This article was first published on the Baker McKenzie blog, Global Arbitration News, on August 10, 2020.
Corporación AIC SA v. Hidroelectrica Santa Rita SA, No. 19-20294-CV (S.D. Fla. Apr. 16, 2020) [click for opinion]
Corporación AIC, S.A. (“Petitioner”) and Hidroelectrica Santa Rita, S.A. (“Respondent”) entered into an Engineering, Procurement and Construction Agreement (the “Contract”). Pursuant to the Contract, Respondent engaged Petitioner for the full turnkey design, engineering, procurement, construction, start-up, and commissioning of a hydroelectric power plant on the Icbolay River in Guatemala. The power plant project was not supported by the local community, and after members of the community blockaded access to the project and threatened those working on it, Respondent issued a force majeure notice ordering Petitioner to suspend work under the Contract.
The parties were unable to resolve several disputes that arose from the project’s termination. On October 9, 2015, Respondent submitted a request for arbitration to the “International Court of Arbitration” seeking payment from Petitioner of advanced funds, certain damages, and attorney’s fees and expenses. The Tribunal issued its Final Award on October 29, 2018. It held that, of the approximately $11 million that Petitioner received as advance payments, Petitioner was entitled to keep $2,429,627.08 and €703,290.00 for work completed pursuant to the Contract, and it ordered Petitioner to return to Respondent $7,017,231.52 and €435,168.00, plus interest.
Petitioner filed a petition and motion to vacate the award in the district court for the Southern District of Florida, where the arbitration hearing had taken place. Petitioner invoked Section 10 of the Federal Arbitration Act (the “FAA”), which authorizes a court to vacate an arbitration award where the arbitrators exceeded their powers. Specifically, Petitioner argued that the Tribunal exceeded its powers by (1) refusing to allow AIC’s subcontractor to be joined to the arbitration; (2) creating a new condition precedent to enforcing the anti-corruption provisions of the Contract; (3) choosing not to follow Guatemalan law; (4) refusing to follow a provision of the Contract regarding recovery of fees and costs; and (5) requiring AIC to post a second set of bonds.
The court noted that there were Second Circuit and Fifth Circuit precedent to support the argument that Section 10 of the FAA should apply to international arbitrations that were seated in the United States. However, the court explained that it was bound by the Eleventh Circuit’s decisions in Inversiones and Industrial Risk, which held that a party can only invoke the defenses set forth in the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention“) to vacate an international arbitration award. The court thus concluded that Section 10 of the FAA was inapplicable. Because Petitioner did not raise any of the seven grounds enumerated in Article V of the New York Convention, and because the New York Convention does not provide that an award can be vacated if the arbitrators “exceeded their powers,” the court recommended denial of Petitioner’s motion to vacate the award (the case had been given to the magistrate judge for purposes of a report and recommendation).