The Court of Appeals affirmed the District Court’s decision that there was no binding arbitration agreement amongst the parties. The Court of Appeals, however, noted that the District Court had incorrectly treated the absence of a binding arbitration agreement as a jurisdictional issue. The Court ruled that the absence of a binding arbitration agreement is a question of merits relating to the grounds for refusal of enforcement under Article V(1)(a) and 2(a) of the New York Convention and does not impact the jurisdiction of the enforcement court.

The arbitration was initiated by the appellants under an arbitration clause contained in a 1933 land concession agreement between Saudi Arabia and Chevron Corporation’s (Chevron) predecessor, Standard Oil Company of California (SOCAL). By 1948, SOCAL had assigned the land concession rights to its subsidiary, Aramco, and had become a minority shareholder of Aramco. In 1949, the Saudi Arabian Government transferred ownership over certain plots of land covered by the land concession agreement to Mr. Al-Qarqani and certain other recipients. The transfer deed contained a lease agreement between Mr. Al-Qarqani, the other land recipients and Aramco. In the 1970s - 1980s, Aramco was nationalized by the Saudi Arabian Government and was later dissolved.

The appellants are the heirs of the Mr. Al-Qarqani. They initiated the arbitration against Chevron seeking payment of rent under the 1949 transfer deed. The arbitral tribunal upheld jurisdiction and awarded in favour of the appellants. The Court of Appeals refused enforcement of the award on the ground that there was no binding arbitration agreement between the appellants and Chevron, noting that (i) the appellants were not party to the 1933 land concession agreement, which was executed between Saudi Arabia and SOCAL; (ii) the appellants had not demonstrated that they may assert Saudi Arabia’s interests under the 1933 land concessions agreement; (iii) it was not established that the 1949 transfer deed included a transfer of rights to Mr. Al-Qarqani to enforce the arbitration clause under the 1993 land concession agreement; and (iv) in any event, Chevron’s rights and obligations under the 1933 concession agreement were extinguished once SOCAL relinquished control of Aramco.