In a ruling rendered on 18 August 2023, the United States Court of Appeals for the Eleventh Circuit unequivocally upheld a substantial arbitration award rendered by a panel operating under the auspices of the International Chamber of Commerce (“ICC”).
This dispute originated from the critically delayed and extensively disrupted Panama Canal expansion project, which culminated in an arbitration award obligating the contractor to remit nearly USD 250 million in damages to the Republic of Panama.
Subsequent to this, the contractor embarked upon an immediate due diligence exercise, seeking to unearth any undisclosed conflicts that might impugn the arbitrators’ impartiality. The Tribunal subsequently divulged several past engagements involving either their mutual associations or their professional interactions with legal representatives of Panama. It emerged, for instance, that two members of the Tribunal had previously collaborated with an attorney who had represented Panama in unrelated arbitrations.
Seizing upon these revelations, the contractor initiated a campaign to disqualify the arbitrators and vacate the award. Initially, the contractor lodged a formal complaint against the arbitrators’ impartiality before the ICC. Despite conceding that the arbitrators had omitted certain disclosures, the ICC determined that there was an insufficient basis to disqualify the arbitrators and hence dismissed the contractor’s objections outright.
However undeterred, the contractor proceeded to file a motion to set aside the award with the U.S. District Court for the Southern District of Florida – the jurisdiction where the arbitration proceedings were conducted. The District Court, manifesting judicial restraint, declined to disturb the award.
Affirming the lower court’s stance, the Eleventh Circuit cogently delineated the exceedingly narrow set of circumstances under which U.S. courts are empowered to set aside international arbitration awards, thereby underscoring the high deference accorded to arbitral decisions in matters of international commercial disputes:
“If there is one bedrock rule in the law of arbitration, it is that a federal court can vacate an arbitral award only in exceptional circumstances. In accordance with this country’s liberal federal policy favoring arbitration, our courts understand arbitration as a complete method of dispute resolution, not merely a prelude to a more cumbersome and time-consuming judicial review process. So, almost always, an arbitral award should represent the end, not the start, of a legal dispute.
The presumption against vacatur applies with even greater force when a federal court reviews an award rendered during an international arbitration. As the Supreme Court has explained, “[t]he goal of the [New York] Convention, and the principal purpose underlying American adoption and implementation of it, was to unify the standards by which agreements to arbitrate are observed and arbitral awards are enforced,” in recognition of the fact that the complex system of international commerce functions only if its disputes are given consistent and predictable resolutions around the world. Against this legal backdrop, U.S. courts refrain from unilaterally vacating an award, rendered under international arbitral rules, in all but the most extreme cases. It is no surprise, then, that although the losing parties to international arbitrations often raise defenses to award enforcement before our courts, those efforts rarely succeed.”
The Federal Arbitration Act sets forth the grounds for setting aside an arbitration award, specifically 9 U.S.C. 10 of the Act, providing as follows:
“(a) In any of the following cases the United States court in and for the district wherein the award was made may make an order vacating the award upon the application of any party to the arbitration–
On the other hand, the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards – a treaty ratified by over 150 countries and incorporated into the Federal Arbitration Act (see 9 U.S.C 207) – sets forth the grounds for vacatur in relation to international awards. As per Article V of the Convention, the following grounds are provided:
In its nuanced analysis, the Eleventh Circuit rigorously scrutinized the contractor’s arguments vis-à-vis the lens of both the Federal Arbitration Act and the New York Convention. The Court unambiguously pronounced that the contractor’s allegations fell woefully short of meeting the formidable criteria requisite for vacating an arbitration award. Whilst acknowledging the prudence of arbitrators erring toward a more fulsome, rather than restrained, disclosure, the Court categorically rejected the notion that an award could be set aside simply on the basis of prior professional affiliations among arbitrators or with parties’ legal counsel in unrelated matters. In the absence of more compelling evidence, the Eleventh Circuit declined to invalidate the award on the grounds of purported arbitrator bias.
This decision serves as an unambiguous admonition to parties facing arbitration: disclosures demand meticulous scrutiny and should be broached at the earliest stages of the proceedings to forestall any subsequent challenges to the award. Failure to do so could render post-award remedies elusive, given the formidable judicial standards required for award vacatur.
 Section II(A), page 13-14, USCA11 Case: 21-14408