What constitutes an "agreement in writing" in international commercial arbitration? Conflicts between the New York Convention and the federal Arbitration Act.

• Author: Strong, S.I.

This Article investigates whether and to what extent a party must produce an "agreement in writing" when seeking to enforce an international arbitration agreement or award in a U.S. federal court. This issue has recently given rise to both a circuit split and a petition for certiorari to the U.S. Supreme Court, and involves matters of formal validity as well as federal subject matter jurisdiction. The problem arises out of subtle differences in the way an "agreement in writing" is defined in the Federal Arbitration Act (FAA) and the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).

This is not just a U.S. problem, however. Questions relating to form requirements under the New York Convention have also been much discussed at the international level, with UNCITRAL recently issuing a formal recommendation on how to deal with the problem.

This Article describes the scope of the current problems associated with form requirements, including how inconsistencies in domestic practice affect international commercial arbitration and global trade. After discussing the difficulties in both the U.S. and the international sphere, the Article makes a number of suggestions for legislative and judicial reform. This is the first article to discuss the circuit split and associated issues in the context of the FAA and to take a serious comparative look at the implementation of the UNCITRAL recommendation at the international level.

1. INTRODUCTION II. "AN AGREEMENT IN WRITING"--DIFFICULTIES AND DILEMMAS UNDER U.S. LAW A. Statutory Analysis B. U.S. Case Law 1. Cases Analyzed Under Article II(2) of the New York Convention a. Arbitral clauses or agreements b. Exchange of letters or telegrams 2. Cases Analyzed Under Section 2 of the FAA 3. Cases Analyzed Under Both Article II(2) of the New York Convention and Section 2 of the FAA C. Conclusions Regarding the Form Requirement Under U.S. Law III. INTERNATIONAL ISSUES REGARDING THE FORM REQUIREMENT OF THE NEW YORK CONVENTION A. International Interpretation of Article II(2) of the New York Convention B. International Interplay Between Article II(2) and Article VII(l) of the New York Convention C. UNCITRAL Recommendation D. The UNCITRAL Model Arbitration Law IV. FUTURE DIRECTION OF U.S. LAW CONCERNING FORM REQUIREMENTS A. Adoption of an Expansive Reading of Article II(2) of the New York Convention B. Explicit Adoption of Domestic Legal Standards Through Reliance on Article VII(1) of the New York Convention C. Adoption of Article 7 of the UNCITRAL Model Arbitration Law V. CONCLUSION I. INTRODUCTION

   At first glance, the term "agreement in writing" appears relatively easy to define, apply and understand. However, as with most things in law, the task has proven much more difficult in practice than in theory.

   Indeed, U.S. federal courts have experienced a number of problems when interpreting this phrase, which appears in article II(2) of the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, more commonly known as the New York Convention. (1) Not only is there a circuit split on how to define the term itself, there are also growing inconsistencies regarding the proper relationship between article II(2) of the New York Convention and the various provisions of the Federal Arbitration Act (FAA) (2) that describe the need for a written arbitration agreement in disputes arising under the New York Convention. (3)

   In fact, certiorari was recently sought from the U.S. Supreme Court on precisely this issue, stating the question presented was "the proper scope and application of article II(2) of the Convention, relating to when an arbitration clause must be 'signed by the parties or contained in an exchange of letters or telegrams'" and noting a "split of authority" on this matter. (4) Similar questions have brought to the attention of the Supreme Court several times over the last few years, demonstrating an increased interest in this issue as well as the need for greater guidance from the Court. (5) Given the Supreme Court's current interest in arbitration, (6) it is altogether possible that certiorari will be granted on this issue at some point in the near future.

   In the meantime, the confusion that surrounds the interpretation and application of article II(2) of the New York Convention has not only generated a great deal of debate among scholars and practitioners, (7) but it has also led to a great deal of litigation. (8) Disputes about the New York Convention's "form requirements" are problematic for two reasons. (9)

   First, litigation is both expensive and time consuming for the parties. This is particularly troubling when the dispute involves a highly technical jurisdictional issue that is "unnecessary and instead serve[s] to frustrate commercial parties' legitimate expectations and rights." (10) Second, litigation regarding the application of the New York Convention is inconsistent with the heightened need for predictability in the resolution of international commercial disputes, a principle that has been recognized by the U.S. Supreme Court on numerous occasions. (11)

   Notably, the United States is not the only nation facing difficulties interpreting and applying article II(2) of the New York Convention. (12) To the contrary, the Secretary General of the United Nations has stated that:

   [i]t has been repeatedly pointed out by practitioners that there are a number of situations where the parties have agreed to arbitrate (and there is evidence in writing about the agreement), but where, nevertheless, the validity of the agreement is called into question because of the overly restrictive form requirement. The conclusion frequently drawn from those situations is that the definition of writing, as contained in [various] international legislative texts, is not in conformity with international contract practices and is detrimental to the legal certainty and predictability of commitments entered into in international trade. (13) The growing international inconsistency regarding article II(2) recently led United Nations Commission on International Trade Law (UNCITRAL) to develop and adopt a recommendation regarding the interpretation and application of this provision (UNCITRAL Recommendation). (14)

   Although the UNCITRAL Recommendation has only been in place a short time and has not yet been considered by a U.S. state or federal court, the Recommendation provides several straightforward solutions to the interpretive problems experienced in the United States. (15)

   This Article therefore has a twofold aim: first, to identify whether there is a problem with the manner in which U.S. law applies and interprets article II(2) of the New York Convention, particularly in light of international legal norms, and second, if a problem does exist, to provide a realistic proposal for improving the situation. (16) To that end, the discussion proceeds as follows.

   First, Section II describes the current state of U.S. law regarding the interpretation and application of article II(2) of the New York Convention. (17) In so doing, the discussion sets forth the text of both the New York Convention and the FAA and discusses the ways in which the various provisions interact. (18) The analysis also introduces U.S. judicial opinions construing the New York Convention and the FAA and discusses the various lines of precedent. (19)

   Section III then takes the Article into the international realm by considering how other national courts and legislatures have addressed the New York Convention's form requirements. (20) This portion of the analysis introduces the UNCITRAL Recommendation and evaluates how that document affects the interpretive issues facing U.S. and other courts.

   Next, Section IV considers ways to address the problems experienced in the United States and suggests a more cohesive and jurisprudentially consistent approach to the form requirements reflected in article II(2) of the New York Convention. (21) Section V then concludes the Article by wrapping up the various threads of discussion and providing some final thoughts.

   Having described the basic framework for analysis, it is time to begin the substantive discussion. The first item to address involves current U.S. law and practice regarding the interpretation and application of article II(2) of the New York Convention. (22)

2. "AN AGREEMENT IN WRITING"--DIFFICULTIES AND DILEMMAS UNDER U.S. LAW

   As it turns out, two types of difficulties exist with respect to the way the United States interprets and applies article II(2) of the New York Convention. (23) First, problems arise with respect to the language of the New York Convention itself. (24) Second, complications arise when the language of the New York Convention is brought into contact with the text of the FAA. (25) Both of these issues are addressed below. (26)

   Before beginning, however, it is important to establish the boundaries of the analysis. First, the following discussion focuses on a very narrow issue, namely the interpretation of article II(2) of the New York Convention and its application to disputes arising in U.S. courts through the various provisions of the FAA. (27) The question, as shall be seen, is a jurisdictional one rather than a substantive one. (28) Therefore, this Article will not discuss issues relating to the substantive validity of an agreement to arbitrate, including the vast majority of issues regarding the rights and obligations of non-signatories. (29)

   Furthermore, the cases that will be introduced are for illustrative purposes only and do not purport to reflect a comprehensive presentation of the nuances in this area of law. Instead, it is sufficient for purposes of this Article to demonstrate the existence and basic scope of the relevant problems, since certain new developments in the international realm not only suggest a potential solution to the difficulties faced by...