International Engineering & Construction S.A. and Greenville Oil & Gas Co. Ltd. v. Baker Hughes, a GE Company, LLC and Baker Hughes, a GE Company

At a glance

Parties

International Engineering & Construction S.A. (IEC) and Greenville Oil & Gas Co. Ltd. (petitioners) v. Baker Hughes, a GE Company, LLC and Baker Hughes, a GE Company (respondents)

Case no.

No. 18 Civ. 9241 (AT)

Court

U.S. District Court, Southern District of New York (Judge Analisa Torres)

Forum and rules

Petition to compel arbitration under the Federal Arbitration Act and the New York Convention (Articles II, II(3) and III); the underlying arbitration is administered by the AAA/ICDR under the AAA Commercial Arbitration Rules

Treaty

New York Convention; contract arbitration clauses (Sales Contract § 20.1, Services Agreement § 20.1, Guarantee Agreement § 7)

Sector

Oil and gas; LNG liquefaction plants

Outcome

Respondents' motion to dismiss granted and the petition to compel arbitration dismissed (13 August 2019).

The dispute

IEC entered into three related contracts with GE Oil & Gas, Inc. (GEOG) and its affiliate: one for the sale of two small-scale LNG liquefaction plants, one for personnel services, and one for a performance guarantee. Each contract provided for AAA arbitration under the Commercial Arbitration Rules. After GE's oil and gas business was merged into the Baker Hughes entities, IEC and Greenville filed a demand for arbitration on 31 July 2018. The demand named GEOG and also the non-signatory Baker Hughes entities (BHGE). BHGE appeared in the arbitration but objected that the tribunal lacked jurisdiction over them because they had not signed the contracts. The petitioners then asked the court to compel BHGE to arbitrate. BHGE moved to dismiss under Federal Rule of Civil Procedure 12(b)(6).

Key holdings

1. The requirement in Section 4 of the FAA that the petitioner be "aggrieved" by a failure, neglect or refusal to arbitrate does not conflict with Section 206 of the Convention Act or with Article II(3) of the New York Convention. Section 4 therefore applies to petitions to compel arbitration brought under the Convention Act. The court followed Hartford Accident v. Equitas and the Second Circuit's dicta in Phoenix v. Ecoplas, and declined to follow Daye Nonferrous v. Trafigura. pp. 6–8
2. The petitioners were not aggrieved. BHGE was already taking part in the arbitration, and objecting before the arbitrators that the claims are not arbitrable is not a refusal to arbitrate under Section 4. pp. 8–9
3. In the alternative, the court would dismiss anyway. By incorporating the AAA Rules, including Rule R-7(a), the contracts give clear and unmistakable evidence that the parties delegated questions of arbitrability to the arbitrator. pp. 9–10
4. Under Contec v. Remote Solution, the undisputed corporate relationship between the BHGE entities and the signatory GEOG is a sufficient relationship for the arbitrability question to go to the arbitrator. GEOG's sole member is BHGE LLC, and BHGE holds a 37.5% economic interest in BHGE LLC. Whether BHGE is GEOG's successor-in-interest is therefore for the tribunal to decide. Republic of Iraq v. BNP Paribas does not apply. pp. 10–12

Procedural history

1. 31 July 2018The petitioners filed a demand for AAA arbitration against GEOG and the BHGE entities.
2. 20 August 2018The ICDR stated that the non-signatory question must be decided by the tribunal once appointed.
3. 31 August 2018The BHGE entities filed an Answering Statement objecting to the tribunal's jurisdiction over them.
4. 9 October 2018The petition to compel arbitration was filed in the S.D.N.Y.
5. 14 December 2018The tribunal refused to refer to the court proceedings in Procedural Order No. 1.
6. 13 August 2019The court granted the motion to dismiss and dismissed the petition. Arbitration hearings were scheduled for 9–20 December 2019.

Tribunal, counsel and experts

Decided by

• Analisa Torres Judge, U.S. District Court, Southern District of New York

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Keywords

• motion to compel arbitration
• FAA Section 4
• FAA Section 206
• aggrieved party
• refusal to arbitrate
• New York Convention Article II(3)
• non-signatory
• delegation of arbitrability
• competence-competence
• AAA Rule R-7(a)
• Contec
• successor-in-interest
• LNG liquefaction plants
• Baker Hughes
• GE Oil & Gas
• ICDR

Summary generated with AI from the published documents — refer to the award for the authoritative text.