The Eleventh Circuit Court of Appeals has overruled long-standing precedent and joined the Second, Third, Fifth, and Seventh Circuits to hold that the grounds for vacatur of an arbitral award are set out in domestic law (specifically Chapter 1 of the Federal Arbitration Act), not the New York Convention, where the United States is the primary jurisdiction under the New York Convention.
Since 1998, the Eleventh Circuit had held that a party seeking vacatur of an arbitral award issued under the New York Convention could only rely on the grounds for vacatur set out in Article V of the New York Convention. But that decision and a subsequent Eleventh Circuit ruling following it were “wrong” and “outliers” according to the Eleventh Circuit. The Eleventh Circuit explained that its prior decisions failed to properly analyze the text of the New York Convention or the FAA. “[N]either Article V of the [New York] Convention nor § 207 of the FAA provides the grounds on which a court in the primary jurisdiction can vacate an arbitral award.” Instead, “the primary jurisdiction’s domestic law acts as a gap-filler and provides the vacatur grounds for an arbitral award.” When the United States is the primary jurisdiction under the New York Convention, Chapter 1 of the FAA is that gap-filler. Thus, a party seeking to vacate an award subject to the New York Convention can rely on Chapter 1 of the FAA rather than Article V of the New York Convention when the United States is the primary jurisdiction.
In the case at bar, the district court had correctly followed the Eleventh Circuit’s prior, binding precedent and therefore not considered a challenge to the arbitration award at issue that was based on Chapter 1 of the FAA. The Eleventh Circuit therefore vacated the district court’s award and remanded for consideration of that challenge in light of its new precedent.
Corporación AIC, S.A. v. Hidroeléctrica Santa Rita S.A., No. 20-13039 (11th Cir. Apr. 13, 2023).