United States Court of Appeals, District of Columbia Circuit
September 19, 2017
from the United States District Court for the District of
Columbia (No. 1:15-cv-01057)
Matthew D. Slater argued the cause and filed the briefs for
Friedman argued the cause for appellee. With him on the brief
was David Y. Livshiz.
Before: Henderson and Griffith, Circuit Judges, and Williams,
Senior Circuit Judge.
GRIFFITH, CIRCUIT JUDGE:
arbitration panel determined that the Republic of Argentina
was liable to AWG Group Ltd. for $20 million. Argentina
challenged that decision in district court, arguing that a
member of the arbitration panel had, with a connection to two
of the parties to the proceeding, shown "evident
partiality" under 9 U.S.C. § 10(a)(2), and that the
way the panel reached its determination exceeded its
authority under § 10(a)(4). The district court enforced
the panel's award against Argentina, and we affirm.
1993, Argentina awarded a contract to Aguas Argentinas S.A.
(AASA), a consortium of seven companies. Three were Argentine
and four were not (AWG Group Ltd. ("AWG"), Sociedad
General de Aguas de Barcelona S.A., Vivendi Universal, S.A.
("Vivendi"), and Suez). According to the contract,
AASA agreed to invest in and operate Argentina's water
services. By its terms, the contract was set to run through
2023 but allowed for earlier termination if either AASA or
Argentina failed to live up to its commitments. Argentina
also entered bilateral investment treaties with the home
countries of the members of AASA promising fair and equitable
treatment of their investments in Argentina (the
"fair-treatment provisions"). These treaties also
established arbitration procedures to resolve disputes that
might arise from investments in the signatory countries.
turn of this century, Argentina's economy fell into
crisis, and its government responded with emergency
regulatory measures. One measure unpegged Argentina's
currency, the Argentine peso, from the U.S. dollar. Another
froze the tariffs AASA could charge customers. Together these
measures suppressed the peso's value and prevented AASA
from increasing its prices, which led to a significant loss
of revenue from its services. AASA had committed to repaying
loans that were denominated in dollars and claimed that it
could not pay for the quality of service that it had provided
when the peso was more valuable unless something changed.
Argentina denied AASA's repeated requests to alter the
emergency measures or modify its obligations.
2003, the non-Argentine members of AASA began arbitration
proceedings at the International Centre for Settlement of
Investment Disputes (the "Centre") in Washington,
D.C. The gravamen of their claim was that Argentina had
breached its contract by treating them unfairly. Among its
defenses, Argentina maintained that its conduct was compelled
by the need to protect its economy and provide safe water.
Three years into the arbitration, Argentina terminated the
contract on the ground that AASA had failed to keep the
nation's water supply free from contaminants. The
arbitration lasted twelve years. At its conclusion in April
2015, a unanimous panel rejected Argentina's defense that
its conduct was necessary to protect its economy and water
supply and concluded that Argentina had breached the contract
by treating AASA unfairly. The panel later awarded the
claimants the profits they would have realized had Argentina
honored the fair-treatment provisions.
2015, Argentina brought suit in district court seeking to
vacate the panel's award to AWG on two grounds. First,
that the panel member selected by AASA was biased in favor of
two of the non-Argentine consortium members. Although
Argentina does not allege that the panel member had an
outside interest in AWG, its fate in the arbitration was
wrapped up with the fate of its fellow consortium members.
Second, that the panel exceeded its authority by failing to
credit Argentina's necessity defense and by compensating
AASA with hypothetical profits earned after Argentina had
lawfully terminated the contract. The district court rejected
each of Argentina's arguments and granted AWG's
cross-petition to enforce the award. Republic of
Argentina v. AWG Grp. Ltd., 211 F.Supp.3d 335, 363
(D.D.C. 2016). Argentina timely appealed the district
of the United States governing arbitration is codified in the
Federal Arbitration Act (the "Act"), 9 U.S.C.
§ 1 et seq., which incorporates the United
Nations Convention on the Recognition and Enforcement of
Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517 (the
"New York Convention"), in 9 U.S.C. §§
201-08. The New York Convention is a multilateral treaty that
requires signatory nations like the United States to honor
the results of international arbitrations that comply with
the treaty, but allows a court of the nation in which the
arbitration was held to vacate the award if the proceeding
violated that nation's domestic policy of fair
adjudication. New York Convention art. V(2); 9 U.S.C. §
207; Enron Nigeria Power Holding, Ltd. v. Federal
Republic of Nigeria, 844 F.3d 281, 283 (D.C. Cir. 2016);
TermoRio S.A. v. Electranta S.P., 487 F.3d 928,
935-36 (D.C. Cir. 2007). Under the New York Convention, the
district court had authority to enforce or, if the
arbitration violated the standards of fair adjudication set
out in § 10 of the Act, vacate the award. 9 U.S.C.
§ 203; see also § 10(a). We have
jurisdiction under 28 U.S.C. § 1291 to hear
Argentina's appeal of the district court's decision,
and we review the court's legal conclusions de novo.
See Kurke v. Oscar Gruss & Son, Inc., 454 F.3d
350, 355 (D.C. Cir. 2006).
general matter, we will enforce an arbitration award unless
given a compelling reason to suspect that the award resulted
from an unfair process. See Hall St. Assocs. v. Mattel,
Inc., 552 U.S. 576, 588 (2008) ("[L]imited review
[is] needed to maintain arbitration's essential virtue of
resolving disputes straightaway."); Dean Witter
Reynolds, Inc. v. Byrd, 470 U.S. 213, 221 (1985)
("[W]e rigorously enforce agreements to arbitrate . . .
."). Congress has pointedly endorsed private dispute
resolution and directed courts to make the lawful judgments
of arbitration panels effective. Epic Sys. Corp. v.
Lewis, 138 S.Ct. 1612, 1621 (2018) ("[Congress]
specifically directed [courts] to respect and enforce . . .
parties' chosen arbitration procedures."); see
also Preston v. Ferrer, 552 U.S. 346, 353 (2008)
(describing the Act as establishing a national policy in
favor of enforcing arbitration awards). Congress requires
enforcement even when arbitration proceedings do not provide
the full process protections that courts provide because the
"primary purpose" of the Act is not to turn
arbitration panels into private federal courts but to
"ensure that private agreements to arbitrate are
enforced according to their terms." Stolt-Nielsen
S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 682
(2010) (internal quotation marks and citations omitted).
interfere with an arbitration decision, it is only because
the proceeding deviated significantly from the Act's
standards of fair adjudication. Oxford Health Plans LLC
v. Sutter, 569 U.S. 564, 568 (2013) ("Under the
[Act], courts may vacate an arbitrator's decision
'only in very unusual circumstances.'" (quoting
First Options of Chi., Inc. v. Kaplan, 514 U.S. 938,
942 (1995))); see also Hall St. Assocs., 552 U.S. at
586 ("Section 10 . . . address[es] egregious
departures from the parties' agreed-upon arbitration . .
. ." (emphasis added)). The burden to prove that there
was unfair process falls on the challenger's shoulders,
and it is "onerous." Al-Harbi v. Citibank,
N.A., 85 F.3d 680, 683 (D.C. Cir. 1996); see also
Encyclopaedia Universalis S.A. v. Encyclopaedia Brittanica,
Inc., 403 F.3d 85, 90 (2d Cir. 2005) (describing the
burden on the challenger as a "heavy one"). If it
were easy to call into question the fairness of an
arbitration, losing parties would have every reason to
challenge the process in court. Because arbitration's
"essential virtue" is the avoidance of the length
and expense of litigation, courts may grant relief to a
disgruntled party only when its challenge ...