United Mexican States v. Lion Mexico Consolidated L.P.

The Federal Arbitration Act (“FAA”) authorizes courts to vacate an arbitration award when an arbitrator has “exceeded [its] powers.” 9 U.S.C. § 10(a)(4). Under this Court’s decisions, an arbitrator “may not ignore the plain language of the contract.” United Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29, 38 (1987). But if the arbitrator even arguably construes or applies the parties’ agreement, courts must let the award stand. See id. The courts of appeals have developed notably different methods for determining when arbitrators are arguably interpreting an agreement versus ignoring the plain text. Some courts examine the language of the contract and will vacate an award when there is no plausible connection between the text and the arbitrator’s conclusions. Others ask only whether the arbitrator purported to interpret the agreement, in other words, whether the arbitrator looked to and construed the agreement. The court below adopted the latter approach, and in doing so, materially prejudiced the right to relief of the United Mexican States under the FAA. The text of the agreement – in this case, a treaty – was plain and unambiguous and there is no plausible connection between the text and the arbitrators’ conclusions. The question presented is: Whether arbitrators have “exceeded their powers” under 9 U.S.C. § 10(a) when the award has no plausible basis in the governing instrument.