2d Cir. 1997) (discusses New York Convention applicability to "nondomestic" awards)