Author: Ira Rosenberg*
| Jurisdiction: United States |
Topics: Enforcement of Arbitral Awards Jurisdiction and Powers of the Courts in Matters of Arbitration Generally Court Decisions |
Suppose a foreign arbitration court, in awarding a judgement, set forth a formula for the amount owed but did not explicitly name an amount. Is the award amount justiciable pursuant to the Federal Arbitration Act (FAA)? Yes, according to the Court of Appeals for the Eleventh Circuit, in a recent pragmatic opinion, in which the court remanded the award calculation to the district court.[1]
According to Article 5 of the Panama Convention, a party to an international arbitration may request that the execution of a decision be refused upon proof that the decision is not yet binding.[2] Likewise, the FAA, which adopts the Panama Convention,[3] provides for a similar exception for nondefinite awards.[4]
In the case decided by the Eleventh Circuit, EGI-VSR, LLC v. Coderch Mitjans, Coderch Mitjans sought to prevent the court from enforcing an arbitration decision that only specified a formula for reaching the award amount but no defined amount was declared.[5] The case involved a stock purchase of a Chilean wine company that was contractually subject to a “put right” whereby the issuing company, if they did not meet certain obligations, must reimburse the investor for the stock plus fees, inflation, and interest.[6] The agreement also included an arbitration clause.[7] A dispute subsequently arose over the activities of the company and EGI elected to exercise their “put right.”[8] In 2009, the dispute went to arbitration where the arbitrator ruled that Coderch Mitjans must reimburse EGI according to their agreement.[9]The arbitrator, however, in the 102-page arbitration award, did not specify the amount owed. Rather, the award laid out the amount of shares purchased along with the sale dates and the fee rates.[10] Consequently, in 2015, EGI sued Coderch Mitjans in the Southern District of Florida.[11] Although no award amount was given, the amount could be deduced, with some calculation—by figuring out how much was paid for the stock and adjusting it to the fee percentages provided. This was the source of contention. Coderch Mitjans averred that so long as there was no final amount in Chilean Pesos, there was no final award and thus nothing for the court to enforce. EGI contended, on the other hand, that there is no difference: the amounts owed could fairly be deduced and converted to U.S. Dollars.
The legal tension here appears to be whether the courts should take a formalist approach to the Panama Convention and the FAA and, thus, should only grant enforcement where the award amount is explicit and avoid meddling in arbitration awards, or whether the courts should take a pragmatic approach and clarify any discernable award ambiguities. The Eleventh Circuit took the latter approach and affirmed the district court’s holding that the award was final, even if the award amount was not explicit.[12] Moreover, the court remanded the district court to determine what exactly would be owed in U.S. Dollars.[13]
This decision may indicate a receptivity by the courts to scrutinize arbitration awards that contain no precise, final award amount and provide measures to close any gaps. While this can lead to increased litigation costs in such instances, cases like these are almost certainly rare.[14]
[1] EGI-VSR, LLC v. Coderch Mitjans, 963 F.3d 1112, 1122 (11th Cir. 2020).
[2] Inter-American Convention on International Commercial Arbitration art. 5, Jan. 30, 1975, O.A.S.T.S. No. 42.
[3] 9 U.S.C. § 301 (“The Inter-American Convention on International Commercial Arbitration of January 30, 1975, shall be enforced in United States courts in accordance with this chapter”).
[4] 9 U.S.C. § 10(a)(4).
[5] Coderch Mitjans, 963 F.3d at 1112.
[6] Id. at 1115-16.
[7] Id. at 1116.
[8] Id.
[9] Id. at 1116-17.
[10] Id.
[11] Id. at 1117.
[12] Id. at 1122-23.
[13] Id. at 1125.
[14] Especially given the fact that the arbitration award was essentially specific performance—EGI had to return the stock and Coderch Mitjans had to reimburse it along with the agreed-upon fees. See Florian Faust, Specific Performance, in Current Issues in the CISG and Arbitration 235, 245 (Ingeborg Schwenzer et al. eds., 2014) (“In international trade, parties do not normally sue for specific performance; rather, they enter into a cover transaction and sue for damages”); Ewan Mckendrick & Iain Maxwell, Specific Performance in International Arbitration, 1 Chinese J. Comp. L. 195, 195 (2013) (“specific performance in international arbitration [does not] appear frequently in the case law”).
*J.D. Candidate 2022, Columbia Law School