Summary

Arbitration

Affirming the district court's judgment on a petition for enforcement of a foreign arbitral award against Chevon Corporation, the panel held that the parties did not enter into a binding agreement to arbitrate, and enforcement under the New York Convention therefore should be denied.

In 1949, the government of Saudi Arabia transferred land to an official, who leased it to an affiliate of what later became Chevron. The official's heirs claimed that Chevron owed them rent. They contended that an arbitration clause contained in a separate 1933 land concession agreement between Saudi Arabia and Chevron's predecessor, Standard Oil Company of California, applied to their dispute. An Egyptian arbitral panel agreed and awarded them $18 billion. The district court found that the parties had never agreed to arbitrate and therefore held that it lacked jurisdiction over the heirs' petition for enforcement of the award.

The panel held that under Fed. R. App. P. 3(c)(1)(A), the five heirs named in the notice of appeal were the only proper appellants.

Agreeing with the Second Circuit, and disagreeing with the Eleventh Circuit, the panel held that the absence of an agreement to arbitrate was a reason to deny enforcement on the merits, rather than to dismiss for lack of subject-matter jurisdiction. The panel held that so long as a party makes a non-frivolous claim that an arbitral award is covered by the New York Convention, the district court must assume subject-matter jurisdiction.

The panel held that as to respondent Chevron USA, Inc., which was not named in the Egyptian arbitral award, the heirs advanced no non-frivolous theory of enforcement. The panel therefore affirmed the district court's dismissal for lack of subject-matter jurisdiction as to Chevron USA.

The panel held that as to Chevron Corporation, the district court correctly concluded that there was no binding agreement to arbitrate between the parties. First, the heirs could not enforce the 1933 concession agreement against Chevron directly because the agreement was signed by Saudi Arabia, not the heirs, and Chevron's rights and obligations under the 1933 agreement were extinguished long ago.

Second, the 1949 deed did not incorporate by reference the arbitration clause contained in the 1933 agreement. The panel held that the proper disposition was not dismissal but denial of the enforcement petition on the merits.

Nonetheless, because there was no reason to remand to the district court simply to direct it to affix a new label to its order, the panel affirmed the district court's judgment.

See also:

• OGEL: First Petroleum Agreement between Kingdom of Saudi Arabia and Standard Oil of California Company - English and Arabic - 20 May 1933
• OGEL: Waleed Bin Khalid Abu Al-Waleed Al-Qargani v Chevron - Arbitration Award Issued by the International Arbitration Center Cairo - English and Arabic - 3 June 2015
• TDM: First Petroleum Agreement between Kingdom of Saudi Arabia and Standard Oil of California Company - English and Arabic - 20 May 1933
• TDM: Waleed Bin Khalid Abu Al-Waleed Al-Qargani v Chevron - Arbitration Award Issued by the International Arbitration Center Cairo - English and Arabic - 3 June 2015