A consortium that was on the losing side of a $238-million arbitration over the construction of the third set of locks for the Panama Canal is asking the United States Supreme Court to review a circuit court opinion that decline to vacate the award, claiming that the circuit court applied the wrong standard in considering whether the arbitrators had disqualifying conflicts of interest.
The case pits Grupo Unidos por el Canal, S.A. (“Grupo”), a consortium of Spanish, Italian, Belgian, and Panamanian construction firms, against Autoridad del Canal de Panama (“ACP”), the Panamanian government entity that operates the Panama Canal and that sponsored the multi-billion-dollar, decade-long project to expand the Canal’s capacity by building a new set of locks (the “Project”). The current dispute (the “Panama 1 Arbitration”), which centered on the suitability of basalt rock that came from the excavation works under the contract to be used to produce concrete aggregates for the Project, was arbitrated before a three-member ICC Tribunal and resulted in a $238-million award to ACP after an arbitration that lasted five years.
After Grupo received two adverse awards amounting to more than a quarter-billion dollars in the arbitration, it sought wide-ranging disclosures from each of the three members of the panel pertaining to possible bias. Each arbitrator disclosed for the first time that he had served on panels in other, unrelated arbitrations in which an arbitrator or counsel involved in Grupo Unidos’s arbitration also participated.
Following the disclosures of the new information, Grupo challenged the impartiality of the arbitrators before the International Court of Arbitration (“ICA”) of the International Chamber of Commerce. The ICA agreed that some arbitrators failed to make a few disclosures but did not find any basis for removal and rejected Grupo challenges on the merits. Thereafter, Grupo moved—unsuccessfully—for the vacatur of the awards in the United States District Court for the Southern District of Florida. Grupo then appealed to the United States Court of Appeals for the Eleventh Circuit, and the Eleventh Circuit affirmed the District Court’s ruling.[1]
The Eleventh Circuit agreed with the ICA and the District Court that Grupo had presented “nothing that comes near the high threshold required for vacatur” under the Federal Arbitration Act. The Court ruled: “It is little wonder, and of little concern, that elite members of the small international arbitration community cross paths in their work. . . . We refuse to grant vacatur simply because these people worked together elsewhere.”
In its petition for certiorari to the United States Supreme Court,[2] Grupo argues that the Eleventh Circuit applied a standard that makes it too difficult for parties to demonstrate arbitrator partiality, and that it should have ruled instead that “evident partiality” is present “when undisclosed facts show a reasonable impression of partiality.” In its opposition brief, ACP argues that Grupo’s evidence would be insufficient under any standard. The Supreme Court will likely decide whether to grant Grupo’s petition to review the case within the next few months.
Sarah B. Biser, Co-Chair Of International Arbitration at Fox Rothschild, represents Constructuro Urbana, which is one of the four shareholders in Grupo Unidos por el Canal, S.A., but which is not a party to Grupo’s challenges to the arbitration award discussed in this article.
[1] Grupo Unidos por el Canal, S.A. v. Autoridad del Canal de Panama, 78 F.4th 1252 (11th Cir. 2023).
[2] Grupo Unidos por el Canal, S.A. v. Autoridad Del Canal de Panama, No. 23-660.
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