Key takeaways
- The Eleventh Circuit has confirmed that under Chapter 1 of the FAA, public policy cannot serve as a basis for vacating an arbitration award, affirming the restrictive limits of judicial review in such cases.
- The ruling emphasizes the principle that arbitration awards are final and binding, with courts having a limited role in reviewing and overturning these awards.
- The decision establishes that, for non-domestic international arbitration, the vacatur grounds are set by Chapter 1 of the FAA rather than Chapter 2, aligning with the New York Convention’s requirements.
Summary
The U.S. Court of Appeals for the Eleventh Circuit has upheld the confirmation of a $187.9 million arbitration award in favor of Commodities & Minerals Enterprise, Ltd. (CME) against CVG Ferrominera Orinoco, C.A. (FMO). This ruling highlights the rigorous standards required to vacate arbitration awards pursuant to the Federal Arbitration Act (FAA) and how the FAA interplays with the New York Convention.
Background
CME, a trading intermediary incorporated in the British Virgin Islands, entered into a series of agreements with FMO, a state-owned mining entity of Venezuela, for the supply of iron ore. The parties’ relationship culminated in a management contract in 2010. Disputes arose when CME claimed FMO failed to fulfill its contractual obligations, prompting CME to terminate the parties’ agreement.
Arbitration and district court proceedings
In 2016, CME initiated arbitration proceedings against FMO. Pursuant to the parties’ contract, the parties agreed to arbitrate disputes in Miami, Florida, under the substantive general maritime law of the United States. As the arbitration involved international parties and the seat was established in the United States, the resulting award is classified as a non-domestic international award. Consequently, both the FAA and the New York Convention are applicable.
After nearly three years of proceedings, the arbitration tribunal issued an award in favor of CME, granting $187.9 million in damages. In late 2019, CME filed an application in the Southern District of Florida (the District Court) to confirm the award pursuant to Chapter 2 of the FAA and the New York Convention. Chapter 2 of the FAA incorporates the provisions of the New York Convention. FMO opposed the confirmation, asserting that the parties’ contract had been procured through fraud, bribery, and corruption, and argued that enforcing the award would contravene U.S. public policy. The District Court confirmed the award, ruling that FMO was precluded from raising its public policy defense under Article V(2)(b) of the New York Convention due to its failure to seek vacatur within the FAA’s three-month time limit.