Hidroelectrica Santa Rita S.A. (“HSR”) and Corporación AIC, S.A. (“AICA”) were parties to an Engineering, Procurement, and Construction (“EPC”) contract for a power plant to be built in Guatemala. HSR canceled the project, citing force majeure, and the parties brought various claims against each other in arbitration. The arbitration panel issued an award which—among other things—awarded more to HSR than to AICA. AICA filed an action in district court seeking to vacate the award, arguing that the arbitration tribunal had exceeded its powers. The district court rejected the argument because, at the time, the Eleventh Circuit did not recognize the exceeding-powers ground as applicable to international arbitration awards. A panel of the Eleventh Circuit affirmed, but the full court vacated the district court’s judgment, overruling two prior decisions to hold that the grounds for vacatur of an international arbitration award are those set forth in Chapter 1 of the Federal Arbitration Act (“FAA”), including the exceeding-powers ground. (You can read more about that decision here.) On remand, the district court rejected AICA’s argument on the merits and confirmed the arbitration award. AICA appealed.
The Eleventh Circuit affirmed. Hidroelectrica Santa Rita S.A. v. Corporación AIC, SA, 2024 WL 4500962 (Oct. 16, 2024). The court’s opinion, written by Judge Tjoflat, began with a reminder that “[p]arties to an arbitration dispute bargained for the arbitrator’s interpretation of contractual language, and courts do not usurp that function.” 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.” None of AICA’s three arguments was able to clear this “high hurdle.”
First, AICA argued that the tribunal exceeded its powers when it entered an award requiring AICA to replace bonds provided as security for advances made to it if the existing bonds lapsed before AICA paid what it owed to HSR. The tribunal based that part of its order on a provision of the EPC contract providing that the bonds “shall remain in full force and effect until the beneficiary of any such security determines . . . that all claims and potential claims are fully and finally settled and satisfied.” The tribunal’s award also referred to dictionary definitions in support of its conclusion that the requirement to keep the bonds in place included an obligation to replace lapsed bonds. Whether or not that was a correct interpretation of the EPC contract, the court held, it was an interpretation of the contract, and thus within the tribunal’s authority.
Second, AICA asserted that the tribunal exceeded its authority when it denied AICA’s claim that HSR breached the EPC contract’s anti-corruption provisions. AICA claimed that a donation HSR made to the local Guatemalan community constituted a violation of the Foreign Corrupt Practices Act (“FCPA”) and was thus a violation of the EPC contract’s provision requiring compliance with the FCPA. The tribunal accepted that a violation of the FCPA would be a violation of the EPC contract, but determined that it could only exercise jurisdiction to find an FCPA violation if the statute created a private right of action. The tribunal determined that no such private right existed, and interpreted the contract’s incorporation of the FCPA to require that a private right of action exist before an FCPA-based breach could be found. This was—again—an interpretation of the EPC contract, which was within the tribunal’s authority. The tribunal also found insufficient evidence to support ACIA’s bribery claim, “and the arbitrating Tribunal could not exceed its authority by making findings of fact that foreclose AICA’s claim.”
Finally, AICA claimed that the tribunal exceeded its authority when it refused to join as a party to the arbitration one of AICA’s subcontractors, which had asserted claims against AICA after cancellation of the project. But that decision, too, was grounded in the tribunal’s interpretation of the EPC contract: the tribunal concluded that the provision respecting additional parties permitted joinder only for claims asserted by HSR or AICA, not for third-party claims against one of those parties. AICA argued that the tribunal had essentially nullified the relevant provision of the EPC contract, but the tribunal had explained its reasoning based on the contract’s language, and “[t]o vacate an arbitral award on the merits of the arbitrator’s contract interpretations would make meaningless the parties’ bargained-for provisions establishing the finality of the arbitrator’s interpretation.”