Arbitration — Incorporation of UNCITRAL or AAA Rules in an Arbitration Clause Constitutes Clear and Unmistakable Evidence that Sophisticated Parties Intended to Delegate Arbitrability to Arbitrator

Oracle Am., Inc. v. Myriad Grp A.G., 2013 U.S. App. LEXIS 15284 (9th Cir. July 26, 2013):

Myriad Group A.G. appeals the district court's partial denial of its motion to compel arbitration. Myriad maintains that incorporation of the United Nations Commission on International Trade Law (UNCITRAL) arbitration rules into an arbitration provision in a commercial contract constitutes clear and unmistakable evidence that the parties to the contract intended to delegate questions of arbitrability to the arbitrator. We agree, consistent with the other circuits to have considered the question. We therefore reverse the district court's partial denial of Myriad's motion to compel arbitration.***

A. Whether Incorporation of the UNCITRAL Arbitration Rules Clearly and Unmistakably Delegates Arbitrability to the Arbitrator

***

The parties' central dispute is whether incorporation of the UNCITRAL rules into the parties' arbitration provision constitutes clear and unmistakable evidence that the parties intended to arbitrate arbitrability. This is an issue of first impression in the Ninth Circuit, but the Second Circuit and the D.C. Circuit have concluded that incorporation of the 1976 UNCITRAL arbitration rules constitutes clear and unmistakable evidence that the parties to an agreement intended to arbitrate questions of arbitrability.

1. Second Circuit

In Republic of Ecuador v. Chevron Corp., 638 F.3d 384 (2d Cir. 2011), the Second Circuit held that whether Chevron had waived its right to arbitration under an investment treaty or was estopped from invoking arbitration under that treaty were issues for the arbitral panel. The treaty--to which Ecuador was a signatory--incorporated the 1976 UNCITRAL arbitration rules.

The court noted initially that waiver was presumptively an issue for the arbitrator. Id. at 394. But the court then ruled that, even if waiver and estoppel could be characterized as questions of arbitrability (and therefore, presumptively as issues for judicial determination), incorporation of the UNCITRAL rules was "clear and unmistakable" evidence that the parties delegated questions of arbitrability to the arbitrator. Id. Because Ecuador's waiver and estoppel claims challenged the validity of the arbitration agreement, and because the UNCITRAL rules gave the arbitrator authority to decide objections to the validity of the arbitration agreement, the Second Circuit concluded that the waiver and estoppel claims were for the arbitrator to decide. Id. at 394-95.

Oracle argues that Republic of Ecuador only addressed whether the arbitrator should decide waiver and estoppel issues in the first instance. But the Second Circuit has more recently confirmed that "Republic of Ecuador . . . held that a bilateral investment treaty's incorporation of the . . . UNCITRAL rules was clear and unmistakable evidence that the parties intended questions of arbitrability to be decided by the arbitral panel in the first instance." Schneider v. Kingdom of Thailand, 688 F.3d 68, 73 (2d Cir. 2012) (internal quotation marks omitted).

2. D.C. Circuit

In Republic of Argentina v. BG Group PLC, 665 F.3d 1363, 1371 (D.C. Cir. 2012), the D.C. Circuit also concluded that incorporation of the 1976 UNCITRAL Rules provides clear and unmistakable evidence that the parties agreed to arbitrate arbitrability. Like Republic of Ecuador, the decision in Republic of Argentina involved a bilateral investment treaty. Id. at 1365. The treaty called for arbitration so long as a party first filed suit in the host country's courts and eighteen months passed without resolution. Id. If those preconditions were met and the parties did not separately agree on an arbitration forum or procedure, the treaty dictated that the UNCITRAL arbitration rules would govern. Id. at 1370-71.

The plaintiff in Republic of Argentina invoked the treaty's arbitration provision without first filing suit in an Argentine court. Id. at 1365. The D.C. Circuit ultimately held that because the preconditions to arbitration had not been met, "the question of arbitrability [was] an independent question of law for the court to decide." Id. at 1371. But the court also observed that if the plaintiff had first filed suit in an Argentine court and waited eighteen months, the result would have been different: "the Treaty's incorporation of the UNCITRAL Rules provides clear and unmistakable evidence that the parties intended for the arbitrator to decide questions of arbitrability." Id. (internal quotation marks, alterations, and citations omitted). The D.C. Circuit concluded succinctly that "the UNCITRAL Rules grant the arbitrator the power to determine issues of arbitrability." Id.

3. Incorporation of the American Arbitration Association Rules

Virtually every circuit to have considered the issue has determined that incorporation of the American Arbitration Association's (AAA) arbitration rules constitutes clear and unmistakable evidence that the parties agreed to arbitrate arbitrability. See Petrofac, Inc. v. DynMcDermott Petroleum Operations Co., 687 F.3d 671, 675 (5th Cir. 2012); Fallo v. High-Tech Inst., 559 F.3d 874, 878 (8th Cir. 2009); Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366, 1373 (Fed. Cir. 2006); Terminix Int'l Co. v. Palmer Ranch LP, 432 F.3d 1327, 1332 (11th Cir. 2005); Contec Corp. v. Remote Solution Co., 398 F.3d 205, 208 (2d Cir. 2005). Only one circuit has concluded otherwise. See Riley Mfg. Co. v. Anchor Glass Container Corp., 157 F.3d 775, 777 & n.1, 780 (10th Cir. 1998). The AAA rules contain a jurisdictional provision similar to Article 21(1) of the 1976 UNCITRAL rules and almost identical to Article 23(1) of the 2010 UNCITRAL rules. The Second and D.C. Circuits' conclusions with respect to incorporation of the UNCITRAL rules are consistent with the majority view regarding the effect of incorporating the AAA rules into an agreement.

We see no reason to deviate from the prevailing view that incorporation of the UNCITRAL arbitration rules is clear and unmistakable evidence that the parties agreed the arbitrator would decide arbitrability. We hold that as long as an arbitration agreement is between sophisticated parties to commercial contracts, those parties shall be expected to understand that incorporation of the UNCITRAL rules delegates questions of arbitrability to the arbitrator.

Footnote 2. We express no view as to the effect of incorporating arbitration rules into consumer contracts.

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