Reported / Citable
Background
Lummus Technology and Ineos are successors to the parties to a 2010 license agreement concerning technical information and know-how for producing, separating, and recovering paraxylene. The agreement required Ineos to disclose and license that information, while Lummus agreed to make payments and conduct worldwide marketing of sublicenses. It also contemplated technology-transfer meetings at Ineos facilities in the United States and Belgium, and included an arbitration provision.
After the agreement’s initial 15-year term, Lummus sued Ineos in Texas state court. Lummus alleged that Ineos improperly refused to authorize an approved catalyst supplier, in violation of contract provisions governing catalyst supply, and breached a provision concerning disclosure of technical information. Ineos removed the action under Chapter 2 of the Federal Arbitration Act, which implements the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Lummus moved to remand.
The Court’s Holding
The court denied remand, holding that it had subject-matter jurisdiction under 9 U.S.C. § 205. The arbitration agreement fell under the Convention because, although the parties appeared to assume they were American citizens, the commercial relationship bore a reasonable relation to an important foreign element. The agreement required some technology-transfer activity at an Ineos facility in Belgium and the parties anticipated that all of Lummus’s licensees would be located abroad.
The action also “related to” the arbitration agreement for purposes of Section 205. Lummus argued that its Clause 3.1 claim could be excluded from arbitration under the agreement’s opt-out provision. But its petition also asserted claims under Clauses 6.5 and 14.4(b), which were not within that exclusion. Ineos’s arbitration defense was therefore not completely absurd or impossible and could conceivably affect the case’s outcome.
Key Takeaways
- An arbitration agreement between U.S. parties may fall under the Convention when the agreement contemplates meaningful foreign performance.
- Contractual meetings and technology-transfer obligations in Belgium, coupled with anticipated foreign sublicensees, supplied the required foreign connection.
- For Convention removal, an arbitration defense need only conceivably affect the suit; a dispute over arbitrability does not itself defeat jurisdiction.
Why It Matters
The decision applies the Fifth Circuit’s broad approach to Convention-based removal. Agreements with domestic parties can support federal jurisdiction when their actual contemplated performance has a sufficient overseas component.
It also distinguishes jurisdiction from the ultimate merits of an arbitration defense. Even where some claims may be contractually excluded from arbitration, the presence of other potentially arbitrable claims can keep the action in federal court under Section 205.