In the last two years, the legal framework for vacating non-domestic arbitral awards in the Eleventh Circuit significantly evolved, affecting arbitration users choosing Miami as their seat of arbitration. This article focuses on the landmark Hidroeléctrica Santa Rita S.A. v. Corporación AIC S.A. case, which changed the Eleventh Circuit’s approach to the grounds for vacating non-domestic awards. It also explores the high threshold for proving excess of powers in vacatur applications.

Background

The case between Hidroeléctrica Santa Rita, S.A. (“HSR“) and Corporación AIC, S.A. (“AICSA“)—two Guatemalan companies—arose in connection to a contract for the construction of a hydroelectric power plant in Guatemala.

In March 2012, HSR and AICSA signed a contract under which AICSA agreed to build the power plant. The contract stipulated that disputes would be resolved through arbitration in accordance with the ICC Rules of Arbitration.

In 2013, HSR issued a force majeure notice that resulted in AICSA suspending its work on the project. Subsequently, HSR terminated the contract. This led to arbitration proceedings, seated in Miami, Florida.

Ultimately, the arbitral tribunal issued an award requiring AICSA to return approximately USD 7 million and EUR 435,000 in advance payments to HSR, while permitting AICSA to retain approximately USD 2.5 million and €700,000 for completed work. It also required AICSA to maintain the advance payment bonds or, if those bonds had expired, to obtain new bonds.

Dissatisfied with the outcome of the proceedings, AICSA filed an application to vacate this award in the U.S. District Court for the Southern District of Florida, arguing that the tribunal had exceeded its powers by not adhering to the contract terms and Guatemalan law. As a legal basis for its suit, AICSA cited § 10(a)(4) of the Federal Arbitration Act (“FAA“) [1].

Law applicable to vacatur of non-domestic awards

The district court denied AICSA’s motion, citing Eleventh Circuit precedents—Industrial Risk Insurers v. M.A.N. Gutehoffnungshutte GmbH [2], and Inversiones y Procesadora Tropical INPROTSA, S.A. v. Del Monte International GmbH [3]. These cases limited the grounds for vacating international arbitration awards to those specified in the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention“) [4].

Upon appeal, the Eleventh Circuit affirmed the district court’s decision, citing the same precedents. However, it recommended that the full court hear the case [5].

The rehearing en banc was ordered and the opinion of the Eleventh Circuit was vacated [6]. On April 13, 2023, the full court of the Eleventh Circuit overturned its prior precedents, determining that domestic grounds for vacatur, currently listed in Chapter 1 of the Federal Arbitration Act (FAA), apply to non-domestic awards issued in proceedings seated in the United States, even though for enforcement purposes the New York Convention would apply [7]. In reaching this conclusion, the Eleventh Circuit observed that:

• The previous precedents equated the defenses to recognition and enforcement with grounds for vacatur. But recognition and enforcement serve different purposes than vacating an arbitral award.
• Recognition and enforcement may be granted by courts in secondary jurisdictions (where the arbitration was not seated). In contrast, only courts in primary jurisdiction (where the arbitration was seated) may vacate an award.
• It was incorrect to apply the grounds for refusal of recognition and enforcement to the application for vacatur as this issue is not addressed neither the New York Convention nor Chapter 2 of the FAA (pertaining to recognition and enforcement of awards).
• As such, in a New York Convention case where the arbitration is seated in the United States, or where United States law governs the conduct of the arbitration, Chapter 1 of the FAA provides the grounds for vacatur of an arbitral award.
• This conclusion is in line with the interpretation applied in the Second, Third, Fifth, and Seventh Circuits.

Exceeding powers by arbitrators as ground for vacatur

Following the en banc decision of the Eleventh Circuit, the case was remanded to the district court to assess AICSA’s claims under § 10(a)(4) of the FAA on the merits. AICSA claimed that the tribunal exceeded its powers, in particular:

• by requiring AICSA to maintain the advance payment bonds or, if those bonds had expired, to obtain new bonds—in AICSA’s view, this action was not contemplated in the contract, and as such the issue of new bonds was outside the tribunal’s authority.
• by denying AICSA’s claim that HSR breached the EPC Contract’s anti-corruption provisions—in AICSA’s view, a payment made by HSR to the local authorities was in breach of the anti-corruption provisions of the contract, and the tribunal, by refusing to apply this provision, exceeded its powers.
• by refusing to join a subcontractor to the arbitration proceeding—in AICSA’s view, the contract expressly provided for joinder and the tribunal’s decision not to join a subcontractor to the proceedings was in excess of their powers.

In July 2023, the district court issued an opinion disagreeing with AICSA’s arguments. It concluded that the tribunal acted within its authority, as it had interpreted and applied the contract terms and relevant law in making its decision. [8] Consequently, the court refused to vacate the award. AICSA appealed this decision.

In October 2024, the Eleventh Circuit affirmed the district court’s ruling, agreeing that the tribunal had not exceeded its powers and that the arbitration award should be confirmed [9].

In reaching its decision, the Eleventh Circuit observed that:

• The court has limited powers of review of an award. As such, an arbitral decision even arguably construing or applying the contract must stand, regardless of a court’s view of their merits. The court’s role is to verify that the tribunal (even arguably) interpreted the parties’ contract not whether it got the interpretation right or wrong.
• Applying this standard to the allegation relating to bonds, the tribunal’s decision had some contractual basis. The tribunal considered the language of the contract in reaching its conclusion, as evidenced by the award. It makes no difference whether this analysis is correct, as it is enough that the tribunal engaged with the contract’s language.
• As for the claim for breach of the anti-corruption provision of the contract, again the decision was grounded in the contract’s terms. The tribunal ruled that it did not have jurisdiction to find the breach, as the relevant anti-corruption law (to which the contract referred) did not create a private right of action. This shows that the tribunal considered the contract, which is sufficient to find that it did not exceed its powers. The additional factual finding of the arbitrators that there was insufficient evidence to find corruption cannot be reviewed by the court in an action for vacatur.
• With regard to the joinder issue, it was again sufficient for the court that the tribunal’s decision not to join a third party to the proceedings was based on the analysis of the contract. The tribunal parsed the language of the arbitration agreement. As a result, it concluded that the joinder provision would have applied only when claims were asserted either by HSR or AICSA. But in this case, it was the third party that was asserting its claims.

Relevance of the case

Miami has been steadily becoming an increasingly popular seat for non-domestic arbitrations in the U.S., following New York, which remains the top choice for many international parties. In these circumstances, the case law of the Eleventh Circuit is relevant to arbitration users who are considering which location to choose as the seat for their arbitration proceedings.

The two takeaways to remember from the discussed case:

• The Eleventh Circuit now aligns with the approach presented by the Second Circuit—relevant to New York-seated arbitrations—when it comes to the law applicable to the application for vacating of a non-domestic arbitral award. Both Circuits consider that it is appropriate to apply Chapter 1 of the FAA to such applications.
• The Eleventh Circuit remains strict when it comes to interpretation of the grounds for vacatur. As demonstrated by the Hidroeléctrica case, the threshold for proving excess of powers is extremely high. The Second Circuit is equally stringent and will in most instances defer to the tribunal’s choices. However, contrary to the Eleventh Circuit precedents, the Second Circuit still considers other grounds, such as manifest disregard of law [10], as a valid basis for vacatur of an arbitral award in the context of excess of power.

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[1] 9 U.S.C. § 10(a)(4), 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 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.

[2] 141 F.3d 1434 (11th Cir. 1998).

[3] 921 F.3d 1291, 1301–02 (11th Cir. 2019).

[4] Corporación AIC, S.A. v. Hidroélectrica Santa Rita, S.A., Case No. 19-20294, 2020 WL 4478424, ECF No. 52 (S.D. Fla. Aug. 4, 2020).

[5] Corporación AIC, SA v. Hidroélectrica Santa Rita S.A., 34 F.4th 1290 (11th Cir. 2022).

[6] Corporación AIC, SA v. Hidroélectrica Santa Rita S.A., 50 F.4th 97 (11th Cir. 2022).

[7] Corporación AIC, SA v. Hidroelectrica Santa Rita S.A., No. 20-13039 (11th Cir. Apr. 13, 2023).

[8] Hidroeléctrica Santa Rita, v. Corporación AIC, S.A., 684 F. Supp. 3d 1277 (S.D. Fla. 2023).

[9] Hidroeléctrica Santa Rita v. Corporación AIC, SA, No. 23-12519 (11th Cir. Oct. 16, 2024).

[10] See T.Co Metals, LLC v. Dempsey Pipe & Supply, Inc., 592 F.3d 329 (2d Cir. 2010).