United States District Court, District of Columbia
A. HOWELL Chief Judge
Republic of Argentina ("Argentina") filed this
lawsuit seeking vacatur of an international arbitration award
against the country in the amount of $20, 957, 809, plus
interest, in favor of the respondent AWG Group Ltd.
("AWG"). Pet. to Vacate Arbitration Award
("Pet."), ECF No. 1. AWG, for its part, seeks
confirmation, recognition, and enforcement of that same
award. Cross-Pet. for Confirmation, Recognition and
Enforcement of Award ("Resp.'s Cross-Pet."),
ECF No. 12. Argentina's instant petition is not
the only effort by the country to avoid unfavorable
arbitration awards arising out of disputes between Argentina
and private consortia that contracted with Argentina to
provide infrastructure and public services in the country.
See, e.g., BG Grp. PLC v. Republic of
Argentina, 134 S.Ct. 1198 (2014) (reversing the D.C.
Circuit's vacatur of a $185 million dollar arbitration
award against Argentina in favor of British firm that was
part of consortium with a majority interest in an Argentine
entity holding "exclusive license to distribute natural
gas in Buenos Aires"); Argentine Republic v.
Nat'l Grid PLC, 637 F.3d 365 (D.C. Cir. 2011)
(affirming denial of Argentina's petition to vacate a $53
million dollar arbitration award and grant of respondent
National Grid's cross-motion to confirm the same).
arbitration award at issue in this case arises from a
now-terminated thirty-year contract between Argentina and a
private consortium, which included AWG, "to operate the
water distribution and treatment systems serving the city of
Buenos Aires." Resp.'s Mem. in Opp'n Pet. to
Vacate Arbitration Award and in Supp. of Cross-Pet. for
Confirmation, Recognition and Enforcement of Award
("Resp.'s Mem.") at 1, ECF No.
AWG alleges that fewer than ten years into the contract,
Argentina altered the investment framework, refused to
authorize tariff adjustments, attempted to force a
renegotiation of the contract, and ultimately terminated the
contract, thereby breaching "Argentina's obligation
to grant foreign investments 'fair and equitable
treatment'" and "Argentina's obligation to
provide foreign investments 'full protection and
security'" under the governing bilateral investment
treaty between the United Kingdom and Argentina, the
Agreement Between the Government of the United Kingdom of
Great Britain and Northern Ireland and the Government of the
Republic of Argentina for the Promotion and Protection of
Investments, Arg.-U.K. ("UK-BIT"). Id. at
7-9. The UK-BIT provides for binding international
arbitration arising out of an investment, Resp.'s
Cross-Pet., Ex. 6 to Decl. of Elliot Friedman ("Friedman
Decl."), Agreement Between the Government of the United
Kingdom of Great Britain and Northern Ireland and the
Government of the Republic of Argentina for the Promotion and
Protection of Investments, Arg.-U.K., Dec. 11, 1990
("UK-BIT"), ECF No. 12-7, available at
1765 U.N.T.S. 33, 38, and when the country where the award is
made is a signatory to the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards ("New York
Convention"), codified by reference at 9 U.S.C.
§§ 201 et seq., that convention governs
enforcement of the award, see New York Convention, arts. I,
accordance with the terms of the UK-BIT, the parties'
dispute was submitted to binding international arbitration
before an expert tribunal (the "Tribunal"), which
confirmed its jurisdiction, see Pet., Ex. B to Deck
of Matthew Slater ("Slater Deck"), AWG Grp.
Ltd. v. The Argentine Republic, Decision on Jurisdiction
(Aug. 3, 2006) ("Decision on Jurisdiction"), ECF
No. 1-5, and after twelve years of proceedings entered a
final award in favor of AWG in April 2015. Resp.'s Mem.
at 1, 4, 11-12. Argentina now seeks to vacate the
Tribunal's award under the Federal Arbitration Act
("FAA"), 9 U.S.C. § 10, arguing that one of
the arbitrators acted with "evident partiality, "
and that the Tribunal exceeded its powers, Pet. ¶¶
For the reasons explained below, Argentina's request to
vacate the Tribunal's award is denied and AWG's
cross-petition to confirm the award is granted.
below is the factual and procedural background pertinent to
the resolution of the pending motions.
The Concession Contract
December 28, 1992, Argentina awarded a concession for the
"provi[sion of] water and sewage services to Buenos
Aires and surrounding municipalities" to a private
consortium, which included AWG, a British corporation. Pet.
¶¶ 5, 13-14; Pet., Ex. C to Slater Decl, AWG
Grp. v. The Argentine Republic, Decision on Liability
(July 30, 2010) ("Decision on Liability")
¶¶ 1, 33, ECF No. 1-6. Prior to this award,
Argentina had declared its public services to be in "a
state of emergency" and had taken steps to establish
"a regulatory framework to privatize certain public
services." Pet. ¶¶ 10-11; Decision on
Liability ¶¶ 28-31. Under this scheme,
concessionaires would provide services, new capital, and
technology, and in turn, "would be entitled to the
payment of tariffs." Pet. ¶¶ 11-12; Decision
on Liability ¶¶ 30-32. To attract "the
necessary long-term private and foreign capital, " the
new regulatory framework: (1) pegged the Argentine peso to
the United States dollar at a ratio of 1:1; and (2) permitted
tariff adjustments "to take account of changing and
unexpected circumstances." Resp.'s Mem. at 5-6;
Decision on Liability ¶¶ 29, 124. Argentina also
entered into more than fifty bilateral investment treaties,
including the UK-BIT,  through which the countries sought to
"encourage cross-border private investment."
Resp.'s Mem. at 4; Decision on Liability ¶¶ 29,
Buenos Aires water and sewage concession was granted to a
consortium comprised of AWG and other foreign and Argentine
companies, which together formed and operated as an Argentine
company named Aguas Argentinas S.A.
("AASA"). Pet. ¶ 13; Decision on Liability
¶¶ 32-33. On April 28, 1993, AASA entered into a
thirty-year contract with Argentina (the "Concession
Contract"). Pet. ¶ 14; Decision on Liability ¶
34. In accordance with the requirement in the Concession
Contract to provide an "upfront investment to improve
and expand the system, " AASA obtained loans from
multilateral lending agencies, payable in United States
dollars, while AASA had agreed to receive tariff payments in
Argentine pesos, which were pegged under the terms of the
Concession Contract to the United States dollar at a ratio of
1:1. Pet. ¶ 15; Decision on Liability ¶ 35. The
Concession Contract included a termination clause
"allowing termination under specified circumstances,
including termination for the concessionaire's
fault." Pet. ¶ 16; Decision on Liability ¶
2001, AASA had invested $1.7 billion in the Concession
Contract, "yield[ing] substantial improvements in the
water distribution and sewage system serving Buenos
Aires." Resp.'s Mem. at 6; Decision on Liability
¶¶ 35-36. Around this time, however, Argentina
"began to experience significant economic difficulties
that would eventually lead to a financial crisis having
serious consequences for the country, its people, and its
investors, both foreign and national." Decision on
Liability ¶ 41; Pet. ¶ 18. "[T]o return
stability to the country, " Argentina adopted "a
series of policies and measures, " including, in 2002,
Emergency Law No. 25, 561. Pet. ¶ 19; Decision on
Liability ¶ 44. This measure, inter alia: (1)
"abolished the currency board that linked the Argentine
peso to the U.S. dollar, which was followed by a significant
depreciation of the Argentine peso;" (2) "abolished
the adjustment of public service contracts according to the
agreed-upon indexations;" and (3) "authorized the
Executive branch of the government to renegotiate all public
service contracts." Pet. ¶ 19; Decision on
Liability ¶ 44. The Emergency Law "also forbade
concessionaires from suspending or altering their contractual
performance." Resp.'s Mem. at 7; Decision on
Liability ¶ 44. These policies and measures,
particularly the unpegging of the Argentine peso from the
United States dollar, "had a ruinous effect on
AASA's cash flows, because AASA's tariffs were
calculated in Argentine pesos while its debt obligations were
necessarily denominated in U.S. dollars." Resp.'s
Mem. at 7; Decision on Liability ¶ 50.
in March 2002, Argentina and AASA engaged in negotiations
"to adjust the terms of the Concession Contract, "
but were unable to come to an agreement. Pet. ¶ 20;
Decision on Liability ¶¶ 46-47, 49-50. Argentina
ignored or rejected AASA's requested "tariff
adjustments and modifications to its operation
conditions" and, instead, "demanded that AASA
provide water and sewage services to areas outside the scope
of [the Concession Contract]" and "insisted that
AASA continue to comply fully with its investment
obligations." Resp.'s Mem. at 7; Decision on
Liability ¶¶ 44-51. Argentina also "alerted
AASA to several significant performance failures in violation
of the Concession Contract." Pet. ¶ 20; Decision on
Liability ¶ 52.
September 2005, the AASA requested termination of the
Concession Contract, which Argentina refused. Resp.'s
Mem. at 7; Decision on Liability ¶ 53. Several months
later, in March 2006, Argentina terminated the Concession
Contract for fault by AASA. Pet. ¶ 21; Decision on
Liability ¶ 56.
April 17, 2003, after passage of the Emergency Law, but prior
to the termination of the Concession Contract, the foreign
investors in AASA requested arbitration against Argentina
claiming that Argentina's actions "violate[d] three
specific treaty provisions: 1) guarantees against direct and
indirect expropriation of their investments; 2) guarantees to
accord their investments full protection and security; and 3)
guarantees to accord their investments fair and equitable
treatment." Decision on Liability ¶¶ 48, 127;
see UK-BIT, arts. 2(2), 5.
the foreign investors (hereinafter "Claimants")
invoked Argentina's consent to arbitrate in the bilateral
investment treaty governing their investment. Decision on
Liability ¶¶ 1-2. Since the other bilateral
investment treaties provided for International Centre for
Settlement of Investment Disputes ("ICSID")
arbitration, Argentina and AWG agreed that the ICSID would
also administer AWG's case, subject to the Arbitration
Rules of the United Nations Commission on International Trade
Rules ("UNCITRAL Rules"), which is a default
international arbitration scheme provided for in the UK-BIT.
Decision on Liability ¶¶ 2, 4; BIT, art. 8(3). This
scheme permitted all of the foreign investors' claims to
be arbitrated before the same tribunal. Decision on Liability
¶¶ 2, 4; Pet. ¶ 24.
Tribunal, appointed in fall 2003, was comprised of three
members. Decision on Liability ¶ 5; Pet. ¶ 24. The
Claimants appointed Professor Gabrielle Kaufmann-Kohler;
Argentina appointed Professor Pedro Nikken; and, because the
parties could not agree on a third arbitrator, ICSID
appointed Professor Jeswald W. Salacuse to be the Tribunal
President. Decision on Liability ¶¶ 5-6; Pet.
¶ 24. The seat of the arbitration was designated to be
Washington, D.C. Pet., Ex. A to Slater Deck, AWG Grp.
Ltd. v. The Argentine Republic, Award (Apr. 9, 2015)
("Final Award") at i, ECF No. 1-4; Decision on
Liability ¶ 9.
the course of the arbitration, from the time of AWG's
request for arbitration in April 2003 to the Tribunal's
issuance of the final award twelve years later, in April
2015, the Tribunal issued five decisions. Decision on
Liability ¶ 1; Final Award at i. In the first decision,
issued on August 3, 2006, the Tribunal rejected
Argentina's objections to the Tribunal's jurisdiction
to hear the claims. Decision on Jurisdiction ¶ 69. The
second decision responded to Argentina's request to
remove Professor Kaufmann-Kohler from the Tribunal, because
she had served as an arbitrator in a different case, in which
the panel had already issued an award against Argentina.
Resp.'s Mem. at 14. This challenge was rejected by
"the two unchallenged arbitrators (including
Argentina's appointee), " in accordance with
agreed-upon procedures. Resp.'s Mem. at 14; Resp.'s
Cross-Pet, Ex. 16 to Friedman Decl., AWG Grp. v. The
Argentine Republic (Oct. 22, 2007) ("First
Disqualification Decision") ¶¶ 12, 17, ECF No.
12-17 (citing ICSID Arbitration Rule 9(4)). The third
decision responded to a second request from Argentina to
remove Professor Kaufmann-Kohler, following her appointment
on April 19, 2006, to the Board of Directors of UBS
("UBS Board"), "on grounds that her
directorship, and her decision not to disclose it, gave rise
to justifiable doubts as to her impartiality and
independence, in conflict with the ICSID Convention and the
UNCITRAL Rules." Pet. ¶¶ 28-29; Pet., Ex. K to
Slater Decl., Challenge to Mrs. Gabrielle Kaufmann Kohler
("Second Disqualification Challenge") at 1-2, ECF
No. 1-14. The two unchallenged arbitrators, again, rejected
Argentina's claim. Pet., Ex. H to Slater Tied., AWG
Grp. Ltd. v. The Argentine Republic (May 12, 2008)
("Second Disqualification Decision") ¶ 26, ECF
No. 1-11. In any event, on April 15, 2009, nearly a year
after the Second Disqualification Decision, "Professor
Kaufmann-Kohler resigned as an independent director [of
UBS]" in order "to avoid any possible expression of
doubt about her arbitral independence." Resp.'s Mem.
at 22; Resp.'s Cross-Pet., Ex. 23 to Friedman Decl.,
Kaufmann Kohler Leaves UBS Board, Global Arbitration
Review, May 1, 2009, at 1, ECF No. 12-24.
year after Professor Kaufmann-Kohler had resigned from the
UBS Board, the Tribunal issued its fourth decision, on July
30, 2010, finding Argentina liable for failing to provide the
investments "fair and equitable treatment."
Decision on Liability ¶¶ 247-48. Specifically, as
described in the Decision on Liability, the Tribunal
concluded that "Argentina's actions in refusing to
revise the tariff according to the legal framework of the
Concession and in pursuing the forced renegotiation of the
Concession Contract contrary to that legal framework violated
its obligations under the applicable BITs to accord the
investments of the Claimants fair and equitable
treatment." Id. ¶ 247. The fifth and
final Tribunal decision on damages owed by Argentina, known
as the "Final Award, " was issued on April 9, 2015,
and awarded a total of $404, 539, 050, plus interest, to the
Claimants, including $20, 957, 809, plus interest, to AWG.
Final Award at 58-62.AWG alleges that Argentina has not yet
complied with the award, see Resp.'s Mem. at 3,
and Argentina does not dispute this assertion.
6, 2015, Argentina petitioned to vacate the Tribunal's
arbitration award on the grounds that the Tribunal acted with
evident partiality, under 9 U.S.C. § 10(a)(2)
(authorizing vacatur of arbitration award "where there
was evident partiality or corruption in the
arbitrators"), and that the Tribunal exceeded its powers
by improperly calculating damages and failing to apply
international law, under 9 U.S.C. § 10(a)(4)
(authorizing vacatur of arbitration award "where the
arbitrators exceeded their powers, or so imperfectly executed
them that a mutual, final, and definite award upon the
subject matter submitted was not made"). See
generally Pet. Less than two months later, on September
1, 2015, AWG filed a cross-petition to confirm the award,
pursuant to 9 U.S.C. § 9, and Article IV of the New York
Convention. See generally Resp.'s Cross-Pet.
Both petitions are ripe for review.
LEGAL STANDARD FOR REVIEW OF CHALLENGED ARBITRATION
of arbitral awards is "extremely limited, "
Kurke v. Oscar Gruss & Son, Inc., 454 F.3d 350, 354
(D.C. Cir. 2006) (quoting Teamsters Local Union No. 61 v.
United Parcel Serv., Inc., 272 F.3d 600, 604 (D.C. Cir.
2001)), and is "'not an occasion for de
novo review.'" Scandinavian Reins. Co. v.
Saint Paul Fire & Marine Ins. Co., 668 F.3d 60, 71 (2d
Cir. 2012) (quoting Wallace v. Buttar, 378 F.3d 182,
189 (2d Cir. 2004)). Courts "do not sit to hear claims
of factual or legal error by an arbitrator" as they
would "in reviewing decisions of lower courts."
Kurke, 454 F.3d at 354 (internal citations and
quotations omitted). Indeed, the standard of review of
arbitral awards is so narrow that courts are "not
authorized to reconsider the merits of an award even though
the parties may allege that the award rests on errors of fact
or on misinterpretation of the contract." United
Paperworkers Int'l Union, AFL-CIO v. Misco, Inc.,
484 U.S. 29, 36 (1987). While an "arbitrator may not
ignore the plain language of the contract. . . [, ] as long
as the arbitrator is even arguably construing or applying the
contract and acting within the scope of his authority, that a
court is convinced he committed serious error does not
suffice to overturn his decision." Id. at 38.
Supreme Court has explained that this high level of deference
is required for arbitration awards because, "[i]f
parties could take 'full-bore legal and evidentiary
appeals, ' arbitration would become 'merely a prelude
to a more cumbersome and time-consuming judicial review
process.'" Oxford Health Plans LLC v.
Sutter, 133 S.Ct. 2064, 2068 (2013) (quoting Hall
Street Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576,
588 (2008)). Thus, where the parties have chosen arbitration,
they "must now live with that choice." Id.
fact that the document containing an arbitration agreement is
a treaty does not "make a critical difference, "
since "[a]s a general matter, a treaty is a contract,
though between nations." BG Grp. PLC, 134 S.Ct.
at 1208. "Consistent with the 'emphatic federal
policy in favor of arbitral dispute resolution'
recognized by the Supreme Court as 'appl[ying] with
special force in the field of international commerce, '
the FAA affords the district court little discretion in
refusing or deferring enforcement of foreign arbitral awards
. . . ." Belize Soc. Dev. Ltd. v. Gov't of
Belize ("Belize Soc. Dev. I"), 668 F.3d 724,
727 (D.C. Cir. 2012) (alteration in original) (quoting
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,
Inc., 473 U.S. 614, 631 (1985)).
urges vacatur of the arbitration award under two provisions
of the FAA's § 10. First, due to Professor
Kaufmann-Kohler's position on the UBS Board, and her
alleged failure to investigate and disclose that position and
its potential for conflict, Argentina contends vacatur is
warranted under 9 U.S.C. § 10(a)(2). Pet. ¶¶
2, 43. Second, because the Tribunal allegedly awarded damages
outside of the legal boundaries afforded by the UK-BIT and
allegedly failed to apply international legal principles as
required by the UK-BIT, Argentina argues that vacatur is also
warranted under 9 U.S.C. § 10(a)(4). Id.
¶¶ 3, 68. AWG discounts these arguments as
"groundless" and contends that the arbitration
award must be confirmed because none of the statutory bases
for vacatur exist. Resp.'s Mem. at 3. Following review of
the statutory framework, Argentina's challenges to the
Tribunal's arbitration award are addressed
the United States and Argentina are parties to the New York
Convention, which applies to arbitral awards made in the
territory of a signatory country to the Convention. See
New York Convention, art. 1(1)); Belize Soc. Dev.
I, 668 F.3d at 731 n.3 ("If the place of the award
is 'in the territory of a party to the Convention, all
other Convention states are required to recognize and enforce
the award, regardless of the citizenship or domicile of the
parties to the arbitration.'" (quoting Creighton
Ltd. v. Gov't of the State of Qatar, 181 F.3d 118,
121 (D.C. Cir. 1999))). The Supreme Court described the
purpose of the New York Convention as to "encourage the
recognition and enforcement of commercial arbitration
agreements in international contracts and to unify the
standards by which agreements to arbitrate are observed and
arbitral awards are enforced in the signatory
countries." Scherk v. Alberto-Culver Co., 417
U.S. 506, 520 n.15 (1974). Thus, the Convention
"provid[es] for 'the recognition and enforcement of
arbitral awards made in the territory of a State other than
the State where the recognition and enforcement of such
awards are sought.'" Belize Soc. Dev., Ltd. v.
Gov't of Belize ("Belize Soc. Dev. II"),
794 F.3d 99, 103 (D.C. Cir. 2015), petition for cert,
filed, Dec. 24, 2015 (quoting New York Convention, art.
1(1)). "The basic understanding of the New York
Convention is that '[e]ach Contracting State shall
recognize arbitral awards as binding and enforce them in
accordance with the rules of procedure of the territory where
the award is relied upon, under the conditions laid down in
the . . . articles [of the Convention].'"
TermoRio S.A. E.S.P. v. Electranta S.P., 487 F.3d
928, 934 (D.C. Cir. 2007) (alteration in original) (quoting
New York Convention, art. III). '"[T]he critical
element is the place of the award: if that place is in the
territory of a party to the Convention, all other Convention
states are required to recognize and enforce the award,
regardless of the citizenship or domicile of the parties to
the arbitration.'" Id. (quoting
Creighton Ltd., 181 F.3d at 121).
York Convention, which has been codified as chapter 2 of the
FAA, 9 U.S.C. §§ 201-08, provides that a party may
apply to any court with jurisdiction for confirmation of an
arbitration award within three years of when the award is
made, id. § 207. The court is required to
"confirm the award unless it finds one of the grounds
for refusal or deferral of recognition or enforcement of the
award specified in the [New York] Convention."
Id. Article V of the New York Convention sets forth
the exclusive grounds for refusal of recognition and
enforcement of the award. See TermoRio S.A. E.S.P.,
487 F.3d at 935 (noting that courts "may refuse to
enforce the award [subject to New York Convention] only on
the grounds explicitly set forth in Article V of the
Convention." (quoting YusufAhmed Alghanim & Sons v.
Toys "R" Us, Inc., 126 F.3d 15, 23 (2d Cir.
1997))). As pertinent here, Article V(1)(e) provides for
vacatur of an arbitral award that "has been set aside or
suspended by a competent authority of the country in which,
or under the law of which, that award was made, " New
York Convention, art. V(1)(e), thereby authorizing parties to
employ any grounds provided by domestic law in the
jurisdiction where the award was made, "to the extent
that" those domestic provisions are "not in
conflict with" the New York Convention. 9 U.S.C. §
208. See also Scandinavian Reins. Co., 668 F.3d at
71 (observing that '"FAA and the New York Convention
work in tandem, and they have overlapping coverage to the
extent that they do not conflict'") (quoting
Sole Resort, S.A. de C. V. v. Allure Resorts Mgmt,
LLC, 450 F.3d 100, 102 n.1 (2d Cir. 2006)); Yusuf
Ahmed Alghanim & Sons., 126 F.3d at 21 ("We read
Article V(1)(e) of the [New York] Convention to allow a court
in the country under whose law the arbitration was conducted
to apply domestic arbitral law, in this case the FAA, to a
motion to set aside or vacate that arbitral
when, as here, the award is made in the United States, the
parties may, through Article V(1)(e), seek vacatur of the
arbitration award under the FAA provisions applicable to
domestic awards in 9 U.S.C. §§ 10 and 11. See
Zeiler v. Deitsch, 500 F.3d 157, 164 (2d Cir. 2007)
(finding, where "arbitration took place in the United
States" but where significant aspects of the
arbitration, including certain parties and the governing law
were international, "the awards entered ... are at the
same time subject to the FAA provisions governing domestic
arbitration awards" and the New York Convention);
see also Yusuf Ahmed Alghanim & Sons, 126 F.3d at 23
("The Convention specifically contemplates that the
state in which, or under the law of which, the award is made,
will be free to set aside or modify an award in accordance
with its domestic arbitral law and its full panoply of
express and implied grounds for relief").
the domestic provisions of the FAA, the court must confirm an
arbitration award unless there are statutory grounds to
vacate, modify, or correct the arbitrators' decision. 9
U.S.C. § 9 ("[A]ny party to the arbitration may
apply to the court [in and for the district within which such
award was made] for an order confirming the award, and
thereupon the court must grant such an order unless the award
is vacated, modified, or corrected as prescribed in sections
10 and 11 of [the FAA]."). Section 10 of the FAA
provides the following four grounds for vacatur of an
arbitration decision and award:
(1) where the award was procured by corruption, fraud, or
(2) where there was evident partiality or corruption in the
arbitrators, or either of them;
(3) where the arbitrators were guilty of misconduct in
refusing to postpone the hearing, upon sufficient cause
shown, or in refusing to hear evidence pertinent and material
to the controversy; or of any other misbehavior by which the
rights of any party have been prejudiced; or
(4) where the arbitrators exceeded their powers, or so
imperfectly executed them that a mutual, final, and definite
award upon the subject matter submitted was not made.
9 U.S.C. § 10(a).
Argentina's Claim of Evident Partiality by ...