Guest blog: Reflecting on 20 years of international arbitration in the United States

The gathering of hundreds of international arbitration practitioners in New York for the 20th ICC New York Conference offers an opportunity for a short reflection on the United States’ international arbitration journey since the first ICC New York Conference in 2005.

By that time, New York had positioned itself as an arbitration-friendly seat for international arbitration originating from around the world.

Thirty-five years earlier, the 1970 amendment of the Federal Arbitration Act (FAA) introduced the New York Convention into the US legal order and adopted a more modern legal framework, favourable to arbitration, both domestic and international. During the three decades that preceded the first ICC New York Conference, the United States Supreme Court led the US judiciary from defiance to deference towards arbitration agreements and the arbitral awards that emanate from them.

The scope of arbitrable issues expanded with decisions such as Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. (1985), courts began to apply a pro-arbitration bias when interpreting arbitration agreements following cases like Moses H. Cone Memorial Hospital v. Mercury Construction Corp. (1983), and US case law on limited judicial review of international awards became aligned with that of other arbitration-friendly seats such as London, Paris and Geneva. 

While the United States, and New York in particular, had earned their place among the well-tested arbitration-friendly locations, commentators in the first decade of the 21st century nevertheless raised questions as to whether the United States stood apart from the other arbitration-friendly seats in some respects. For example, questions remained as to whether the United States was friendly to arbitration outside of New York.

The United States’ perceived defiance of the Competence-Competence principle was often viewed as a risk of unwelcome judicial interference with the arbitral process. And as part of the persistent criticism of a so-called “Americanisation” of the arbitral process, the possibility to use 28 U.S.C. § 1782 to allow discovery in aid of foreign or international proceedings cast doubt on the willingness of US courts to protect rather than interfere with the arbitral process.  While US federal courts were split on whether private arbitral tribunals qualified as “foreign or international tribunals” under the statute, Section 1782 had been interpreted broadly in some instances to allow discovery in aid of foreign arbitration proceedings.

But the past 20 years have largely proven the skeptics wrong. US courts gradually narrowed the scope of foreign arbitrations in which Section 1782 could be invoked, and any remaining ambiguity was removed in 2022 when the US Supreme Court issued a unanimous decision in ZF Automotive US, Inc. v. Luxshare, Ltd., in which it held that Section 1782 does not apply to private commercial or ad hoc investor-state arbitrations. As a result, Section 1782 discovery is no longer available in most of international arbitrations. This change brings clarity, even if views differ on its impact.

As to US seats, New York remains a prominent place for international arbitration with a sophisticated bar, a well-tested arbitration case law and an arbitration-savvy state and federal bench. But others, such as California, Texas, Florida or the District of Columbia particularly for investor-state cases, also have emerged as credible arbitration seats. 

California is now a long way from the infamous 1998 Birbrower v. Superior Court decision that limited foreign lawyers’ participation in California-seated arbitrations. In the past 10 years, California adopted pro-arbitration legislation, as did Florida, with both states benefiting from increasing community and institutional engagement. Texas has likewise taken a significant place in the American arbitration landscape. And with the US District Court for the District of Columbia and the US Court of Appeals for the District of Columbia Circuit having established themselves as sophisticated venues for the enforcement of awards implicating the Foreign Sovereign Immunities Act (FSIA) as well as investment treaties, arbitration in the United States can no longer be reduced to New York. 

The risk of inappropriate judicial interference in the context of determining the parties’ consent to arbitrate likewise did not materialise. Since the 1995 US Supreme Court decision in First Options of Chicago, Inc. v. Kaplan, the default rule remains that courts, not tribunals, decide whether the parties to an agreement have consented to arbitrate – what US courts characterise as “arbitrability”, and the rest of the world categorises as the jurisdiction to determine an arbitral tribunal’s authority to hear a case. But the important exception that First Options set to this default “arbitrability” rule has fended off the risk of improper judicial interference with the arbitral process: the parties have the power to delegate to the arbitrators the authority to rule on their own jurisdiction, including by incorporating institutional rules such as the ICC, AAA-ICDR, or JAMS.

This alternative approach to the Competence-Competence principle has been carried out responsibly by most courts in the United States, even if scholars continue to debate it.  However, that is but another sign of the richness of the arbitration scholarship in the United States.       

*Disclaimer: The content of this article may not reflect the official views of the International Chamber of Commerce. The opinions expressed are solely those of the authors and other contributors.