October 02, 2019 Practice Points

The New York Convention or the FAA: Circuit Split Still Stands

The Eleventh Circuit maintains its outlier status on the enforcement of non-domestic arbitration awards.

By Rebecca Lunceford Kolb

In a recent decision, the Eleventh Circuit makes clear that its prior position still stands—challenges to international arbitration awards rendered in the United States will be governed by the New York Convention’s grounds for refusing enforcement of foreign awards, rather than the Federal Arbitration Act’s (FAA) grounds for vacatur. Inversiones y Procesadora Tropical INPROTSA, S.A. v. Del Monte Int’l GmbH, 921 F.3d 1291 (11th Cir. 2019). The question is the subject of a current circuit split, with the Eleventh Circuit falling in the minority (though, as discussed below, the minority position may be advantageous for arbitrators practicing in the circuit).

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly referred to as the New York Convention, is an international treaty adopted by 160 countries. It is widely cited as one of the biggest benefits of international arbitration because it allows for summary enforcement of an international award in any country that is a party to the convention (as opposed to the sometimes difficult process of having a domestic court judgment enforced in a foreign court). The United States has adopted the New York Convention and incorporated it into Chapter 2 of the FAA while Chapter 1 of the FAA addresses domestic arbitration law. See 9 U.S.C. §§ 201-208 and 9 U.S.C. §§ 1-16.

Under the New York Convention, challenges to an award are limited to the seven grounds listed in Article V of the convention, which are incorporated into the FAA at Section 207. See 9 U.S.C. § 207. In contrast, if domestic arbitration law applies, then challenges to an award are limited to the four grounds set forth in Section 10 of Chapter 1 of the FAA. See id. § 10. It is clear that, for awards rendered abroad, the convention’s Article V standards apply, and for purely domestic awards, which have no international element and are rendered in the United States, the FAA’s Section 10 standards apply. The question circuit courts—as well as the reporters for the Restatement of the U.S. Law of International Commercial Arbitration—have grappled with is which standards apply for awards rendered in the United States that have an international element, i.e., a non-U.S. party, property located outside the United States, or performance outside the United States. This last category of awards, those that are rendered in the United States but have an international party or involve property or performance abroad, are referred to as “non-domestic” awards.

The Eleventh Circuit decided twenty years ago that the New York Convention would govern non-domestic awards, and the issue seemed settled for the circuit. See Industrial Risk Insurers v. M.A.N. Gutehoffnungshutte GmbH, 141 F.3d 1434, 1440 (11th Cir. 1998). But that decision was called into question by the U.S. Supreme Court in BG Group PLC v. Republic of Argentina, 572 U.S. 25, 44-45 (2014). In BG Group, the Court analyzed whether a specific FAA Section 10 ground required vacatur of a non-domestic award. The Court did not address whether FAA Section 10 grounds should govern to begin with, but by engaging in an analysis of whether a Section 10 ground applied to a particular award, the Court opened the door to later arguments that Section 10 does supply the grounds to challenge non-domestic awards. The Eleventh Circuit appeared to accept those arguments in a 2017 opinion, where, in a footnote, it implied that the BG Group decision did rule that the FAA Section 10 grounds governed challenges to non-domestic awards. See Bamberger Rosenheim, Ltd., (Israel) v. OA Dev., Inc., (United States), 862 F.3d 1284, 1287 n.2 (11th Cir. 2017).

In Del Monte, however, the Eleventh Circuit revisits and squarely addresses the issue, making clear that Industrial Risk still governs—the New York Convention provides the only grounds to challenge a non-domestic award rendered in the United States. Del Monte, 921 F.3d 1291 at 1301-02. (The Panama Convention applied in the Del Monte case, but that made no meaningful difference to the analysis at issue, as the Panama Convention is the Inter-American analogue to the New York Convention and is incorporated into the FAA in Chapter 3.) The Eleventh Circuit emphasizes that the BG Group decision did not overrule Industrial Risk because the Supreme Court did not directly address the issue—it only decided whether a particular ground applied to the facts before it, not whether the convention provides the exclusive grounds for vacating non-domestic awards. 

As a practical matter, the grounds for challenge and vacatur are largely similar between the FAA and the New York Convention. But the Eleventh Circuit’s deference to the New York Convention could be an advantage for attracting international arbitrations to the circuit, a point that was noted in an amicus brief filed by the Atlanta International Arbitration Society in support of the position ultimately adopted in Del Monte. Limiting challenges of international awards rendered in the United States to the internationally-adopted standards provides certainty and familiarity to international parties. They will likely feel more comfortable having challenges governed by international standards to which they are accustomed, which could be beneficial to arbitrators practicing in Florida, Georgia, and Alabama when parties choose their seat for international arbitrations.

Also, limiting challenges to those under the New York Convention precludes use of the much-maligned “manifest disregard of the law” doctrine. Even if rarely successful, its availability allows parties to make mischief during enforcement proceedings.

The Eleventh Circuit’s decision puts it in the minority of the circuit split, with at least the Second (Yusuf Ahmed Alghanim & Sons v. Toys “R” Us, Inc., 126 F.3d 15, 23 (2d Cir. 1997)); Third (Ario v. Underwriting Members at Lloyds, 618 F.3d 277, 292 (3d Cir. 2010)); Fifth (Gulf Petro Trading Co. Inc. v. Nigerian National Petroleum Corp., 512 F.3d 742 (5th Cir. 2008)); and Sixth Circuits (Jacada (Europe), Ltd. v. Int’l Mktg Strategies, 401 F.3d 701, 709 (6th Cir. 2005)) falling on the other side. But its minority position could make it more attractive to international parties that choose to seat their arbitrations in the United States. Stay tuned, though. A petition for certiorari is pending before the Supreme Court, (Petition for a Writ of Certiorari, Inversiones y Procesadora Tropical Inprosta S.A. v. Del Monte International GMBH, No. 19-117 (U.S. July 25, 2019)), which could settle the question once and for all.

Rebecca Lunceford Kolb is a senior associate at Arnall Golden Gregory LLP in Atlanta, Georgia.


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