Trafigura Pte. Ltd. v. CNA Metals Ltd.
526 S.W.3d 612
Tex. App.2017Background
- Trafigura Pte. Ltd. contracted (Jan 2013) to buy 70,000 MT of iron ore from CNA Metals under a contract containing a broad arbitration clause providing arbitration in London under the Arbitration Act 1996.
- CNA advanced funds to Jace Metals (an alleged agent) to purchase ore; CNA delivered only ~40,989 MT and admitted breach but claimed Trafigura accepted and paid for that delivery.
- CNA alleges Jace later sold additional ore to Trafigura (Second Contract) — some of which CNA claims was purchased with CNA funds — and sued Trafigura for conversion and conspiracy (added as defendant in 2015).
- Trafigura moved to compel arbitration under the First Contract; the trial court denied the motion, holding CNA’s claims were outside the arbitration clause and could be litigated.
- Trafigura appealed the interlocutory denial, arguing (1) arbitrability was delegated to the arbitrator, (2) CNA’s claims fall within the arbitration clause, and (3) direct benefits estoppel might bind CNA to arbitration under the Second Contract.
- The appellate court reversed, holding the arbitration clause (plus incorporation of the Arbitration Act 1996) clearly and unmistakably delegated arbitrability to the arbitrator and remanded for arbitration proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who decides arbitrability | CNA: court should decide because claims arise independently and contract was terminated | Trafigura: clause and incorporation of Arbitration Act 1996 delegate arbitrability to arbitrator | Arbitrator decides; trial court erred in deciding arbitrability |
| Scope of arbitration clause | CNA: claims are outside scope and can be litigated independently | Trafigura: broad clause covers "all claims...arising out of or in connection with" the contract | Not reached (court resolved delegation question dispositively) |
| Effect of incorporating Arbitration Act 1996 | CNA: Act’s language is permissive, not mandatory, so doesn’t clearly delegate arbitrability | Trafigura: incorporation + broad clause is clear and unmistakable delegation | Incorporation showed clear and unmistakable intent to delegate arbitrability |
| Limited court remedies carve-out | CNA: carve-outs (interim relief, option to go to court) defeat delegation | Trafigura: limited carve-outs do not negate delegation | Carve-outs did not prevent delegation here |
Key Cases Cited
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) (threshold questions of arbitration are for arbitrator unless parties clearly and unmistakably reserve them for court)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (courts decide arbitrability absent clear and unmistakable delegation)
- In re Weekley Homes, L.P., 180 S.W.3d 127 (Tex. 2005) (Texas follows federal principles on arbitrability delegation)
- Schlumberger Tech. Corp. v. Baker Hughes Inc., 355 S.W.3d 791 (Tex. App.—Houston [1st Dist.] 2011) (incorporation of arbitration rules can evidence delegation to arbitrator)
- J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) (party seeking arbitration must show agreement and that claims fall within its scope)
- In re AdvancePCS Health, L.P., 172 S.W.3d 603 (Tex. 2005) (same)
- Petrofac, Inc. v. DynMcDermott Petroleum Operations Co., 687 F.3d 671 (5th Cir. 2012) (adoption of arbitration rules provides clear and unmistakable evidence of delegation)