U.S. District Court Upholds Two Arbitral Awards Against Lima
The recent District of Columbia District Court's decision against Lima demonstrates deference to arbitral tribunals.
On March 12, 2024, the United States District Court for the District of Columbia confirmed two arbitration awards totaling more than US$196 million against the municipality of Lima in Peru. Lima petitioned the court to vacate the two awards under the Federal Arbitration Act, arguing the awards were "procured by corruption, fraud, or undue means." The court declined "Lima['s] improvident invitation," refusing to "upend well-settled law by rehearing a claim two tribunals have independently rejected."
The dispute arose from a 30-year highway concession contract awarded to Rutas de Lima S.A.C., an Odebrecht subsidiary, to build and maintain Lima's highways. In 2017, Rutas filed its initial arbitration after Lima shut down a Rutas toll booth due to local protests over toll costs. The tribunal rejected Lima's defense that the concession was void due to corruption associated with Odebrecht. Lima then threatened to terminate the contract, triggering Rutas to initiate the second arbitration. There, Rutas won its tariff claim and defeated Lima's fraud-related counterclaims.
Before the court, Lima argued the awards were a product of fraud, that new evidence was available, and that the second tribunal's failure to admit such evidence was misconduct. The court disagreed with Lima, noting that Rutas had "won [the two awards] fair and square." The court placed great weight on the tribunals' decisions. As to the corruption challenge, the court reasoned that "putting it mildly," it would be "difficult" for Lima to prove that Rutas bribed officials to win the concession "given that two tribunals found insufficient evidence of corruption under a lower preponderance of the evidence standard."
Considering the second award, the court was "mindful of the substantial body of case law instructing it to defer to arbitral tribunals' evidentiary rulings." The court refused to "second-guess a well-founded procedural ruling," noting that the tribunal consisted of "well credentialed" members and "explained its reasoning and decision at exhaustive length."
In finding that it would not "re-weigh the evidence or review the merits of decisions made by two arbitral tribunals," the court's decision exemplifies its pro-arbitration stance and deference to arbitral tribunals.
