Corporacion AIC, SA v. Hidroelectrica Santa Rita S.A.

Citation34 F.4th 1290
Decision Date27 May 2022
Docket Number20-13039
Parties CORPORACION AIC, SA, Plaintiff-Appellant, v. HIDROELECTRICA SANTA RITA S.A., a Guatemalan company, Defendant-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (11th Circuit)

George J. Fowler, III, Edward F. LeBreton, III, Jones Walker, LLP, New Orleans, LA, Jeanne Louise Amy, U.S. Department of Justice, Torts Branch, Civil Division, Washington, DC, Luis Emilio Llamas, Caroline Sanches, Jones Walker, LLP, Miami, FL, Michael Abram Rosen, Fowler Rodriguez, Coral Gables, FL, for Plaintiff - Appellant.

Jaime A. Bianchi, Sheldon Philp, White & Case, LLP, Miami, FL, for Defendant - Appellee.

Before Jordan, Jill Pryor, and Tjoflat, Circuit Judges.

Tjoflat, Circuit Judge:

This case involves the interplay between the Federal Arbitration Act ("FAA") and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention"). We believe that our Circuit is out of line with Supreme Court precedent, but we are powerless to change the course as a three-judge panel. As a result, today, we must affirm the District Court's determination that it could not vacate an arbitral award under the New York Convention on the exceeding powers ground. In so doing, we hope that this case will be taken en banc where this Court may overturn Inversiones y Procesadora Tropical INPROTSA, S.A. v. Del Monte International GmbH , 921 F.3d 1291 (11th Cir. 2019), and Industrial Risk Insurers v. M.A.N. Gutehoffnungshutte GmbH , 141 F.3d 1434 (11th Cir. 1998), and hold that under a correct understanding of Supreme Court precedent the exceeding powers ground is a valid basis for vacatur under both the New York Convention and the FAA. Until an en banc panel of our Court takes up this issue, our hands are tied.


In a nutshell, Corporacion AIC, SA ("AICSA") and Hidroelectrica Santa Rita S.A. ("HSR"), two Guatemalan companies, signed a contract in March 2012 (and restated it in February 2013) for the construction of a hydroelectric power plant in Guatemala. Under the terms of the contract, AICSA was responsible for creating a new power plant for HSR. However, in October 2013, AICSA had to discontinue the project because HSR issued a force majeure notice.1 Next, HSR sought reimbursement for the advance payments it had made to AICSA and ultimately commenced arbitration proceedings, as specified in the original contract, in the International Court of Arbitration to recover them. AICSA sought dismissal of HSR's claims and counterclaimed for damages, costs, reimbursements for its subcontractor, and attorney's fees and expenses. AICSA also sought to join one of its subcontractors to the proceeding. The arbitration was held in Miami, Florida, and a split, three-member arbitration panel denied AICSA's request to join the subcontractor to the arbitration and, in short, ruled for HSR on the merits claims. The panel ordered AICSA to return about $7 million and about €435,000 to HSR in advance payments while allowing AICSA to keep what it had earned pursuant to the contract, about $2.5 million and about €700,000.

Dissatisfied with the arbitration panel's decision, AICSA initiated a case in the District Court, seeking to vacate the arbitral award on the basis that the arbitration panel had exceeded its powers.2 The District Court denied AICSA's petition. It said that Eleventh Circuit precedent foreclosed AICSA's claim that a party to a New York Convention arbitration could challenge an arbitration panel's decision on the exceeding powers ground under 9 U.S.C. § 10(a)(4) of the FAA. So, the District Court declined to analyze whether the arbitrators had indeed exceeded their powers in the AICSA/HSR arbitration. AICSA timely appealed.


We review de novo questions of law in a district court's refusal to vacate an arbitral award. First Options of Chicago, Inc. v. Kaplan , 514 U.S. 938, 947–49, 115 S. Ct. 1920, 1926, 131 L.Ed.2d 985 (1995). We review a district court's factfinding for clear error. Bamberger Rosenheim, Ltd. , (Israel) v. OA Dev., Inc. , (United States) , 862 F.3d 1284, 1286 (11th Cir. 2017). As a general rule, our review of an arbitration decision itself is extremely limited, "among the narrowest known to the law," for the very reason that arbitration is not litigation. AIG Baker Sterling Heights, LLC v. Am. Multi-Cinema, Inc. , 508 F.3d 995, 1001 (11th Cir. 2007).


There are two questions on appeal. First, may we, under our precedent, decide that an arbitration panel exceeded its powers in a non-domestic arbitration under the New York Convention? And second, if so, did the arbitration panel in this case indeed exceed its powers? Because we are bound to answer the first question in the negative, we cannot reach the merits of the second question.

Starting with the basics, arbitrations may be either domestic or non-domestic (international). Chapter 1 of the FAA applies to domestic arbitrations, and Chapter 2 of the FAA applies to non-domestic arbitrations. Indus. Risk , 141 F.3d at 1439–40. Under Chapter 2 of the FAA, the only domestic arbitration awards are those arising out of a commercial relationship "entirely between citizens of the United States" with enforcement in the United States. 9 U.S.C. § 202. An arbitration is non-domestic under the New York Convention3 when either 1) the award was "made in a country other than that in which enforcement of the award is sought," or 2) the award is "not considered as domestic [ ] in the country where enforcement of the award is sought." Indus. Risk , 141 F.3d at 1440 (internal quotation marks omitted). The arbitration in the present case is non-domestic (or international) for purposes of the New York Convention and FAA because two foreign corporations are arbitrating in Miami, Florida. See Indus. Risk , 141 F.3d at 1441 (explaining that we have jurisdiction to review arbitrations that are "non-domestic," that is, those that are "not entirely between citizens of the United States," under Chapter 2 of the FAA).

Now, things get trickier when we start trying to figure out how the New York Convention and FAA work together. The New York Convention "must be enforced according to its terms over all prior inconsistent rules of law," including Chapter 1 of the FAA applying to domestic arbitrations. Indus. Risk , 141 F.3d at 1440 (quoting Sedco, Inc. v. Petroleos Mexicanos Mexican Nat'l Oil Co. (Pemex) , 767 F.2d 1140, 1145 (5th Cir. 1985) ). At the same time, under Chapter 2 of the FAA, "Chapter 1 [i.e., domestic law] applies to actions and proceedings brought under" Chapter 2 "to the extent that" Chapter 1 "is not in conflict" with Chapter 2 or the New York Convention. 9 U.S.C. § 208 ; see GE Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA, LLC , ––– U.S. ––––, 140 S. Ct. 1637, 1645, 207 L.Ed.2d 1 (2020) (explaining that domestic law doctrines "fill gaps" in the New York Convention). So, we have three potential bodies of law here: 1) the New York Convention, the treaty itself; 2) Chapter 2 of the FAA, the domestic law implementing the New York Convention; and 3) Chapter 1 of the FAA, the domestic law usually governing domestic arbitrations, which may apply in international arbitrations to the extent it does not conflict with the New York Convention or Chapter 2 of the FAA.

Today, the parties disagree about the parameters of the New York Convention's terms. Article V of the New York Convention provides seven grounds on which recognition and enforcement of an international arbitration award may be refused. And, according to Industrial Risk , an "arbitral award must be confirmed unless appellants can successfully assert one of the seven defenses against enforcement of the award enumerated in Article V of the New York Convention."4 Indus. Risk , 141 F.3d at 1441 ; id. at 1441 n.8 (explaining that the New York Convention's defenses against enforcement are "exclusive"). The burden of proof for establishing one of these seven defenses lies with the appellants. Id. at 1442. In Industrial Risk , which involved two foreign corporations arbitrating in Tampa, Florida, the appellants raised three grounds for vacatur of the arbitration award, one under Article V(1)(d), one under Article V(2)(b), and one ground recognized domestically5 but not explicitly in the New York Convention—that the award was arbitrary and capricious. Id. at 1442–43. The Court addressed the first two defenses under Articles V(1)(d) and V(2)(b) but declined to address whether the award was arbitrary and capricious because it was "not specified by the Convention." Id. at 1443. In other words, the Court refused to vacate an arbitral award based on anything other than the New York Convention's explicit carveouts in Article V. See id. ; see also 9 U.S.C. § 207 ("The court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the said Convention.").

Significant for our purposes is the fact that the Industrial Risk court did not consider whether the "arbitrary and capricious" defense was tucked into Article V(1)(e). Article V(1)(e) states:

(1) Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:
(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

New York Convention, Art. V(1)(e). Article V(1)(e) suggests that our domestic courts and law have some role to play when either the United States is the "country in which" the arbitration occurred or when United States’ law governed the award. Under Article V(1)(e), our courts may apparently set aside or suspend an award when the United States was either the location of the arbitration or was the source of law for the arbitration. And it is...

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