Opinion ID: 3048411
Heading Depth: 2
Heading Rank: 2

Heading: Scherk v. Alberto-Culver Co. (U.S. 1974)

Text: Only a few years later, the Supreme Court in Scherk extended these principles to arbitration, reasoning that “[a]n agreement to arbitrate before a specified tribunal is, in effect, a specialized kind of forum-selection clause that posits not only the situs of suit but also the procedure to be used in resolving the dispute.” 417 U.S. at 519, 94 S. Ct. at 2457. Scherk also recognized that U.S. statutory claims are amenable to arbitral resolution—even U.S. statutory claims containing anti-waiver provisions, such as the U.S. securities law barring any provision that requires a security buyer to waive compliance with the Securities Exchange Act of 1934. Id. at 513, 94 S. Ct. at 2454. Both the district and circuit courts in Scherk had refused to compel 6 Compare The Bremen, 407 U.S. at 8 n.8, 92 S. Ct. at 1912 n.8 (referencing an “undisputed” affidavit of a British solicitor that English courts would find the clauses exculpating the German defendant from liability “‘prima facie valid and enforceable’”), with id. at 8 n.9, 92 S. Ct. at 1912 n.9 (noting the Fifth Circuit’s suggestion that enforcing the exculpatory clauses would be improper in American courts because doing so “would deny [the American plaintiff] relief to which it was ‘entitled’”). 13 arbitration. Id. at 510, 94 S. Ct. at 2452-53. Reversing, the Supreme Court held that the parties’ agreement, calling for arbitration in Paris applying Illinois law, should be “respected and enforced.” Id. at 519-20, 94 S. Ct. at 2457. The Court stated that “[a] contractual provision specifying in advance the forum in which disputes shall be litigated and the law to be applied is[] . . . an almost indispensable precondition to achievement of the orderliness and predictability essential to any international business transaction.” Id. at 516, 94 S. Ct. at 2455 (emphasis added). The Scherk majority rejected the dissent’s insistence that “American standards of fairness” must govern the controversy, commenting that such judicial obstinacy “demeans the standards of justice elsewhere in the world, and unnecessarily exalts the primacy of United States law over the laws of other countries.” Id. at 517 n.11, 94 S. Ct. at 2456 n.11 (quotation marks omitted). After declaring that the arbitration clause must be “respected and enforced by the federal courts,” the Supreme Court’s 1974 Scherk decision commented that its holding garnered further support in light of the United States’ 1970 accession to the New York Convention and the treaty’s subsequent implementation by the FAA. Id. at 519-20 & n.15, 94 S. Ct. at 2457 & n.15. Although declining to decide whether the New York Convention required of its own force the enforcement of the arbitration clause, the Supreme Court proclaimed that the 14 Convention and the FAA “provide strongly persuasive evidence of congressional policy consistent with the decision we reach today.” Id. at 520 n.15, 94 S. Ct. at 2457 n.15. C. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. (U.S. 1985) In Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 105 S. Ct. 3346 (1985), the Supreme Court again enforced an arbitration clause in a sales agreement—this time calling for arbitration in Japan under the rules of the Japan Commercial Arbitration Association—even though a litigant raised U.S. statutory causes of action. In Mitsubishi, a Japanese car manufacturer (Mitsubishi Motors Corporation) entered into a sales agreement with Soler Chrysler-Plymouth, Inc., a Puerto Rican dealership, for the sale of Mitsubishi-manufactured products. Id. at 616-17, 105 S. Ct. at 3348-49. Mitsubishi sued Soler for payments due and sought to compel arbitration as provided in the sales agreement. Id. at 618-19, 105 S. Ct. at 334950. Soler counterclaimed, alleging, inter alia, that Mitsubishi had violated the Sherman Act. Id. at 619-20, 105 S. Ct. at 3350. In holding that the arbitration agreement was enforceable, the Supreme Court in Mitsubishi stressed the strong presumption favoring the enforcement of arbitration clauses and remarked that “[t]here is no reason to depart from these 15 guidelines where a party bound by an arbitration agreement raises claims founded on statutory rights.” Id. at 626, 105 S. Ct. at 3354. The Supreme Court concluded that a party is bound by its agreement to arbitrate U.S. statutory claims unless Congress has precluded arbitration as to that subject matter: Just as it is the congressional policy manifested in the Federal Arbitration Act that requires courts liberally to construe the scope of arbitration agreements covered by that Act, it is the congressional intention expressed in some other statute on which the courts must rely to identify any category of claims as to which agreements to arbitrate will be held unenforceable. . . . Having made the bargain to arbitrate, the party should be held to it unless Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue. Nothing, in the meantime, prevents a party from excluding statutory claims from the scope of an agreement to arbitrate. Id. at 627-28, 105 S. Ct. at 3354-55 (emphasis added). This is consistent with Article II(1) of the Convention, which states that “[e]ach Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences . . . concerning a subject matter capable of settlement by arbitration.” New York Convention, art. II(1) (emphasis added). The Mitsubishi Court agreed that Article II(1) “contemplates exceptions to arbitrability grounded in domestic law.” 473 U.S. at 639 n.21, 105 S. Ct. at 3360 n.21. In other words, courts may examine, at the arbitration-enforcement stage, whether a type of statutory claim cannot be 16 submitted to arbitration. The Supreme Court stressed, however, that this subjectmatter exception is a policy decision to be made by Congress, not courts: The utility of the Convention in promoting the process of international commercial arbitration depends upon the willingness of national courts to let go of matters they normally would think of as their own. Doubtless, Congress may specify categories of claims it wishes to reserve for decision by our own courts without contravening this Nation’s obligations under the Convention. But we decline to subvert the spirit of the United States’ accession to the Convention by recognizing subject-matter exceptions where Congress has not expressly directed the courts to do so. Id. (emphasis added). The Mitsubishi Court rejected the argument that Sherman Act antitrust claims were unsuitable for arbitration. The Supreme Court adverted to its decision in Scherk, concluding that “concerns of international comity, respect for the capacities of foreign and transnational tribunals, and sensitivity to the need of the international commercial system for predictability in the resolution of disputes require that we enforce the parties’ agreement, even assuming that a contrary result would be forthcoming in a domestic context.” Id. at 629, 105 S. Ct. at 3355 (emphasis added). The Mitsubishi Court observed that “The Bremen and Scherk establish a strong presumption in favor of enforcement of freely negotiated contractual choice-of-forum provisions,” that this presumption is “reinforced by the emphatic federal policy in favor of arbitral dispute resolution,” and that this 17 federal policy “applies with special force in the field of international commerce.” Id. at 631, 105 S. Ct. at 3356. Because the meaning of dicta in Mitsubishi’s footnote 19 is so hotly disputed by the parties, we discuss it in detail. In footnote 19, the Supreme Court commented that the United States, acting as amicus curiae, raised the possibility that the Japanese arbitral panel could read the choice-of-law provision to “wholly . . . displace American law,” not just as to the interpretation of the contract terms but also where it would otherwise apply. Id. at 637 n.19, 105 S. Ct. at 3359 n.19. Although the arbitration clause provided Swiss law governed the agreement, Mitsubishi conceded in oral argument that American law would apply to the antitrust claims in arbitration. Id. The Supreme Court stated it had “no occasion to speculate on this matter at this stage in the proceedings, when Mitsubishi seeks to enforce the agreement to arbitrate, not to enforce an award.” Id. The Supreme Court added there was no need to “consider now the effect of an arbitral tribunal’s failure to take cognizance of the statutory cause of action on the claimant’s capacity to reinitiate suit in federal court.” Id. (emphasis added). In continuing dicta in footnote 19, the Supreme Court “merely note[d]” that in the event the “choice-of-forum and choice-of-law clauses operated in tandem as a prospective waiver of a party’s right to pursue statutory remedies for antitrust 18 violations, we would have little hesitation in condemning the agreement as against public policy.” Id. The Supreme Court’s footnote 19 provided no examples of the types of clauses constituting such an impermissible prospective waiver. And to date, the Supreme Court has never invalidated an arbitration agreement under the “prospective waiver” reasoning of footnote 19. Instead, it has compelled arbitration at the initial arbitration-enforcement stage, noting that this “prospective waiver” issue is premature and should instead be resolved at the arbitral awardenforcement stage. See Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 540-41, 115 S. Ct. 2322, 2329-30 (1995) (concluding, at arbitrationenforcement stage, that ruling on “prospective waiver” question would be “premature” given subsequent opportunity for review at award-enforcement stage); see also 14 Penn Plaza LLC v. Pyett, 556 U.S. 247, __, 129 S. Ct. 1456, 1474 (2009) (stating, at arbitration-enforcement stage, that resolution of the question of a prospective waiver of “federally protected civil rights . . . . at this juncture would be particularly inappropriate in light of our hesitation to invalidate arbitration agreements on the basis of speculation” (citations omitted and emphasis added)). Notably, Mitsubishi is consistent with the fact that an Article V public policy defense applies at the award-enforcement stage, not the initial arbitration19 enforcement stage. Immediately following footnote 19, the text of Mitsubishi discussed how the Court’s enforcement of the arbitration clause did not divest federal courts of their authority to review the arbitrators’ ultimate decision. 473 U.S. at 636, 105 S. Ct. at 3359-60. At the award-enforcement stage, federal courts retain the ability to review whether the arbitral proceeding paid sufficient heed to a litigant’s claims and the public policies underlying them: “Having permitted the arbitration to go forward, the national courts of the United States will have the opportunity at the award-enforcement stage to ensure that the legitimate interest in the enforcement of the antitrust laws has been addressed.” Id. at 638, 105 S. Ct. at 3359 (emphasis added). Additionally, the Mitsubishi Court observed that Article V of the New York Convention “reserves to each signatory country the right to refuse enforcement of an award where the ‘recognition or enforcement of the award would be contrary to the public policy of that country.’” Id. (emphasis added) (quoting New York Convention, art. V(2)(b)). Further allaying concerns that such public policy review would occur too late in the process, the Supreme Court stated that although “the efficacy of the arbitral process requires that substantive review at the award-enforcement stage remain minimal, it would not require intrusive inquiry to ascertain that the tribunal took cognizance of the antitrust claims and actually 20 decided them.” Id. at 638, 105 S. Ct. at 3360. In other words, at the arbitral award-enforcement stage, a court can ascertain if the arbitral tribunal recognized the antitrust claims. The Supreme Court gave no indication that an Article V public policy analysis—which by its own terms applies when the “[r]ecognition and enforcement of an arbitral award” is sought, New York Convention art. V(2)—should be conducted prior to the award-enforcement stage. D. Vimar Seguros y Reaseguros v. M/V Sky Reefer (U.S. 1995) Importantly for the issue here, Vimar extended this wait-and-see principle of Mitsubishi even further. In Vimar, a U.S. distributor purchased fruit to be shipped from Morocco in a vessel owned by a Panamanian company and time-chartered to a Japanese company. 515 U.S. at 530, 115 S. Ct. at 2325. Because the fruit cargo was damaged en route, the U.S. distributor and its subrogated marine cargo insurer brought suit in federal district court against the ship in rem and its Panamanian owner in personam, while those defendants sought to compel arbitration. Id. at 531-32, 115 S. Ct. at 2325. The Supreme Court enforced the arbitration provision providing that disputes “shall be referred to arbitration in Tokyo by the Tokyo Maritime Arbitration Commission” and that the contract “shall be governed by the Japanese law.” Id. at 531, 115 S. Ct. at 2325 (quotation marks omitted). The Supreme 21 Court acknowledged that the substantive law prospectively applied in the Japanese arbitration proceedings could reduce the defendant Panamanian shipping carrier’s liability below the U.S. legal guarantees afforded to the American cargo owner under the Carriage of Goods by Sea Act (“COGSA”).7 Id. at 539-40, 115 S. Ct. at 2329. Specifically, Japanese Hague Rules vested carriers with an additional defense based on the acts or omissions of hired stevedores, whereas the U.S. statute, COGSA, rendered the proper stowage of cargo a nondelegable duty. Id. Echoing Mitsubishi, the Vimar Court stated that “[w]hatever the merits of petitioner’s comparative reading of COGSA and its Japanese counterpart, its claim is premature. At this interlocutory stage it is not established what law the 7 COGSA, now codified as amended in the note following 46 U.S.C. § 30701, “governs the terms of bills of lading issued by ocean carriers engaged in foreign trade.” Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., 561 U.S. __, 130 S. Ct. 2433, 2440 (2010). COGSA provides that “‘[a]ny clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to or in connection with the goods, . . . or lessening such liability . . . shall be null and void and of no effect.’” Vimar, 515 U.S. at 534, 115 S. Ct. at 2326-27 (emphasis added) (quoting COGSA). The plaintiffs in Vimar contended that this provision of COGSA proscribed enforcement of the foreign arbitration clause. As a preliminary matter, the Supreme Court rejected the plaintiffs’ argument that the costs and inconvenience of foreign arbitration necessarily “lessen[ed] . . . liability” in a manner not countenanced by COGSA. The Supreme Court concluded that nothing in COGSA’s “lessening such liability” language “prevents the parties from agreeing to enforce [COGSA’s] obligations in a particular forum.” Id. at 535, 115 S. Ct. at 2327. Relying on the “contemporary principles of international comity and commercial practice” observed in The Bremen, Scherk, and Mitsubishi, the Vimar Court declared that “[i]t would also be out of keeping with the objects of the Convention for the courts of this country to interpret COGSA to disparage the authority or competence of international forums for dispute resolution.” Id. at 537-38, 115 S. Ct. at 2328-29. 22 arbitrators will apply to petitioner’s claims or that petitioner will receive diminished protection as a result.” Id. at 540, 115 S. Ct. at 2329 (emphasis added). Unlike Mitsubishi, the foreign defendants in Vimar offered no stipulation that American law would apply to the arbitration proceedings in Japan. The Vimar Court hypothesized scenarios where the arbitrators could conclude “that COGSA applies of its own force or that Japanese law does not apply so that, under another clause of the bill of lading, COGSA controls.” Id. Nevertheless, such speculations were immaterial at this juncture, the Supreme Court reasoned, since the foreign defendants “seek only to enforce the arbitration agreement” and the district court “retained jurisdiction over the case and ‘will have the opportunity at the award-enforcement stage to ensure that the legitimate interest in the enforcement of the . . . laws has been addressed.’” Id. at 540, 115 S. Ct. at 2329-30 (quoting Mitsubishi, 473 U.S. at 638, 105 S. Ct. at 3359). Even though the bill of lading specified that the contract “shall be governed by the Japanese law,” the Supreme Court concluded it was “correct to reserve judgment on the choice-of-law question,” since this “must be decided in the first instance by the arbitrator.” Id. at 541, 115 S. Ct. at 2330 (quotation marks omitted) (citing Mitsubishi, 473 U.S. at 637 n.19, 105 S. Ct. at 3359 n.19). 23 Citing Mitsubishi again, the Supreme Court added a qualifier to the language in Mitsubishi’s footnote 19. Vimar stated that an arbitration agreement could be “‘condemn[ed] . . . as against public policy’” if the “‘choice-of-forum and choice-of-law clauses operated in tandem as a prospective waiver of a party’s right to pursue statutory remedies’” and if there were “no subsequent opportunity for review.” Id. at 540, 115 S. Ct. at 2330 (emphasis added) (quoting Mitsubishi, 473 U.S. at 637 n.19, 105 S. Ct. at 3359 n.19). Since “the District Court has retained jurisdiction, mere speculation that the foreign arbitrators might apply Japanese law which, depending on the proper construction of COGSA, might reduce respondents’ legal obligations, does not in and of itself lessen liability under COGSA . . . .” Id. at 541, 115 S. Ct. at 2330. Together, these Supreme Court precedents propound several overarching themes: (1) courts should apply a strong presumption in favor of enforcement of arbitration and choice clauses; (2) U.S. statutory claims are arbitrable, unless Congress has specifically legislated otherwise; (3) choice-of-law clauses may be enforced even if the substantive law applied in arbitration potentially provides reduced remedies (or fewer defenses) than those available under U.S. law; and (4) even if a contract expressly says that foreign law governs, as in Vimar, courts should not invalidate an arbitration agreement at the arbitration-enforcement stage 24 on the basis of speculation about what the arbitrator will do, as there will be a later opportunity to review any arbitral award. E. Lipcon v. Underwriters at Lloyd’s, London (11th Cir. 1998) Following Supreme Court precedent, as we must, this Court enforced both choice-of-law and forum-selection clauses in Lipcon v. Underwriters at Lloyd’s, London, 148 F.3d 1285 (11th Cir. 1998), despite the likelihood that the law to be applied in the foreign tribunal would accord the American plaintiffs fewer remedies than would be available under U.S. statutory law. Lipcon is not an arbitration case, and was not subject to the Convention’s linking of Article V’s public policy defense to the arbitral award-enforcement stage. Aside from the timing feature of when the Convention’s public policy defense is raised, Lipcon is highly relevant to footnote 19 in Mitsubishi. In Lipcon, the plaintiff American investors incurred massive financial losses from certain underwriting transactions. Id. at 1288. The Lipcon case arose from efforts by Lloyd’s of London, a large British insurance market, to recruit American investors. Id. Under the contractual arrangement, the American investors would provide underwriting capital in exchange for the right to participate in Lloyd’s underwriting agencies. Id. Like The Bremen, the agreements in Lipcon contained choice-of-law and forum-selection clauses providing that “the courts of England 25 shall have exclusive jurisdiction to settle any dispute” and the “rights and obligations of the parties . . . shall be governed by and construed in accordance with the laws of England.” Id. (emphasis added and quotation marks omitted). Alleging that the English defendant Lloyd’s concealed information, the American investors brought statutory claims in U.S. district court under, inter alia, the Securities Act of 1933 and the Securities Exchange Act of 1934 (collectively, the “U.S. Securities Acts”). Id. at 1288-89. Among other contentions, the American plaintiffs argued that Mitsubishi’s footnote 19 indicated the Supreme Court’s “unwillingness to permit choice provisions to eliminate United States statutory remedies.” Id. at 1293. This Court in Lipcon rejected this argument and affirmed the district court’s enforcement of the English forum and English law clauses, concluding that the forum-selection and choice-of-law clauses “satisfy scrutiny for fundamental fairness and do not contravene public policy.” Id. at 1287. Similar to the Supreme Court’s Scherk decision, Lipcon considered whether the anti-waiver provisions of U.S. securities law—which barred any provision requiring a security buyer to waive compliance with the U.S. Securities 26 Acts8—voided the choice-of-law and forum-selection clauses at issue. While acknowledging that the American plaintiffs’ argument “finds strong support in the plain language of the anti-waiver provisions, which facially admit of no exceptions,” this Court nonetheless stated that “precedent and policy considerations compel us to conclude that Bremen’s framework for evaluating choice clauses in international agreements governs this case.” Id. at 1292. The Lipcon Court summarized the “Bremen test” as calling for the enforcement of forum-selection clauses unless: (1) their formation was induced by fraud or overreaching; (2) the plaintiff effectively would be deprived of its day in court because of the inconvenience or unfairness of the chosen forum; (3) the fundamental unfairness of the chosen law would deprive the plaintiff of a remedy; or (4) enforcement of such provisions would contravene a strong public policy. Id. at 1296. As to the first factor—“fraud or overreaching”—we concluded that the American plaintiffs had not adequately pled fraud. Id. As to the latter three factors of “the inconvenience or unfairness of the chosen forum,” “the fundamental unfairness of the chosen law,” and the 8 The Securities Act of 1933 provides, “Any condition, stipulation, or provision binding any person acquiring any security to waive compliance with any provision of this subchapter or of the rules and regulations of the Commission shall be void.” 15 U.S.C. § 77n. Similarly, the Securities Exchange Act of 1934 provides, “Any condition, stipulation, or provision binding any person to waive compliance with any provision of this chapter or of any rule or regulation thereunder, or of any rule of a self-regulatory organization, shall be void.” 15 U.S.C. § 78cc(a). 27 “contraven[tion] [of] a strong public policy,” this Court in Lipcon examined whether the English remedies were inadequate, given that English law contained no direct analogues to the U.S. Securities Acts. We recounted numerous facets of English securities law which, the American plaintiffs contended, provided for inferior remedies as compared to their U.S. counterparts. Id. at 1297-98. We confessed there was “little doubt that ‘the United States securities laws would provide [appellants] with a greater variety of defendants and a greater chance of success due to lighter scienter and causation requirements.’” Id. at 1297 (quoting Roby v. Corporation of Lloyd’s, 996 F.2d 1353, 1366 (2d Cir. 1993)). In concluding that English law contained “adequate” remedies to withstand a challenge under the Bremen test, this Court declared, “We will not invalidate choice clauses[] . . . simply because the remedies available in the contractually chosen forum are less favorable than those available in the courts of the United States.” Id. (emphasis added). Rather, choice clauses are unenforceable “only when the remedies available in the chosen forum are so inadequate that enforcement would be fundamentally unfair.”9 Id. (emphasis added). 9 Lipcon approvingly cited similar conclusions reached by the Second and Tenth Circuits. See Roby, 996 F.2d at 1360-61 (“In the absence of other considerations, the agreement to submit to arbitration or the jurisdiction of the English courts must be enforced even if that agreement tacitly includes the forfeiture of some claims that could have been brought in a different forum.”); Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953, 958 (10th Cir. 1992) (“The fact that an international transaction may be subject to laws and remedies different or less 28 Lastly, in Lipcon we were mindful of Mitsubishi’s footnote 19 “prospective waiver” language. See id. at 1298 (citing Mitsubishi, 473 U.S. at 637 n.19, 105 S. Ct. at 3359 n.19). The SEC, as amicus curiae, argued that courts which had addressed the issue gave short shrift to the “compensatory function of private actions under the securities laws” by enforcing similar choice clauses. Id. Although recognizing the value of these private actions, the Lipcon Court opined, “We are more confident than the SEC . . . that the compensatory policy underlying United States securities law will be vindicated by litigation in English courts under English law; this is especially so given our conclusion that English law provides adequate remedies to appellants in this case.” Id. at 1299 (emphasis added). Accordingly, this Court held that the American plaintiffs were bound by the choice clauses and must honor their bargain by bringing their claims in English courts, under English law. Id. F. Bautista v. Star Cruises (11th Cir. 2005) Next comes Bautista v. Star Cruises, where this Court compelled arbitration of Jones Act negligence claims in the Philippines and rejected the plaintiff seamen’s arguments that the arbitration provision was “unconscionable.” 396 favorable than those of the United States is not a valid basis to deny enforcement, provided that the law of the chosen forum is not inherently unfair.”). 29 F.3d at 1302-03. In reaching this holding, Bautista followed the clear weight of the Supreme Court’s and our Circuit’s precedents discussed above. Bautista involved the explosion of a cruise ship’s steam boiler while the vessel was docked in Miami. Id. at 1292. Four injured crewmembers and the personal representatives of six deceased crewmembers—all Filipino citizens, id. at 1294 n.7 (collectively referred to as the “plaintiff seamen”)—filed separate complaints in Florida state court against defendant NCL (owner of the ship) and its alleged parent company, Star Cruises. Id. at 1292. Their complaints sought damages for failure to provide maintenance, cure, and unearned wages, and for Jones Act negligence and unseaworthiness. Id. The defendant NCL removed the case to federal court and sought to compel arbitration in the Philippines pursuant to the seamen’s one-page employment agreements. Id. at 1292-93. The employment agreements, along with other facets of the seaman hiring process, were regulated by the Philippine government through the Philippine Overseas Employment Administration (“POEA”). Id. at 1293. The employment agreements incorporated by reference a document containing the arbitration clause, which provided that all claims and disputes arising from employment should be submitted to the National Labor Relations Commission in the Philippines, or to a voluntary arbitrator or panel of arbitrators 30 (presumably also in the Philippines). Id. at 1293 n.5. The district court compelled arbitration in the Philippines and retained jurisdiction to enforce any arbitral award. Id. at 1294. Following the Convention and precedent, this Court in Bautista recognized that it: (1) conducts only a “very limited inquiry” in deciding a motion to compel arbitration under the Convention, id. (quotation marks omitted), and (2) must be “mindful that the Convention Act ‘generally establishes a strong presumption in favor of arbitration of international commercial disputes.’” Id. at 1294-95 (quoting Indus. Risk Insurers, 141 F.3d at 1440). The Bautista Court quoted Mitsubishi’s instructions to enforce international arbitration clauses even if a different resolution would be reached in a purely domestic setting. Id. at 1302. We also explained that a court must order arbitration unless (1) the four jurisdictional prerequisites are not met10 or (2) an affirmative defense under the New York Convention applies. Id. at 1294-95. After determining that all jurisdictional prerequisites were met, the Bautista 10 The jurisdictional prerequisites mandate that: (1) there is an agreement in writing within the meaning of the Convention; (2) the agreement provides for arbitration in the territory of a signatory of the Convention; (3) the agreement arises out of a legal relationship, whether contractual or not, which is considered commercial; and (4) a party to the agreement is not an American citizen, or that the commercial relationship has some reasonable relation with one or more foreign states. Bautista, 396 F.3d at 1294 n.7. 31 Court next considered whether the plaintiff seamen could assert any affirmative defenses under the Convention. We addressed only the defenses in Article II, which provides that arbitration agreements should be enforced unless the agreement “is null and void, inoperative or incapable of being performed.” New York Convention, art. II(3). The plaintiff seamen made two arguments: (1) that the arbitration provision was “unconscionable” and (2) that the dispute was not arbitrable.11 Bautista, 396 F.3d at 1301-02. This Court framed the first argument as implicating Article II’s “null and void” language, whereas the second argument appertained to Article II’s “incapable of being performed” phrasing. Id. Importantly, in Bautista we held that Article II’s “null and void” clause was confined to “‘standard breach-of-contract defenses’” and that “[t]he limited scope of the Convention’s null and void clause ‘must be interpreted to encompass only those situations—such as fraud, mistake, duress, and waiver—that can be applied neutrally on an international scale.’” Id. at 1302 (emphasis added) (quoting DiMercurio, 202 F.3d at 79-80). The plaintiff seamen had not claimed fraud, 11 Bautista also analyzed a separate argument propounded by the plaintiff seamen: that the FAA exemption for seamen’s employment contracts applied to their employment agreements, thus foreclosing operation of the arbitration provision. See Bautista, 396 F.3d at 1295-1300. In an exercise of statutory interpretation, this Court determined that the plain language of chapter 2 of the FAA barred the plaintiff seamen’s attempt to apply the exemption. Id. Because Lindo does not raise this issue on appeal, it is not further addressed here. 32 mistake, duress, or waiver, and thus we enforced their arbitration agreement. Id. In rejecting the seamen’s asserted defense that their employment contracts were “unconscionable,” this Court in Bautista concluded that economic hardship and unconscionability arguments are not available defenses under Article II of the Convention. We indicated that “[d]omestic defenses to arbitration are transferrable to a Convention Act case only if they fit within the limited scope of defenses described above.” Id. (emphasis added). Since it was “doubtful that there exists a precise, universal definition of the unequal bargaining power defense that may be applied effectively across the range of countries that are parties to the Convention,” this Court “decline[d] to formulate one.” Id. Although acknowledging that the seamen’s penury might lead to a “hard bargain during the hiring process,” we pointed out that the Philippines government, operating through POEA, had a role in the hiring process to protect seamen interests. Id. at 1302 n.13. The Bautista Court next considered whether the plaintiff seamen’s claims were even arbitrable in the Philippines. The plaintiff seamen had cited to a Philippine case involving tortious conduct in which the Philippine Supreme Court determined that both the labor arbiter and the national labor relations body lacked jurisdiction to consider the claims. Id. at 1302-03. In the case before it, by 33 contrast, the Bautista Court commented that such preclusion of the claim “is not foreordained.” Id. at 1303. This Court noted that “Plaintiffs have options beyond tort claims” and thus the Philippine case did not provide a sufficient basis for concluding that the employment dispute at issue could not be arbitrated in the Philippines. Id. Having found Article II’s “null and void” clause inapplicable and having determined that the arbitration provision was not “incapable of being performed” in the Philippines, the Bautista Court ruled that the district court had properly granted NCL’s motion to compel arbitration of the plaintiff seamen’s claims—including claims under the Jones Act—in the Philippines. Id. G. Thomas v. Carnival Corp. (11th Cir. 2009) This survey brings us to Thomas v. Carnival Corp., 573 F.3d 1113 (11th Cir. 2009), where this Court did not enforce a plaintiff’s arbitration agreement as to his Seaman’s Wage Act claim. The plaintiff in Thomas was the head waiter on defendant Carnival’s cruise ship, which flew a Panamanian flag of convenience. Id. at 1115-16. The plaintiff (Thomas) sued Carnival for injuries incurred onboard its ship. Id. at 1115. The complaint alleged Jones Act negligence, unseaworthiness, failure to provide maintenance and cure, and failure to pay wages under the Seaman’s Wage Act. Id. As to the place of arbitration, the 34 plaintiff’s employment agreement specified that any disputes would be arbitrated in the Philippines. Id. at 1116. As to the choice of law, the law of the vessel’s flag applied in the proceedings (in the plaintiff’s case, Panamanian law).12 Id. at 1116, 1123. The district court compelled arbitration in the Philippines. Id. at 1115. On appeal, the plaintiff argued that his arbitration clause should not be enforced because, inter alia, (1) not all the jurisdictional prerequisites for enforcement were met, and (2) the Convention provides that courts should not enforce an arbitration clause when doing so “‘would be contrary to the public policy of that country.’” Id. (quoting New York Convention, art. V(2)(b)). The plaintiff argued that the foreign forum would apply Panamanian law, and thus his arbitration clause operated as a prospective waiver of his U.S. statutory rights, in contravention of U.S. public policy. Id. This Court determined that only the Seaman’s Wage Act claim met the four jurisdictional prerequisites because the other claims (including Thomas’s Jones Act claim) arose before the arbitration agreement went into effect.13 Id. at 1117-20. 12 There was no indication that the employment contract in Thomas was negotiated by a union, or incorporated by reference a collective bargaining agreement. 13 The Thomas Court expressly declined to address whether the plaintiff’s Jones Act claim was arbitrable, as it did not fall within the scope of the arbitration agreement. 573 F.3d at 1120 n.9. 35 In analyzing the plaintiff’s affirmative defenses under the Convention, the Thomas Court cited only to Article V, quoting as follows: Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that . . . [t]he recognition or enforcement of the award would be contrary to the public policy of that country. Id. at 1120 (alteration and omission in original) (quoting New York Convention, art. V(2)(b)). The Thomas Court did not cite Article II anywhere in the opinion. At the conclusion of the opinion, however, Thomas declared, “[W]e find the Arbitration Clause requiring arbitration in the Philippines under Panamanian law null and void as it relates to Thomas’s Seaman’s Wage Act Claim.” Id. at 1124 (emphasis added). In a footnote appended thereto, Thomas stated, “[T]he narrow holding is that the Convention does govern but, applying its affirmative defenses provision, we find that the particular arbitration clause in question is null and void as a matter of public policy.” Id. at 1124 n.17 (third emphasis added). Thus, although Thomas does not cite Article II, it does twice use the term “null and void,” which is an Article II defense. Thomas crafted a new public policy defense, providing that arbitration is unenforceable if foreign law applies because the plaintiff cannot assert U.S. statutory claims. The Thomas Court distinguished its case from Mitsubishi and 36 Vimar on the basis that Thomas’s arbitration agreement provided that Panamanian law would apply. The Thomas Court stated that—unlike a situation where American law would affirmatively be applied in an arbitration setting (Mitsubishi) or at least potentially applied and subject to later review by U.S. courts (Vimar)—“[i]n the case before us . . . it is undisputed that, regardless of the procedural posture of the case, U.S. law will never be applied in resolving the resolution of Thomas’s claims.” Id. at 1122-23. The Thomas Court offered its own characterization of the Mitsubishi and Vimar decisions: “The [Supreme] Court, then, has held that arbitration clauses should be upheld if it is evident that either U.S. law definitely will be applied [(Mitsubishi)] or if, [sic] there is a possibility that it might apply and there will be later review [(Vimar)].”14 Id. at 1123. The Thomas Court concluded that “[t]he arbitration clauses that provided the bases for these holdings are in direct contradistinction to the Arbitration Clause in [Thomas’s] case, which specifies ex ante that only foreign law would apply in arbitration. There is no uncertainty as to the governing law in these proposed arbitral proceedings—only Panamanian law 14 The Thomas Court quoted Mitsubishi’s footnote 19 dicta, stating that if “‘the choice-offorum and choice-of-law clauses operated in tandem as a prospective waiver of a party’s right to pursue statutory remedies . . . , we would have little hesitation in condemning the agreement as against public policy.’” Thomas, 573 F.3d at 1121 (quoting Mitsubishi, 473 U.S. at 637 n.19, 105 S. Ct. at 3359 n.19). 37 will be applied.” Id. The Thomas Court opined that there was “no assurance of an ‘opportunity for review’” after the arbitration process concluded, since “the possibility of any later opportunity presupposes that arbitration will produce some award which the plaintiff can seek to enforce.” Id. In this regard, the Thomas Court stated that (1) “Thomas would only be arbitrating a single issue—the Seaman’s Wage Act claim, one derived solely from a U.S. statutory scheme”; (2) “If, applying Panamanian law, Thomas receives no award in the arbitral forum—a distinct possibility given the U.S. based nature of his claim—he will have nothing to enforce in U.S. courts”; and, therefore, (3) U.S. courts “will be deprived of any later opportunity to review.” Id. at 1123-24. The Thomas Court pronounced that this possibility of no subsequent court review “would counsel against being deferential in this circumstance.” Id. at 1124. Consequently, the Thomas Court applied no deference and refused to compel arbitration as to the plaintiff’s Seaman’s Wage Act claim. Id. Thomas thus concluded that arbitration agreements that select any law other than U.S. law are unenforceable under the Convention because they eliminate a plaintiff’s U.S. statutory claims and a plaintiff may possibly receive no award, precluding later court review. 38