By George H. Friedman, SAA Publisher & Editor-in-Chief
Relying on recently-announced Eleventh Circuit precedent -- that the grounds set forth in FAA section 10 are the sole basis for challenging “foreign” awards under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“UN Convention”), where the arbitration took place in the United States – the Court finds that the Arbitrators’ alleged lack of complete disclosure did not warrant Award vacatur.
An issue dividing the Circuits and some state courts is the grounds for challenging awards under the UN Convention. The views range from: 1) application of the grounds in Article V of the Convention, as implemented by Federal Arbitration Act (“FAA”) Chapter 2’s 9 U.S.C. section 207; 2) the grounds set forth in FAA Chapter 1’s 9 U.S.C. section 10; and/or 3) both for “foreign” awards resulting from an arbitration conducted in the U.S. As reported in SAA 2023-16 (Apr. 27), Corporacion AIC, SA v. Hidroelectrica Santa Rita S.A., 66 F.4th 876, 880 (11th Cir. Apr. 13, 2023) (en banc), represented reversal of Eleventh Circuit precedent dating back over 20 years, with the Court holding unanimously that in UN Convention arbitrations conducted in the U.S., only the FAA Chapter 1 grounds are available.
Prior Precedent Overruled
Said the Opinion:
“We hold that in a New York Convention case where the arbitration is seated in the United States, or where United States law governs the conduct of the arbitration, Chapter 1 of the FAA provides the grounds for vacatur of an arbitral award. To the extent that Industrial Risk and Inversiones are inconsistent with this holding, we overrule them. The district court correctly followed Industrial Risk and Inversiones, which constituted binding precedent at the time, and declined to address Corporación AIC’s argument that the arbitral award should be vacated because the panel exceeded its powers under 9 U.S.C. § 10(a)(4). We vacate the judgment in favor of Hidroeléctrica and remand for the district court to consider Corporación AIC’s § 10(a)(4) contention” (footnote omitted).
Applying the New Standard, Award Upheld
Applying the new standard, the Court finds in Grupo Unidos por el Canal, S.A. v. Autoridad del Canal de Panama, No. 21-14408 (11th Cir. Aug. 18, 2023), that allegedly inadequate Arbitrator disclosures did not warrant Award vacatur. We quote liberally from the Opinion, starting with the facts and procedural history:
“After Grupo Unidos por el Canal, S.A., received two adverse awards amounting to more than a quarter-billion dollars in an arbitration arising out of its construction work on the Panama Canal, Grupo Unidos sought wide-ranging disclosures from each of the three members of the panel pertaining to possible bias. Each arbitrator disclosed for the first time that he had served on panels in other, unrelated arbitrations in which an arbitrator or counsel involved in Grupo Unidos’s arbitration also participated. Following the disclosures of the new information, Grupo Unidos challenged the impartiality of the arbitrators before the International Court of Arbitration (‘ICA’) of the International Chamber of Commerce. The ICA agreed that some arbitrators failed to make a few disclosures but, notably, did not find any basis for removal and rejected Grupo Unidos’s challenges on the merits. Thereafter, Grupo Unidos moved -- unsuccessfully -- for the vacatur of the awards in the United States District Court for the Southern District of Florida. Autoridad del Canal de Panama, in turn cross-moved for confirmation of the awards, which the district court granted.” And the holding on appeal: “Because we agree with the International Court of Arbitration and the district court that Grupo Unidos has presented nothing that comes near the high threshold required for vacatur, we affirm the denial of vacatur and the confirmation of the awards.”
(ed: *This outcome is not surprising. We find that courts are reluctant to second-guess ADR administrators on this issue.)