The Eleventh Circuit’s latest decision in Corporacion AIC highlights a close review of international arbitration awards | Smith Gambrell Russel

On October 16, 2024, the U.S. Eleventh Circuit Court of Appeals issued its final ruling Hidroeléctrica Santa Rita SA v Corporación AIC, SAa long-standing dispute over the potential vacancy of an arbitration award.(1) The court’s previous decision in the case held that the grounds for vacancy in Chapter 1 of the Federal Arbitration Act (“FAA”) apply to all arbitration awards governed by the New York Convention. (2) In its most recent decision, the Eleventh Circuit examined whether one of the vacatur grounds in Chapter 1 of the FAA – that the arbitrators exceeded their authority – provided a basis for dismissing the disputed arbitration to quash the ruling. The court concluded that this was not the case.

In 2012, Hidroeléctrica Santa Rita SA entered into a contract with Corporación AIC, SA – both Guatemalan companies – for the design and construction of a hydroelectric power plant in Guatemala. Santa Rita suspended work on the project after local opposition and ultimately terminated the project. To recover certain advances it had already paid to AIC in connection with the project, Santa Rita initiated ICC arbitration proceedings against AIC in Miami.

In the arbitration, AIC responded with its own claims against Santa Rita. Furthermore, AIC requested the joinder of one of its subcontractors, who filed claims against AIC in connection with the termination of the project. The tribunal dismissed AIC’s joinder request, concluding that neither the underlying contracts at issue nor the applicable arbitration rules provided for a mechanism to join the subcontractor.

On the merits, AIC argued that Santa Rita had allegedly engaged in a bribery scheme with a local official, in violation of the anti-corruption provision of the contract. This provision prohibited the parties from engaging in conduct that violated the U.S. Foreign Corrupt Practices Act (“FCPA”). A majority of the tribunal rejected the argument. The majority did so based on a finding that the tribunal lacked authority to enforce the FCPA because the FCPA did not create a private right of action. The tribunal’s majority also ruled that there was insufficient evidence that Santa Rita had engaged in the alleged corrupt conduct.

In its final ruling, the tribunal ordered AIC to repay approximately $7 million in advance payments to Santa Rita and directed AIC to maintain certain bonds required by the parties’ contract. The tribunal issued a subsequent clarifying order requiring AIC to obtain new bonds if the existing bonds matured or expired.

After the tribunal issued its clarifying order, AIC petitioned the U.S. District Court for the Southern District of Florida to vacate the award under Section 10 of the FAA, arguing that the tribunal exceeded its jurisdiction. (3) The district court denied AIC’s motion based on Eleventh Circuit precedent Industrial risk insurers v MAN Gutehoffnungshutte GmbH. There, the Circuit Court had held that the vacatur grounds in Section 10 of the FAA did not apply to arbitral awards governed by the New York Convention. (4) A panel of the Eleventh Circuit affirmed the district court’s decision. (5) AIC filed a petition. for and sofa revision, which the court allowed. (6) The Full Court subsequently rejected her position Industrial riskand joins the Second, Third, Fifth, and Seventh Circuits in holding that the vacatur grounds in Section 10 of the FAA apply to rulings covered by the New York Convention.(7)

On remand, AIC argued that the tribunal exceeded its powers by, among other things: (1) failing to join AIC’s subcontractor; (2) refuse to enforce the anti-corruption provision of the contract; and (3) requiring AIC to obtain new bonds after the original bonds expired. (8) The district court again denied AIC’s request for vacatur. The court found that the tribunal’s decision on each of these issues was based on the arbitrators’ interpretation of the agreement between the parties, which the court could not review.

AIC appealed and the Eleventh Circuit affirmed. The court explained that when a party challenges an arbitration award and claims that the tribunal exceeded its powers, the court’s role is limited to assessing whether the tribunal even demonstrably interpreted or applied the contract. (9) The court concluded that the tribunal’s rulings on the three issues raised by AIC were all based on the tribunal’s interpretation of the contract between the parties.

On the bond issue, the court noted the tribunal’s reliance on dictionary definitions to interpret the relevant language in the parties’ agreement. On the anti-corruption issue, the court found that the tribunal’s jurisdictional findings with respect to the FCPA were based on the tribunal’s interpretation of the incorporation of the FCPA standards into the contract. Finally, with regard to joinder, the court found that the tribunal’s refusal to join the subcontractor was based on the tribunal’s interpretation of the parties’ arbitration agreement.

The Eleventh Circuit’s latest decision in Hydroelectrics breaks few new legal grounds. But the decision does underscore the narrow standard of review the Eleventh Circuit applies when considering a party’s vacatur motion based on the claim that the arbitral tribunal exceeded its authority. As long as the arbitral tribunal appears to have interpreted the parties’ agreement, the court will not revise the outcome of the arbitral tribunal’s substantive analysis.

(1) Hidroeléctrica Santa Rita SA v Corporación AIC, SA— F.4^e –, 2024 WL 4500962 (11th about October 16, 2024).

(2) Corporación AIC, SA v Hidroeléctrica Santa Rita SA66 F.4th 876, 890 (11th Cir. 2023).

(3) Corporación AIC, SA2020 WL 4485226, at *2.

(4) Identity card at *3 (cit Industrial risk141 F.3d 1434, 1446 (11th Cir. 1998)).

(5) Corporación AIC, SA v Hidroeléctrica Santa Rita SA34 F.4th 1290 (11th circa 2022).

(6) Corporación AIC, SA66 F.4e at 881.

(7) Identity card at 886.

(8) Hidroeléctrica Santa Rita, SA v Corporación AIC, SA684 F. Supp. 3d 1277, 1282-83 (S.D. Fla. 2023).

(9) Hydroelectrics— F.4th –, 2024 WL 4500962, at *3 (citations and citations omitted).