Grupo Unidos por el Canal, S.A. v. Autoridad del Canal de Panama, 78 F.4th 1252 (11th Cir. 2023)[1]
Factual Background
Grupo Unidos por el Canal (“Grupo Unidos”) is a consortium of European companies that was awarded a multi-billion dollar construction contract by Autoridad del Canal de Panama (“Autoridad del Canal”) to expand the Panama Canal. When Grupo Unidos completed the expansion twenty months past the deadline, liability disputes followed. Pursuant to the contract’s arbitration clause, any disputes were required to be resolved through arbitration in Miami, Florida, under the Rules of Arbitration of the International Chamber of Commerce (the “ICC Rules“). As such, the parties entered into at least seven arbitrations. The arbitration at issue in the case before the Eleventh Circuit was the “Panama 1 Arbitration” wherein Grupo Unidos made several contractual claims against Autoridad del Canal.
In 2015, the parties nominated a three arbitrator panel in the Panama 1 Arbitration. Grupo Unidos nominated one arbitrator, Autoridad del Canal nominated another, and both parties jointly nominated the third. The International Court of Arbitration (“ICA”) confirmed all three arbitrators. Per ICC Rules, each arbitrator had to submit a “ICC Arbitrator Statement Acceptance, Availability, Impartiality and Independence” disclosure mentioning any and all potential biases. Each arbitrator submitted the disclosures asserting no impartiality, and neither Grupo Unidos nor Autoridad del Canal requested more information.
After five years of arbitration, on September 21, 2020, Autoridad del Canal received a partial arbitration award with a net win of over $265 million. On October 15, 2020, Grupo Unidos for the first time asked for four additional disclosures from the arbitrators detailing their relationship with each other and the respective law firms involved. Among those disclosures was a statement that the arbitrators were familiar with the lawyers for Autoridad del Canal given their prior involvement in Panama Canal arbitrations. Based on those disclosures, Grupo Unidos appealed to the ICA arguing that all three arbitrators withheld “highly problematic” relationships with each other and counsel. The ICA said that while additional disclosures should have occurred, there was no conflict. After the ICA’s decision, the Autoridad de Canal received a final award of $285 million. Grupo Unidos paid in full.
The Court Proceedings
Before the ICA appeal concluded, Grupo Unidos filed a challenge to the arbitration award in the U.S. District Court for the Southern District of Florida. On November 25, 2020, Grupo Unidos moved to vacate the award, challenging the Panama 1 arbitration proceedings under Article V of the New York Convention as codified in Chapter 2 of the Federal Arbitration Act (“FAA“). Autoridad del Canal cross-moved to affirm the award. The district court denied Grupo Unidos’ motion to vacate, and granted Autoridad del Canal’s motion to confirm the award. Grupo Unidos timely appealed to the Eleventh Circuit Court of Appeals.
On appeal, Grupo Unidos argued that the undisclosed information by the arbitrators provided grounds for vacatur under Article V of the New York Convention. In so arguing, Grupo Unidos relied heavily on now-overruled Eleventh Circuit precedent “that international arbitral awards rendered by tribunals seated in the United States were subject to vacatur on the grounds found in Article V of the New York Convention.” However, in Corporación AIC, SA v. Hidroeléctrica Santa Rita S.A., the Eleventh Circuit, sitting en banc, held that Chapter 1 of the FAA, not Article V of the New York Convention, is the proper authority for American courts to employ when considering whether to vacate international arbitration awards where the arbitration is seated in the United States, or where United States law governs the conduct of the arbitration.
The court recognized that, although Corporación AIC changed the statutory foundation for vacatur, it did not affect the analysis in any real way. The court’s opinion in this case reiterated that, absent an exceptional circumstance, there exists a judicial presumption in favor of upholding international arbitration awards. Though the court agreed with Grupo Unidos that arbitrators ideally would disclose more information than the arbitrators in this case disclosed, the court nonetheless held that under Chapter 1 of the FAA, the non-disclosed information at issue did not require vacatur.
The Court Decision
The court found that not all past work experience constitutes bias that would warrant vacating an arbitration award. The arbitrators on Panama 1’s panel were familiar with each other because they had worked together on previous arbitrations, but were not biased in any significant way. The court noted that Grupo Unidos did not present precedent where arbitrators’ familiarity with each other alone permitted vacatur or explain how such familiarity could result in impartiality. Furthermore, considering the complexities of the Panama Canal expansion, disqualifying an arbitrator based on familiarity would be impractical because only several dozen arbitrators worldwide are able to handle this level of dispute.
The court then analyzed whether there were grounds to decline confirmation of the arbitration award under Article V(2)(b) of the New York Convention. That provision provides a defense to an arbitral award if “[t]he recognition or enforcement of the award would be contrary to the public policy of that country.” The court acknowledged that the United States has a policy against “evident partiality,” or information which would lead a reasonable person to believe that a potential conflict exists. But Grupo Unidos only presented evidence of familiarity, not partiality. The four additional disclosures revealed information that should have been disclosed prior to the proceedings, but did not violate the United States’ public policy against evident partiality, the composition of the tribunal, or fundamental procedural fairness.
Grupo Unidos next challenged the arbitration tribunal under Article V(1)(d) of the New York Convention, stating that parties agreed to follow ICC Rules and the FAA, and because the panel’s composition violated both, that the tribunal was not in accordance with what the parties agreed. As the court already found no evidence of partiality, the court ruled there was no problem with the tribunal.
Finally, Grupo Unidos argued that they were not given proper notice under Article V(1)(b) of the New York Convention’s mandate of fundamental procedural fairness. Again, the court was unpersuaded as the tribunal’s procedures met minimum standard for American courts. Grupo Unidos had a robust opportunity to present arguments and confront Autoridad del Canal’s arguments. Therefore, the court affirmed the district court’s confirmation of the arbitration awards.
This Article was originally published in the North America Newsletter.
