Party Seeking to Vacate International Arbitration Award Must Assert Ground Enumerated in Convention, Court Reaffirms

In Inversiones y Procesadora Tropical INPROTSA, S.A. v. Del Monte International GmbH, 2019 WL 1768911 (11th Cir. Apr. 23, 2019), the Eleventh Circuit affirmed the district court’s order that denied INPROTSA’s petition to vacate an international arbitration award and confirmed that award.  Concluding that INPROTSA was required to assert a valid defense under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the Convention”), the court reaffirmed its holding in Industrial Risk Insurers v. M.A.N. Gutehoffnungshütte GmbH, 141 F.3d 1434, 1446 (11th Cir. 1998), and rejected the argument that Industrial Risk had been overruled by intervening Supreme Court precedent.

Del Monte had initiated an arbitration against INPROTSA in the International Court of Arbitration of the International Chamber of Commerce (ICC) in Miami alleging breach of contract and seeking specific performance, injunctive relief, and damages.  The arbitration tribunal issued an award in favor of Del Monte, awarding Del Monte specific performance, injunctive relief, damages, interest, costs, and attorney’s fees.  INPROTSA moved for correction and clarification of the award under Article 35 of the ICC rules, which the tribunal denied.  INPROTSA then filed a petition to vacate the award in Florida’s Eleventh Judicial Circuit.  Del Monte removed the petition to the United States District Court for the Southern District of Florida, citing 9 U.S.C. §§ 203 and 205, the Convention’s jurisdiction and removal sections, as well as 28 U.S.C. §§ 1331 and 1441.  Del Monte then filed a combined motion to dismiss the petition to vacate and a cross-petition to confirm the award.  INPROTSA, in turn, filed a motion to remand the proceedings to state court, contending the district court lacked subject-matter jurisdiction.

INPROTSA’s argument as to lack of subject-matter jurisdiction was based on a narrow reading of 9 U.S.C. § 203, the jurisdictional provision in the statute implementing the Convention (“the Convention Act”), which provides that “[a]n action or proceeding falling under the Convention shall be deemed to arise under the laws and treaties of the United States.”  INPROTSA contended that because a petition to vacate an arbitral award is not one of the causes of action expressly provided by the Convention Act, it cannot be “[a]n action or proceeding falling under the Convention.”

The Eleventh Circuit disagreed.  The court rejected INPROTSA’s assumption that the Convention Act provides an exhaustive list of actions and proceedings “falling under the Convention.”  Instead, the Convention Act is “merely a statute by which the Convention has been implemented in this country. . . . The relevant inquiry under § 203 is not whether a particular action or proceeding is provided by the Convention Act; it is whether the ‘action or proceeding fall[s] under the Convention’ itself.”

An action or proceeding therefore “fall[s] under the Convention,” for purposes of § 203, “when it involves subject matter that—at least in part—is subject to the Convention, such that the action or proceeding implicates interests the Convention seeks to protect.”  In practice, the court posited, this will require that the case sufficiently relate to an agreement or award subject to the Convention, such that the agreement or award “could conceivably affect the outcome of the case.” (quoting Outokumpu Stainless USA, LLC v. Converteam SAS, 902 F.3d 1316, 1324 (11th Cir. 2018).)

Concluding that it had subject-matter jurisdiction, the court then considered the merits of the district court’s dismissal of INPROTSA’s petition to vacate. The district court had dismissed the petition on the basis that INPROTSA did not assert a valid defense under the Convention, as required by Industrial Risk, which held that the defenses enumerated by the Convention provide the exclusive grounds for vacating an award subject to the Convention.  INPROTSA argued that the United State Supreme Court’s decision in BG Group PLC v. Republic of Argentina, 572 U.S. 25, 44–45 (2014), overruled Industrial Risk.  The Eleventh Circuit disagreed and determined that, at most, “the Supreme Court’s analysis indirectly suggests that the Convention does not supply the exclusive grounds for vacating an international arbitral award.”  Because INPROTSA had not asserted a valid defense under the Convention, the district court did not err by dismissing the petition to vacate.

Even if not bound by Industrial Risk, the court still would have concluded that the district court did not err in denying INPROTSA’s motion to vacate.  INPROTSA argued that the tribunal exceeded its authority in its interpretation of the parties’ agreement by assessing damages in excess of the amount allowed by Florida law and by refusing to correct the award on INPROTSA’s motion to correct the award.  The Eleventh Circuit considered and rejected these arguments.

Posted by Margaret Flatt.

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