Last week, the 11^th Circuit Court of Appeals confirmed an international arbitration award in a case involving a failed hydroelectric project in Guatemala. The project involved an Engineering, Procurement, and Construction agreement (EPC contract) to build a new hydroelectric power plant on the Ocbolay River in Guatemala. The owner terminated the EPC contract for convenience after a local indigenous group objected to the project, blocked access to the construction site, and threatened those working on it. The owner subsequently initiated arbitration before the International Chamber of Commerce against the contractor for the return of unearned advance payments. The arbitral tribunal ruled in favor of the owner and ordered the contractor to return approximately $7.5 million in unearned advance payments. The arbitral tribunal further ordered the contractor to keep in place a security bond until the advance payment was returned.

The contractor filed a motion to vacate the award in the Southern District of Florida on the basis that the tribunal had exceeded its powers. That motion was initially denied based on then-existing 11^th Circuit precedent that foreign arbitral awards could not be challenged on the “exceeding power” grounds. The 11^th Circuit sitting en banc reversed. On remand, the district court evaluated the merits question of whether the tribunal had exceeded its powers and concluded that it had not. On the second appeal, the 11^th Circuit affirmed, concluding that none of the limited grounds for vacatur were present:

The New York Convention is an international treaty which the United States acceded to in 1970, the purpose of which is to encourage the recognition and enforcement of international arbitral awards to relieve congestion in the courts and to provide parties with an alternative method for dispute resolution that is speedier and less costly than litigation. Congress implemented the New York Convention through Chapter 2 of the FAA…One of the grounds for vacating an arbitral award in Chapter 1 of the FAA is where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made. But few awards are vacated because the scope of the arbitrator’s authority is so broad. Parties to an arbitration dispute bargained for the arbitrator’s interpretation of contractual language, and courts do not usurp that function.

Consequently, an arbitral decision even arguably construing or applying the contract’ must stand, regardless of a court’s view of its (de)merits. A court may overturn an arbitral determination when it reflects the arbitrator’s own notions of economic justice rather than drawing its essence from the contract. Accordingly, the sole question for us is whether the arbitrator (even arguably) interpreted the parties’ contract, not whether he got its meaning right or wrong. This is a high hurdle because it is not enough to show that the arbitral authority committed even a serious error. Instead, a determination that the arbitrator interpreted the parties’ contract will end our inquiry.

The 11^th Circuit concluded that the arbitral tribunal had indeed interpreted the parties’ contract, and therefore the high hurdle to vacate its award was not met. According to the court, “to vacate an arbitral award on the merits of the arbitrator’s contract interpretation would make meaningless the parties’ bargained-for provisions establishing the finality of the arbitrator’s interpretation. And although [the Contractor] disagrees, the Tribunal did interpret the contract.”

A copy of the court’s decision in Hidroelectrica Santa Rita S.A. v. Corporacion AIC, SA (No. 23-12519, 2024 WL 4500962, at *2–3 (11th Cir. Oct. 16, 2024)) can be found here.