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How Miami Came To Challenge New York’s Dominance in International Commercial Arbitration

by | Apr 6, 2024

When thinking about international arbitration, New York often springs to mind as the primary city of consideration. Historically, New York has served as the U.S. hub for international arbitration due to its robust legal infrastructure, well-established arbitration institutions, and its status as a global financial hub. However, New York is not the sole contender in the landscape of international arbitration within the United States. Other cities, including Atlanta, Houston, and Washington, D.C., also command attention due to their own unique attributes and strengths when it comes to dispute resolution. In recent years, Miami has risen as a prominent contender in international commercial arbitration, surpassing New York in the number of seated international arbitration cases in 2021, marking a significant shift in the landscape.

Miami’s popularity is especially pronounced among Latin American parties. This shift is attributed not only to Miami’s proximity to Latin America, its abundant pool of legal professionals fluent in Spanish and Portuguese, and its strong cultural connections to the region but also to Florida’s, especially South Florida’s, increasingly arbitration-friendly legal environment.

In today’s article, we will discuss the growing prominence of Miami as a leading destination for international commercial arbitration, which is challenging New York’s traditional dominance in this arena. We will explore the strategic initiatives undertaken by Florida to bolster its arbitration framework, examine landmark cases that underscore Miami’s evolving role in international arbitration, and assess the recent legal developments on Miami’s competitive edge in the arbitration landscape.

Florida’s Strategic Initiatives to Improve Its Arbitration Framework

Over the past thirty years, Florida has made significant strides in supporting international arbitration by developing a comprehensive framework of laws and regulations.

In December 2013, a crucial step was taken when the 11th Judicial Circuit Court established a specialized division for cases involving international commercial arbitration, resulting in the creation of the International Commercial Arbitration Court (ICA Court). This achievement was made possible through collaboration between international law firms, the Florida Bar, the state legislature, the business community, and the Eleventh Judicial Circuit of Florida. However, this initiative also brought about challenges due to the increasing caseload.

In response to the growing number of cases, a separate division of the 11th Judicial Circuit in Miami-Dade County was set up in January 2017, with the number of judges assigned to handle qualifying cases increased from two to four.

Florida’s commitment to supporting arbitration extended beyond the courts to proactive legislative measures. The enactment of the Florida International Commercial Arbitration Act (FICAA) and the revision of the Florida Arbitration Act, which addresses domestic arbitration, exemplified these efforts. The FICAA granted state courts the authority to address requests to set aside an award in cases lacking federal jurisdiction.

These efforts have paid off, with Miami emerging as a strong competitor to New York as a preferred destination for international arbitration, particularly among Latin American parties. Florida’s dedication to facilitating arbitration processes has not only improved its legal standing but has also firmly established Miami as a significant player in arbitration destinations.

Mesa Power Group LLC v. Government of Canada: A Case Study

A compelling instance showcasing the strategic positioning of Miami as an arbitration seat to invoke specific mandatory rules of international arbitration law applicable in Florida is found in Mesa Power Group LLC v. Government of Canada. In this case, despite the arbitration being filed in the United States District Court for the District of Columbia, the seat of arbitration was established in Miami, Florida. This strategic choice initiated the application of specific mandatory rules of international arbitration law applicable in Florida, setting the stage for a jurisdictional dispute with significant implications.

At the heart of the dispute was the interpretation of the applicable law governing the annulment of the arbitration award. Mesa Power Group sought to annul the award under § 10 of the Federal Arbitration Act (FAA), arguing that the interpretation of federal law by the D.C. Circuit should prevail. Conversely, Canada argued for the application of Eleventh Circuit law, citing Miami as the arbitration seat, and sought enforcement of the award under the New York Convention.

The legal context of the case was complex. The Eleventh Circuit had established precedent indicating that the grounds for vacating awards under § 10 of the FAA did not extend to international arbitral awards. However, the specific circumstances of this case, where the arbitration was seated in Miami but filed in the District of Columbia, added layers of complexity to the jurisdictional question.

Despite the lack of direct precedent regarding a U.S. Federal Court’s authority to annul a U.S.-seated international arbitration, the court ultimately ruled in favor of Mesa, vacating the award on the grounds that the arbitration was deemed domestic and, therefore, governed by federal law. This ruling highlights the nuanced considerations involved in selecting an arbitration seat and navigating jurisdictional issues, underscoring Miami’s emerging prominence as a strategic destination for international arbitration.

The Mesa case reminds us of the evolving landscape of international arbitration and the importance of carefully considering jurisdictional factors in arbitration proceedings. It underscores the significance of selecting an arbitration-friendly jurisdiction and strategically leveraging its legal framework and regulations. Miami’s growing reputation as a preferred destination for international arbitration, particularly among Latin American parties, is further reinforced by cases like Mesa, which demonstrate the city’s increasing relevance on the global arbitration stage.

The Impact of Recent Legal Developments on Miami’s Competitive Edge

While Miami’s surge has been undeniable in recent years, recent legal changes have introduced new complexities that could impact its competitive standing. Previously, Miami boasted a distinctive advantage over other major arbitration hubs by imposing stringent criteria on parties seeking to challenge arbitration awards. This advantage stemmed from the requirement to adhere to the rigorous standards outlined in Article V of the New York and Panama Conventions or their equivalents in the Florida International Commercial Arbitration Act. Such strict standards ensured a robust arbitration process and contributed to Miami’s attractiveness as a preferred arbitration destination.

However, the landscape shifted with the landmark ruling in Corporación AIC v. Hidroelectrica Santa Rita. This ruling, which overturned precedent and aligned the Eleventh Circuit with other jurisdictions, clarified that Chapter 1, Section 10 of the Federal Arbitration Act (FAA) could serve as grounds to challenge international arbitration awards issued within the United States. This development effectively leveled the playing field, allowing parties to contest arbitration awards seated in Miami using the same statutory grounds as those in New York.

As a result, Miami’s once-distinctive advantage in arbitration proceedings has been diminished, prompting questions about its continued dominance as a preferred arbitration destination. With the legal landscape now more uniform across jurisdictions, parties involved in international arbitration must carefully weigh various factors when selecting an arbitration seat, including procedural fairness, legal framework, and the potential for judicial intervention.

The long-term implications of these legal developments on Miami’s attractiveness as an arbitration seat compared to New York remain uncertain. However, it’s important for stakeholders to keep an eye on the evolving legal landscape and adjust their strategies as needed. Miami’s future role in international arbitration will rely on its ability to address these challenges while upholding its reputation for offering efficient and fair dispute resolution services.

The Campbell Law Group P.A. brings a wealth of experience in business and commercial litigation. We are dedicated to serving clients across the South Florida region, including Miami Beach, Coral Gables, Coconut Grove, South Miami, Pinecrest, Brickell, Edgewater, Doral, and Wynwood. Additionally, we extend our services to Broward and Palm Beach County, as well as clients in Tampa, Orlando, and throughout Florida.

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