Grupo Unidos por el Canal, SA v Autoridad del Canal de Panama: Disclosure Obligations and Partiality in Arbitration Revisited

In Grupo Unidos por el Canal, SA v Autoridad del Canal de Panama (“Grupo Unidos v ACP“),[1] the United States Court of Appeals for the Eleventh Circuit (the “Court of Appeals“) considered whether a lack of disclosure regarding the involvement of arbitrators in separate proceedings compromises the impartiality of a tribunal. The Court concluded that although the tribunal’s disclosure was lacking, it was insufficient to ground a finding of partiality. Below, we consider the relevance takeaways of this important decision for Canadian arbitration practitioners.

Background

Grupo Unidos, a consortium of European companies, secured a multi-billion dollar contract to design and build new locks for the Panama Canal expansion that began in 2009 and was set to conclude by October 2014. However, unforeseen complications led to a delay of over twenty months, resulting in numerous disputes between the parties involving seven arbitrations. The appeal in Grupo Unidos v ACP concerned one of these arbitrations, namely the Panama 1 Arbitration, where Grupo Unidos brought several contractual claims against the canal authority, Autoridad del Canal de Panama (the “Arbitration”).[2]

The contract between Grupo Unidos and Autoridad del Canal de Panama contained a mandatory arbitration clause, which required that disputes be resolved through arbitration in Miami pursuant to the International Chamber of Commerce’s Rules of Arbitration (the “ICC Rules“). Each party nominated one arbitrator, confirmed by the International Court of Arbitration (“ICA“). The nominees were Dr. Robert Gaitskell, and Claus von Wobeser, who in turn appointed Pierre-Yves Gunter as the president of the tribunal.[3] Autoridad del Canal’s counsel included Andres Jana, James Loftis, and Manus McMullan.

All three arbitrators had substantial international arbitration experience, having collectively been involved in over 500 arbitrations.[4] After their confirmation, each submitted statements confirming their impartiality and independence and disclosed any potential conflicts. At that stage, neither party sought additional disclosure or other details from the arbitrators.

The Arbitration

The subject arbitration took over five years, involving thousands of pages of pleadings, over 150 fact and expert witnesses, thousands of exhibits, and a 20-day merits hearing. On September 21, 2020, the tribunal issued a Partial Award (the “Partial Award”) by which Grupo Unidos was awarded $26.8 million while Autoridad del Canal was awarded $265.3 million, amounting to a net victory of $238.5 million, plus interest, for Autoridad del Canal.[5]

Three weeks after the Partial Award was granted, Grupo Unidos began to question the arbitrators’ impartiality, seeking additional information concerning the arbitrators’ relationships with (1) each other, (2) other arbitrators in related matters, and (3) with the parties’ counsel in other arbitrations.[6] The disclosures revealed certain professional engagements amongst the arbitrators, and between the arbitrators and the parties’ counsel in the current and other, unrelated arbitrations.[7]

The ICA Decision

Based on these disclosures  and prior to the issuance of a final award, Grupo Unidos filed an application with the ICA seeking the removal of the tribunal members, claiming they had concealed significant connections that raised doubts about their neutrality. After extensive proceedings, the ICA determined that although some of the professional intersections should have been disclosed, there was no conflict significant enough to sustain a challenge to the arbitrators. The tribunal then issued a Final Award on February 17, 2021, amounting to approximately $285 million in favour of Autoridad del Canal (the “Final Award“). Grupo Unidos subsequently paid the full amount of the Final Award.[8]

The District Court’s Decision

On November 25, 2020, before the ICA released its decision, Grupo Unidos moved to vacate the Partial Award in the Southern District of Florida. Additionally, by April 19, 2021, Grupo Unidos had also moved to vacate the Final Award. Grupo Unidos argued that the arbitrators showed clear bias, basing their assertions on the New York Convention . Specifically, they relied on Articles V(2)(b), V(1)(d), and V(1)(b) of the New York Convention, which allow a party to resist the enforcement of an international arbitration award if (1) enforcement would be contrary to the public policy, (2) the arbitral procedure was not in accordance with the agreement of the parties, or (3) the party was unable to present its case.[9]

The District Court determined that none of these defenses were available, and criticized Grupo Unidos’ stance as being based on skeptical (and speculative) assumptions about the arbitrators and assuming the worst about their character. Thus, the Court rejected the motion to vacate, and confirmed Autoridad del Canal’s awards. Grupo Unidos appealed this decision to the Court of Appeals. [10]

The Court of Appeals’ Decision:

Which law should govern this case?

Relying on a prior en banc decision, the Court stated that if an arbitration is seated in the United States or governed by United States law, Chapter 1 of the Federal Arbitration Act (“FAA“) dictates the grounds for vacating an award. In this case, the parties agreed that the FAA would govern the arbitration, and although the parties’ arguments on vacatur were framed as arising out of the Convention, the core dispute about vacatur centered on the FAA‘s ‘evident partiality’ exception.[11]

Deference to Arbitral Decisions

As a preliminary point, the Court emphasized that U.S. federal courts will only overturn an arbitral award under rare circumstances:

“[…] U.S. courts refrain from unilaterally vacating an award, rendered under international arbitral rules, in all but the most extreme cases.  It is no surprise, then, that although the losing parties to international arbitrations often raise defenses to award enforcement before our courts, those efforts “rarely” succeed.”[12]

Moreover, with respect to international arbitrations, the reluctance to overturn decisions is even more pronounced, primarily because the New York Convention emphasizes global standards for arbitral agreement observance and award enforcement. As such, American courts only vacate international arbitral awards in exceptional cases.

Grupo Unidos argued that the Panama 1 Arbitration was one such exception due to the non-disclosure of potential biases of the arbitrators. Although the Court agreed that the ICC Rules and American arbitration law emphasized transparent disclosure, it did not accept that Grupo Unidos’ claim that mere professional familiarity amounted to potential bias.

The Appellant’s Arguments

The Court considered and rejected each of the four instances Grupos Unidos submitted as proof of evident partiality, and explained why bias could not be established. Grupo Unidos’ submissions were as follows:

1. Gaitskell’s Nomination of Gunter: During the Panama 1 Arbitration, Gaitskell nominated Gunter to head another tribunal. In that regard, the Court’s decision described Grupo Unidos’ argument as suggesting that Gunter’s receiving of a lucrative appointment may have (consciously or subconsciously) influenced him to side with Gaitskell, such that it may have constituted a quid pro quo.
2. von Wobeser and Jana’s Concurrent Service: Grupo Unidos cited a conflict where, while the Panama 1 Arbitration was ongoing, von Wobeser and Jana served as co-arbitrators in another arbitration.
3. Gaitskell and Loftis’s Prior Co-Arbitration: Prior to the Panama 1 Arbitration, Gaitskell and Loftis served as co-arbitrators in a separate arbitration and Loftis subsequently joined the counsel of the canal authority.
4. Gaitskell and McMullan Prior Involvement: Gaitskell served as an arbitrator in a different case where McMullan represented a party.

Gaitskell’s Nomination of Gunter

The Court determined that this alone did not qualify as evidence of partiality, as Grupo Unidos did not present any precedent where the simple fact of one arbitrator nominating another in a separate matter was sufficient cause for vacating an award. Indeed, to the contrary, the Court cited to American precedent for the proposition that the fact arbitrators appoint each other to panels does not per se manifest evident partiality. Moreover, Gunter’s extensive arbitration experience and his affirmed impartiality negated the suspicion of bias.[13]

von Wobeser and Jana’s Concurrent Service

The Court rejected this argument, and in doing so, rejected Grupo Unidos’ reliance on prior case law holding that partiality exists where an arbitrator represented co-defendants in a different matter with a member of counsel appearing before them. The Court observed that the relationship between co-arbitrators is not the same as the relationship between co-counsel, because arbitrators do not represent a client and have a duty of impartiality. As such, there was nothing inherently suspect regarding von Wobeser and Jana having served as co-arbitrators in another case.[14]

Gaitskell and Loftis’s Prior Co-Arbitration

The Court found that because the mere fact that an arbitrator had previous contact with a party’s counsel does not automatically imply bias. In that regard, the Court observed that international construction arbitration law is a relatively small community, and as such, prior interactions or relationships is a less compelling basis for arguing partiality than might otherwise be the case in non-specialized areas (in other words, it is to some extent unavoidable that construction arbitrators will serve with other construction arbitrators, only to then appear before them as counsel).[15]

Gaitskell and McMullan Prior Involvement

The Court found this insufficient to question Gaitskell’s impartiality, re-emphasizing that repeated interactions within the small international arbitration community do not indicate bias. The record showed no actual bias in the Panama 1 Arbitration, and as such, the overlap was not a cause for concern.[16]

Thus the Court upheld the district court’s decision against vacating the awards.

Confirming the Awards:

After determining there were no grounds to vacate the awards under the FAA, the Court assessed whether to confirm the awards under the New York Convention. Grupo Unidos relied upon the same three provisions from Article V of the Convention as they had relied upon during the District Court’s proceedings.

The first defense centred on the arbitrators’ undisclosed relationships infringing Article V(2)(b) of the Convention (i.e. the award is contrary to public policy). Relying on the basic proposition that enforcement will only be refused where it would violate the jurisdiction’s most basic notions of morality and justice, the Court observed that the public policy in question here pertained to evident partiality, which was not breached (as explained above)[17]

Next, the Court rejected Grupo Unidos reliance on Article V(1)(d) of the New York Convention (i.e. refusing enforcement on the basis the tribunal or procedure was not in accordance with the parties’ agreement or the law of the country where the arbitration took place), Grupo Unidos argued that late disclosures showed a level of partiality that they would not have initially agreed to had they known at the time the tribunal was formed. While these nondisclosures did not breach the evident partiality portion, the focus shifted to whether the arbitration violated the ICC Rules. The Court found that despite late disclosures by Gaitskell and von Wobeser, the ICA did not disqualify them or question their impartiality, emphasizing their adherence to the ICC Rules. As a result, the arbitration followed the format the parties agreed upon, and the ICA’s interpretation of its rules was deemed reasonable.

Finally, Grupo Unidos relied upon Article V(1)(b) to argue that it as not given proper notice regarding the appointment of an arbitrator or the proceeding (which is intended to protect procedural fairness). The Court again rejected Grupo Unidos’ argument, stating that this exception is narrow and safeguards only against severe procedural defects that render the arbitration fundamentally unjust. The Court additionally observed that Grupo Unidos’ claim did not contradict basic principles of due process, which demands an impartial hearing where parties can present and rebut evidence. Here, the Court found no evidence that Grupo Unidos did not have such an opportunity.[18]

Thus, the Court affirmed the District Court, denying the application for vacatur and confirming the arbitral awards.

Commentary

Overall, three main takeaways emerge from Grupo Unidos v ACP that are broadly applicable to construction arbitration practice in Canada.

First, this case reaffirms the basic principle that arbitral awards are not easily set aside on grounds of bias. Specifically, mere allegations or suspicions of bias will not be enough to vacate arbitral awards. This is equally true in the Canadian context, as Canadian arbitration practitioners will appreciate. Consolidated Contractors Group S.A.L. (Offshore) v Ambatovy Minerals S.A.[19] presents a perfect example of such deference, where the Ontario Court of Appeal observed that “this court has repeatedly held that reviewing courts should accord a high degree of deference to the awards of international arbitral tribunals under the Model Law”.

In this particular case, it appears that Grupo Unidos position was not assisted by the timing of its challenge – in particular, Grupo Unidos appears to only have begun to raise questions as to the impartiality of the arbitrators after it received the Partial Award, which was adverse to its interests. While this timing may have been coincidental, a disinterested observer (or, more importantly, a court) might be led to conclude that Grupo Unidos’ challenge was motivated by its loss on the merits rather than genuine concerns of partiality. Needless to say, courts will be skeptical of any challenges that exhibit such timing.

Second, this decision aptly illustrates the distinction between bias and mere professional familiarity. As the Court observed, not every professional overlap can be construed as bias, especially in specialized areas of law such as international construction arbitration.

In that regard, the Court properly rejected the suggestion of any quid pro quo flowing from the overlap of arbitral appointments; given that acting as an arbitrator inevitably involves remuneration, and given the narrow pool of arbitrators in the construction industry, a finding to the contrary would have been problematic as a practical matter insofar as party-appointed arbitrators will commonly appoint other arbitrators with whom they are familiar or with whom they have arbitrated in the past (and likely will again in future). In other words, such a situation is, in practical terms, essentially unavoidable in specialized industries, and in any event, the appointment of a tribunal president will involve agreement between both party-appointed arbitrators, such that a quid pro quo would seem speculative at best.

Finally, this case highlights the importance of judicious and timely disclosure by arbitrators. There is a delicate balance that arbitrators must maintain between disclosing any matters that could give rise to justifiable concerns as to their impartiality and avoiding over-disclosure. In respect of the latter point, it would arguably be impractical for arbitrators to disclose every conceivable professional relationship that might give rise to unjustified or unsupported concerns as to impartiality, as this would simply invite objections to the arbitrator’s appointment on spurious grounds.

In this particular case, and as the tribunal observed, the disclosure sought by Grupo Unidos following the Partial Award were different and much broader than the ICC’s Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration, which was then followed by an even more far-reaching request, which the tribunal indulged. In that regard, although the Court did not specifically rely on the ICC Note in reaching its conclusions, and although guidance prepared by leading arbitral institutions is not binding, it may nevertheless be a persuasive authority on this point (as is the case, for example, with the IBA’s Guidelines on Conflicts of Interest).

Interestingly, Grupo Unidos also provides a useful reminder that a legitimate lack of disclosure is not sufficient in and of itself for a finding of bias or partiality – there must be something more in order to ground such a finding. Here, the ICA concluded that certain of the professional relationships amongst the arbitrators and counsel should have been disclosed by the arbitrators, but nevertheless concluded that the lack of disclosure in and of itself was not sufficient to ground a finding of partiality or lack of independence. This is consistent with English case law on the topic (such as Halliburton v Chubb), as well as certain Canadian case Law (such as Aroma Franchise Company v Aroma Espresso, which we previously discussed here, although the court ultimately made a finding of reasonable apprehension of bias in that case).

On balance, then, it appears that arbitration practitioners should (and perhaps will) manage their practices with a strong emphasis on continuous disclosure, and may lean towards over-disclosure notwithstanding the potential for losing out on arbitral mandates on spurious grounds. As the aphorist has observed, sunlight is the best disinfectant.

[1] 78 F (4th) 1252, 2023 US App LEXIS 21750, 30 Fla L Weekly Fed C 106 (11th Cir 2023) [Grupo Unidos v ACP].

[2] Grupo Unidos v ACP at 4.

[3] Grupo Unidos v ACP at 4.

[4] Grupo Unidos v ACP at 5.

[5] Grupo Unidos v ACP at 7.

[6] Grupo Unidos v ACP at 7.

[7] Grupo Unidos v ACP at 8-9.

[8] Grupo Unidos v ACP at 9-10.

[9] Grupo Unidos v ACP at 10-11.

[10] Grupo Unidos v ACP at 10-11.

[11] Grupo Unidos v ACP at 11-12.

[12] Grupo Unidos v ACP at 14.

[13] Grupo Unidos v ACP at 16-17.

[14] Grupo Unidos v ACP at 17-18.

[15] Grupo Unidos v ACP at 18-19.

[16] Grupo Unidos v ACP at 19-20.

[17] Grupo Unidos v ACP at 21.

[18] Grupo Unidos v ACP at 23-24.

[19] 2017 ONCA 939 at para 23.

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