Eleventh Circuit Defers to International Arbitrator’s Venue Determination

Eleventh Circuit Defers to International Arbitrator’s Venue Determination

Ben Torres*

The Eleventh Circuit recently affirmed the power of arbitrators to interpret international venue disputes in Bamberger Rosenheim, Ltd. v. OA Development, Inc., 862 F.3d 1284, 1286 (11th Cir. 2017). In that case, a real estate developer from Georgia, OA Development, Inc. (“OAD”), entered into a Solicitation Agreement with Israeli investor, Bamberger Rosenheim, Ltd. (“Profimex”). Id. A provision in the agreement compelling arbitration provided that “[a]ny . . . [arbitration] proceedings shall take place in Tel Aviv, Israel, in the event the dispute is submitted by OAD, and in Atlanta, Georgia, in the event the dispute is submitted by Profimex.” Id.

As the case name suggests, the relationship was short-lived. Id. Alleging breach of contract, Profimex initiated arbitration proceedings in Atlanta. Id. In response, OAD filed a counterclaim for defamation in the same Atlanta proceedings. Id. Eliciting the provision of the agreement requiring that “disputes” submitted by OAD take place in Israel, Profimex objected to the venue of OAD’s counterclaim, arguing that the defamation dispute must be arbitrated in Tel Aviv. Id. The arbitrator disagreed. Id. Interpreting “dispute” to refer back to the initial claim submitted by Profimex, the arbitrator declared that the venue for OAD’s counterclaim was proper. Id. The arbitrator then ruled for OAD on its counterclaim, and the District Court for the Northern District of Georgia affirmed, denying Profimex’s motion to vacate. Id.

Appellant Profimex’s appeal to the Eleventh Circuit raised two central arguments. Id. at 1287. First, that the district court erred in confirming the arbitrator’s award under the New York Convention, which applies to “‘non-domestic’ arbitral agreements and awards,” codified under Chapter 2 of the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 201–08. Bamberger Rosenheim, Ltd., 862 F.3d at 1287. Under the statute, district courts must affirm an arbitrator’s award in the absence of one (or more) of seven enumerated defenses. Id. Profimex invoked the defense that “the arbitral procedure was not in accordance with the agreement.” Id. Second, Profimex argued that the district court erred in denying its petition to vacate the award under Chapter 1 of the FAA, 9 U.S.C. §§ 1–16, which governs domestic arbitration. Id. Like the section governing non-domestic disputes, 9 U.S.C. § 10 enumerates several defenses which allow for a reviewing court to vacate an arbitrator’s award. Bamberger Rosenheim, Ltd., 862 F.3d at 1287. Invoking Section 10(a)(4), Profimex claimed the arbitrator exceeded his powers and the district court therefore erred in denying its motion to vacate. Id.

Dodging the issue of whether Section 10(a)(4) can apply to non-domestic disputes, the Eleventh Circuit analyzed both of Profimex’s arguments together, since the cardinal issue raised was whether the arbitrator should be accorded deference in his venue determination. Id. The Eleventh Circuit concluded that questions of venue are “presumptively” for the arbitrator to decide, even in international disputes. Id. at 1286. Simply because the arbitrator interpreted the venue provision at hand, that interpretation must be accorded deference. Id.

The Eleventh Circuit’s analysis begins by distinguishing between “arbitrability” questions and procedural inquiries. Id. at 1288. Questions regarding “arbitrability” are threshold matters determining whether an issue is appropriate for an arbitrator to decide in the first place, and are presumed to be questions for the courts. Id. By contrast, procedural inquiries assume that arbitration is proper, and delve instead into the application of the arbitral process. Id. These inquiries are generally left to arbitrators. Id.

In the case at hand, both parties conceded that their agreement compelled arbitration, so the relevant inquiry was not whether arbitration was proper but where to conduct it. Id. Being a procedural issue, Profimex’s venue question was therefore “presumptively” for the arbitrator to decide. Id. The court ends its analysis by acknowledging its own limitations in reversing an arbitrator’s decision, citing Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2068 (2013) (holding that a reviewing court’s assessment of an arbitrator’s determination is limited to “whether the arbitrator (even arguably) interpreted the parties’ contract, not whether he got its meaning right or wrong”). Because the arbitrator arguably interpreted the term “dispute” to refer to Profimex’s original breach of contract claim, the Eleventh Circuit deferred to his decision. Bamberger Rosenheim, Ltd., 862 F.3d at 1288.

In the absence of deference to arbitral conclusions, the value of arbitration provisions in contracts erodes into a “time-consuming judicial review process.” Id. at 1287. (citing Hall St. Assocs. v. Mattel, Inc., 552 U.S. 576, 588 (2008)). The Eleventh Circuit’s decision then preserves the value of arbitration, relieving future parties of the judicial maneuvering such provisions were created to prevent.

*Ben Torres is a member of the 2017-2018 Editorial Board for Georgia Law Review.

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