USA: An Introduction to International Arbitration: Counsel

Caseload Statistics and Trends 

The year 2023 saw a significant increase in the use of arbitration by parties in the US and North America. The ICC reported an increase in new cases involving North American parties, rising from 207 in 2022 to 308 in 2023. Likewise, the LCIA revealed that US parties represented a higher percentage of its total 377 cases in 2023, increasing to 6.3% from 4.4% in 2022. US-based institutions have also been busy of late. The ICDR had over 850 international cases pending by the end of 2022 and 755 cases filed in 2022, up from 704 in 2020. Another major US-based player, JAMS, had 437 active international cases in 2022.

The 2023 dispute-resolution landscape also saw geographic and sectoral shifts. The latest data from the ICDR indicate that an increasing number of disputes involve parties from China and Mexico. There has been a rise in disputes in the technology and financial services sectors, while construction disputes remain significant.

Enforcement of Awards 

The past year delivered interesting developments in the enforcement of arbitration awards, including a novel approach to enforcement under the Racketeer Influenced and Corrupt Organizations Act (RICO); headline-making enforcement actions against foreign sovereigns; and new interpretations of the Federal Arbitration Act’s (FAA) limitations periods.

In June 2023, the US Supreme Court held that RICO could apply in award-enforcement proceedings involving injury to a business or property in the US. Russian businessman Vitaly Smagin sued to enforce an USD84 million LCIA award against his former business partner, Ashot Yegiazaryan. Yegiazaryan evaded enforcement for years by hiding his assets in offshore shell companies. In 2020, Smagin brought suit in California federal court under RICO’s private right of action, alleging that Yegiazaryan had committed wire fraud and other racketeering crimes in order to subvert Smagin’s efforts to collect on the award. The Supreme Court held that because Yegiazaryan’s evasion efforts were conducted from California, there was a sufficiently domestic injury to support Smagin’s RICO claim. This holding is likely to have a significant impact on enforcing foreign arbitral awards against debtors who engage in evasive financial practices in the US to evade such enforcement.

Disputes regarding the enforcement of arbitral awards against foreign sovereigns have made repeated headlines. In DC federal court, Spain claimed immunity on the basis that CJEU jurisprudence rendered “intra-EU” awards unenforceable due to the lack of an agreement to arbitrate. After two DC district judges reached opposite conclusions on this issue, a DC Circuit panel heard oral argument in a consolidated appeal. As of this writing, it remains to be seen how the DC Circuit will rule—and whether the Supreme Court will take up the issue.

Meanwhile, Yukos creditors’ efforts to enforce their mega-award against Russia have continued apace, and a DC Circuit panel rejected Romania’s continued attempts to escape liability for a decade-old ICSID award. Creditors of Venezuela are angling to capitalize on the judicial auction of shares in the parent company of Citgo, PDVSA’s US-based refining operation. Last year, the Third Circuit ruled that PDVSA is the alter ego of the Venezuelan state.

Courts also scrutinized the limitations periods for enforcement actions under the FAA in 2023. The FAA contains certain mandatory limitations periods—such as the three-month time period for a motion to vacate, modify, or correct an arbitral award. (See here and here.) However, in a September 2023 decision, a Virginia federal court interpreted the FAA’s three-year limitations period for confirmation of a New York Convention award as permissive. The Middle District of North Carolina followed suit, granting a petition to confirm a New York Convention award even though it was filed more than three years after the award’s issuance.

Competence-Competence 

The early months of 2024 saw several developments clarifying the landscape of competence-competence before US courts. First, the Supreme Court declined to take up a Ninth Circuit decision preventing Chinese investors from arbitrating a claim against a Saipan casino. The case involved a carve-out in the arbitration agreement that excluded arbitration of disputes related to the revocation or suspension of casino licenses. The Ninth Circuit held that because the plain language of the agreement stated such disputes were not arbitrable, it was for the district court, not arbitrators, to determine jurisdiction.

Second, the Supreme Court held that, where parties dispute which contract governs a dispute—one contract requiring issues of arbitrability to be decided in arbitration and the other leaving questions of arbitrability to a court—it is for a court to decide which contract governs.

Finally, in the context of a motion to compel arbitration, the Supreme Court unanimously held that when a lawsuit involves an arbitrable dispute and a party has requested a stay of judicial proceedings, a court is bound to stay—rather than dismiss—the court action, even if all the underlying claims are subject to arbitration. Collectively, these cases have implications for the balance of power between courts and arbitral tribunals, suggesting courts may tip the scales in favor of judicial intervention.

Discovery in Aid of Arbitration 

Until 2022, 28 U.S.C. § 1782 (“Section 1782”) offered a powerful means of obtaining US-based discovery in aid of international arbitration proceedings. Then, the Supreme Court held in ZF Automotive US, Inc. v. Luxshare, Ltd. that Section 1782 did not apply to private commercial arbitrations—curtailing its use to proceedings involving a “governmental or intergovernmental adjudicative body.” Subsequently, district courts—such as the Southern District of New York in In re Webuild S.P.A.—interpreted ZF Automotive to mean that Section 1782 discovery is no longer available for investor-State arbitrations under the ICSID Convention.

Recent jurisprudence has revived 1782 discovery as a tool in aid of certain foreign and international arbitrations. For instance, arbitration proceedings brought pursuant to a foreign law mandating resolution of disputes by arbitration may fall within the scope of Section 1782. An Arizona federal court granted such an ex parte petition for discovery for an arbitration proceeding administered by the British Columbia International Commercial Arbitration Centre (BCICAC).

As jurisprudence regarding Section 1782 continues to develop, parties to private international arbitration proceedings may resort to alternative means to obtain discovery from parties located in the United States—including state-law tools such as Section 3102 of New York’s Civil Practice Law and Rules.

USMCA Review 

Domestic political dynamics in the United States have the potential to reshape its investment treaty network in the coming years. Regardless of the outcome of the upcoming US presidential elections, it appears unlikely that investor-State arbitration will receive significant political support during the next administration. One key forum in which these political dynamics may play out in the coming years is in the pending review process for the USMCA, slated to commence on 1 July 2026. Uniquely among major trade treaties, the USMCA provides for a finite 16-year term that expires in 2036. It therefore requires the United States, Canada, and Mexico to meet for annual reviews of the treaty until they agree upon an extension. While the discussions will be multifaceted, they might provide an opportunity for the treaty parties to further curtail (or, less likely, expand) the limited availability of investor-State arbitration under the USMCA.