In Pott v. World Capital Properties, the 11th Circuit held that an international arbitral tribunal operating under the New York Convention may pierce the corporate veil to assert jurisdiction over a non-signatory to an arbitration agreement.

The dispute arose from an alleged breach of a stock option agreement between Alfredo Pott and World Capital Properties (WCP). Gonzalo Lopez-Jordan had close ties to WCP but was not a signatory to the agreement, which contained an ICC arbitration clause. Pott initiated ICC arbitration against WCP and Lopez-Jordan. Lopez-Jordan objected to the tribunal’s jurisdiction early and often, but he signed the ICC Terms of Reference (ToR), which expressly included the jurisdictional issue among the questions for the tribunal to decide.

The tribunal held that it had jurisdiction over Lopez-Jordan under a veil-piercing theory and entered an award against him. Pott obtained enforcement of the award in federal district court. Lopez-Jordan appealed, arguing he never consented in writing to arbitration. The 11th Circuit affirmed enforcement of the award on two grounds.

The Circuit Court’s Reasoning

First, the court held that the absence of a written arbitration agreement does not necessarily deprive the tribunal of jurisdiction citing the Supreme Court’s holding in GE Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA, LLC that an arbitration agreement subject to the New York Convention may be enforced against a non-signatory under state-law principles such as “assumption, piercing the corporate veil, alter ego, incorporation by reference… etc.”

Second, the court held that by signing the ToR, Lopez-Jordan consented to the tribunal’s resolution of his jurisdictional objection. And once the tribunal denied that objection, he was bound by the tribunal’s ruling on the merits.

Key Takeaway

GE Energy allowed courts to bind non-signatories to international arbitration agreements. Pott goes further by allowing international arbitral tribunals themselves to make that determination. As a result, closely related third parties, including owners and parent companies, may not be able to rely solely on the absence of a written arbitration agreement to avoid arbitral jurisdiction.

Additionally, a non-signatory drawn into an arbitration should promptly seek judicial review of its jurisdictional objection if it wants the merits of that objection to be decided in court. As Lopez-Jordan learned in Pott, a party who does not contest an arbitrator’s right to determine jurisdiction over that party may waive the right to later appeal the arbitrator’s exercise of such jurisdiction.