The case of the day is Schneider v. Kingdom of Thailand (2d Cir. 2012). Schneider was the German equivalent of the bankruptcy trustee of Walter Bau AG, a German firm whose predecessor in interest had made an investment in a Thai toll road between 1989 and 1997. Walter Bau initiated an arbitration under the German-Thai BIT, which applied to disputes concerning “approved investments made prior to [the Treaty’s] entry into force ….” By agreement of the parties, the arbitration was conducted under the UNCITRAL Rules.
Thailand objected to the tribunal’s jurisdiction on the ground that the investment was not an “approved investment” because Walter Bau had not obtained the appropriate certificate from the Thai Ministry of Foreign Affairs. Walter Bau responded that the investment was an “approved investment” because the Thai government had approved it in various ways. The tribunal found that it had jurisdiction and that the investments were indeed approved investments. After a hearing on the merits, the tribunal awarded Walter Bau more than € 30 million.
Walter Bau sought confirmation of the award in the Southern District of New York. Thailand moved to dismiss on the grounds that the tribunal had lacked jurisdiction. The judge concluded that the issue whether the investment was an “approved investment” was “an issue of arbitration agreement scope” rather than a “question of agreement formation” and, on a deferential standard of review, confirmed the award. Thailand appealed.
On appeal, the Second Circuit affirmed. The court rejected the motion judge’s framework, however. Whether the courts are to make an independent determination on the “approved investment” questions did not turn, as the judge thought, on whether the question was one of contract formation or one of contract scope. Rather, it turns on whether “there was clear and unmistakable evidence of the parties’ intent to commit that question to arbitration.” Without such evidence, the scope of an agreement to arbitrate is presumptively for the court. But with such evidence, questions of arbitrability are for the arbitrator. Here, the parties agreed to arbitrate under the UNCITRAL Rules, and Rule 21 provides:
The arbitral tribunal shall have the power to rule on objections that it has no jurisdiction, including any objections with respect to the existence or validity of the arbitration clause or of the separate arbitration agreement.
As the court held in Republic of Ecuador v. Chevron Corp., 638 F.3d 384 (2d Cir. 2011), agreement to arbitrate under the UNCITRAL Rules is, given Rule 21, “unmistakable evidence” that the parties intend to submit such questions to the arbitrator. The court rejected Thailand’s effort to distinguish Ecuador v. Chevron on the grounds that it involved a motion to stay rather than a motion to confirm. Therefore, Walter Bau won, despite the motion judge’s incorrect reasoning.