On October 16, 2024, the U.S. Eleventh Circuit Court of Appeals issued its latest decision in Hidroeléctrica Santa Rita S.A. v. Corporación AIC, SA, a long-running dispute over the potential vacatur of an arbitral award.[1] The court’s earlier decision in the case held that the grounds for vacatur in Chapter 1 of the Federal Arbitration Act (“FAA”) apply to all arbitral 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 to vacate the arbitral award at issue. The court concluded that it did not.
In 2012, Hidroeléctrica Santa Rita S.A. contracted with Corporación AIC, SA—both Guatemalan companies—for the design and construction of a hydroelectric plant in Guatemala. Santa Rita suspended work on the project following local opposition, and ultimately terminated the project. To recover certain advance payments it already had made 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. Further, AIC requested the joinder of one of its subcontractors, which asserted claims against AIC related to the project’s termination. The tribunal denied AIC’s joinder request, concluding that neither the underlying contracts at issue nor the applicable arbitral rules provided for a mechanism to join the subcontractor.
On the merits, AIC argued that Santa Rita allegedly had engaged in a bribery scheme with a local official, in violation of the contract’s anti-corruption provision. That 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 the finding that the tribunal lacked jurisdiction to enforce the FCPA, because the FCPA did not create a private right of action. The tribunal majority also found there was insufficient evidence that Santa Rita had engaged in the alleged corrupt conduct.
In its final award, the tribunal ordered AIC to return approximately U.S. $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 lapsed 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, alleging that the tribunal had exceeded its authority.[3] The district court denied AIC’s petition based on the Eleventh Circuit precedent in Industrial Risk Insurers v. M.A.N 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 petitioned for en banc review, which the court granted.[6] The full court then overruled its holding in Industrial Risk, joining the Second, Third, Fifth, and Seventh Circuits in holding that the vacatur grounds in Section 10 of the FAA apply to awards governed by the New York Convention.[7]
On remand, AIC argued that the tribunal exceeded its authority by, among other things: (1) failing to join AIC’s subcontractor; (2) refusing to enforce the contract’s anti-corruption provision; and (3) requiring AIC to obtain new bonds after its original bonds expired.[8] The district court again rejected AIC’s petition for vacatur. The court found that the tribunal’s decision on each of these issues was based on the arbitrators’ interpretation of the parties’ contract, which the court could not revisit.
AIC appealed and the Eleventh Circuit affirmed. The court explained that when a party challenges an arbitral award alleging that the tribunal exceeded its powers, the court’s role is limited to assessing whether the tribunal “even arguably constru[ed] or appl[ied] the contract.” [9] The court concluded that the tribunal’s rulings on the three issues AIC raised were all based on the tribunal’s interpretation of the parties’ contract.
With respect to the issue of the bonds, the court pointed to the tribunal’s reliance on dictionary definitions to interpret the relevant language in the parties’ contract. On the anti-corruption issue, the court found that the tribunal’s jurisdictional findings related to the FCPA were based on the tribunal’s interpretation of the contract’s incorporation of the FCPA’s standards. Finally, on the issue of 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 Hidroeléctrica breaks little new legal ground. But the decision does underscore the narrow standard of review that the Eleventh Circuit applies when considering a party’s vacatur motion based on an allegation that the arbitral tribunal exceeded its authority. As long as the arbitral tribunal appears to have interpreted the parties’ contract, the court will not revisit the outcome of the tribunal’s analysis on the merits.
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[1] Hidroeléctrica Santa Rita S.A. v. Corporación AIC, SA, — F.4th –, 2024 WL 4500962 (11th Cir. Oct. 16, 2024).
[2] Corporación AIC, SA v. Hidroeléctrica Santa Rita S.A., 66 F.4th 876, 890 (11th Cir. 2023).
[3] Corporación AIC, S.A., 2020 WL 4485226, at *2.
[4] Id. at *3 (citing Industrial Risk, 141 F.3d 1434, 1446 (11th Cir. 1998)).
[5] Corporación AIC, SA v. Hidroeléctrica Santa Rita S.A., 34 F.4th 1290 (11th Cir. 2022).
[6] Corporación AIC, SA, 66 F.4th at 881.
[7] Id. at 886.
[8] Hidroeléctrica Santa Rita, S.A. v. Corporación AIC, S.A., 684 F. Supp. 3d 1277, 1282-83 (S.D. Fla. 2023).
[9] Hidroeléctrica, — F.4th –, 2024 WL 4500962, at *3 (citations and quotations omitted).