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Tenth Circuit Finds FAA Defenses Applicable to Nondomestic Arbitral Awards

The U.S. Court of Appeals for the Tenth Circuit recently held for the first time that parties opposing the confirmation of nondomestic arbitral awards (i.e., awards issued in disputes involving property located or conduct occurring outside the U.S.) issued in the U.S. or under U.S. arbitration law are not limited to the grounds set forth in the Inter-American Convention on International Commercial Arbitration (the Panama Convention). Instead, the court ruled that defenses to confirmation under the Federal Arbitration Act (FAA) apply.

In Goldgroup Resources, Inc. v. DynaResource De Mexico, S.A. de C.V., the Tenth Circuit considered an appeal from confirmation of an arbitral award in a protracted, multi-jurisdictional dispute over control of a Mexican gold mine. Following an initial spate of lawsuits in Texas and Mexico, Canadian company Goldgroup Resources, Inc. commenced contractual arbitration proceedings in Denver, Colorado, alleging that Texas-based DynaResource, Inc. and its Mexican subsidiary had improperly diluted Goldgroup’s interest in the mining project. DynaResource refused to participate, however, after obtaining from a Mexico City court a ruling that Goldgroup had waived its right to arbitration by submitting to the jurisdiction of Mexican courts in a previous action. In an August 2016 award, the arbitrator ruled that Goldgroup had not waived its right to arbitration, found the parties’ arbitration agreement valid and enforceable, and granted Goldgroup monetary and equitable relief.

Goldgroup then sought to confirm the award in the U.S. District Court for the District of Colorado. In response, DynaResource filed an application under the Panama Convention for non-recognition of the award and moved for vacatur under § 10(a)(4) of the FAA, arguing that the arbitrator had exceeded authority by deciding the waiver issue. Goldgroup countered that the Panama Convention provides the exclusive grounds to oppose the confirmation of nondomestic arbitral awards.  In May 2019, the district court confirmed the award and entered judgment against DynaResource.  DynaResource appealed.

On appeal, the Tenth Circuit noted that, though it had previously recognized the exclusivity of grounds in the Panama Convention for vacating an arbitral award rendered in or under the arbitration law of a foreign jurisdiction, it had not yet considered the issue in the context of a nondomestic award subject to the Panama Convention and rendered in or under U.S. arbitration law.  The court observed that the majority of circuits to have addressed the issue—including at least the SecondFifth, and Sixth Circuits—found FAA defenses available in such cases based on language in Article 5(1)(e) of the Panama Convention, which provides a defense to confirm if an award “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.” Only the Eleventh Circuit had reached a contrary result, holding that challenges to confirmation of non-domestic arbitral awards are limited to the grounds specified in the Panama Convention.

The Tenth Circuit sided with the majority, concluding that the Panama Convention “expressly contemplates” the application of U.S. arbitration law to arbitral awards rendered in or under U.S. law. Nevertheless, the court declined to vacate the award under FAA § 10(a)(4), reasoning that the parties had clearly manifested their intent to arbitrate issues of arbitrability—including waiver—by incorporating the rules of the American Arbitration Association into their agreement.  The court thus affirmed confirmation of the award.

The Tenth Circuit’s decision has obvious significance for litigants opposing the confirmation of nondomestic arbitral awards by expanding the spectrum of defenses available to them. At the same time, the decision deepens a split of authority among the federal courts of appeals which may ultimately require the U.S. Supreme Court’s intervention. We will monitor developments and report further as warranted.

© 2021 Proskauer Rose LLP. National Law Review, Volume XI, Number 145
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About this Author

Shiloh Rainwater Litigation Attorney Law Firm Proskauer Rose
Associate

Shiloh Rainwater is an associate in the Litigation Department and a member of the firm’s Appellate Practice Group.  His practice spans a diverse array of complex trial and appellate matters, including federal securities actions, real-estate disputes, and restructuring cases.  He also maintains a robust pro bono practice, representing clients in public-housing matters and veterans’ affairs.

212-969-3563
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