Reframing a Remedy or Deciding a New Claim? Chile’s First Annulment of an International Award

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THE AUTHOR:
Pedro Zelaya Etchegaray, Founding Partner at ZELAYA ETCHEGARAY & Co.

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On 24 June 2026, the Santiago Court of Appeals set aside, in full, the arbitral award in the Australis/Joyvio arbitration, one of the largest arbitration cases ever seated in Chile. The decision is now final: Joyvio did not challenge it before the Supreme Court.

It is the first time a Chilean court has annulled an international commercial award under Chile’s International Commercial Arbitration Law, Law No. 19,971 (“LACI”), which follows the UNCITRAL Model Law. The award, rendered in 2025 under the Rules of the Arbitration and Mediation Centre of the Santiago Chamber of Commerce (“CAM Santiago”), had ordered the former owners of the salmon producer Australis Seafoods to return about USD 217 million, plus interest, to the Chinese group Joyvio.

The case matters beyond Chile. The sale and purchase agreement (SPA) was written in English, used familiar M&A wording, and chose Chilean law and Santiago as the seat. In essence, the discussion could be simplified as follows: the buyers asked for damages, and the arbitral tribunal ordered the sellers to give back part of the price as compensation for the breach of one representation and warranty. The valuation issue had been discussed at length in the arbitration.

The Dispute and the Award

In 2019, Joyvio bought Australis for about USD 920 million. Joyvio later claimed that the sellers had fraudulently hidden a serious problem: Australis was producing more salmon than its environmental permits allowed (“overproduction”). On that basis, Joyvio asked the arbitral tribunal, under the SPA and Chilean law, to terminate the contract (“resolución”) and award damages (“indemnización de perjuicios”) or, in the alternative, to award damages alone. Both claims rested on one central allegation: the sellers’ fraud (“dolo”). One request for relief asked for “compensation” of an alleged overprice of about USD 620 million, “or the sum that the Arbitral Tribunal considers appropriate.”

The three arbitrators unanimously rejected the heart of the case: no fraud, no concealment, no deceit. The buyers had enough information when they bought, and their losses came from a later change in the environmental regulator’s enforcement practice. Nevertheless, the majority found one breach: the sellers’ statement on environmental compliance was incomplete. It also accepted that, without fraud, all SPA clauses remained valid and applicable, including the five per cent indemnity cap. But the majority then held that the cap did not apply because it was not awarding damages; it was deciding that the price paid should have been different. It recalculated the price by reference to what Australis could lawfully have produced and ordered the sellers to return USD 217 million, plus interest. The dissenting arbitrator added that the claim and the relief, as pleaded by the parties, fix limits that the tribunal cannot move.

The Annulment

The sellers asked the Santiago Court of Appeals to set the award aside on three grounds under LACI:

• they could not present their case because the decision took them by surprise;
• the award decided matters beyond what the parties had submitted; and
• the award violated Chilean public policy.

The Court, by majority, upheld the challenge only on the second ground. In the Court’s words, the award “upheld an action different from the one exercised and debated in the arbitral proceedings, substituting a nominate damages action, founded on the defendant’s fraudulent conduct, for a restitutory price-reduction action.” The award was therefore “not congruent with the description of the case made by the parties.”

The Court also rejected Joyvio’s argument that everything had been debated. Since the damage claimed was the alleged overprice, the parties necessarily discussed whether an overprice existed and how the company should be valued. But that did not allow the tribunal to adopt a legal characterization not put forward by the parties. The overprice had been claimed “as compensable damage under the liability system fixed in the contract, and not as a generic restitution action.” The Court added that Chilean law has no general action of restitution; claims must fit the specific actions provided by law.

The Court set the award aside in full. One judge dissented. For him, annulment is not a second instance; a central issue in the arbitration was precisely the restitution or compensation of the overprice; and the sellers’ own defence had described the subsidiary claim as seeking recovery of that overprice. For the dissent, the award restored the economic balance of the contract after false statements that affected the price.

Debated Is Not Submitted

The Court’s dissent (see, para. 56) states the strongest case for the award and against annulment. If compensation or restitution of the overprice was pleaded, quantified by experts and tested in cross-examination, where is the surprise?

The answer lies in a distinction kept firm by the majority: an issue that was debated is not the same as a remedy that was submitted. The parties debated overprice as a measure of alleged damages within the SPA’s indemnity system, with its cap, exclusions, and time limits. The relief granted, however, was placed outside that system. A remedy is not only an amount of money. It is also the legal rules and defences that govern it. Iura novit curia allows a tribunal to apply the law to the claim before it. But when a new legal label switches off the contractual limits and defences written by the parties, the tribunal is no longer only renaming the claim; it is deciding a different one.

This suggests a practical test: a remedy granted by an arbitral tribunal is fairly within the case only if it was clearly requested in the parties’ principal submissions, or if the tribunal itself put it to the parties before the award. It is not enough that the sum eventually awarded (here, the restitution of part of the price) was debated when valuing the damages claimed. The Court noted the missing safeguard: the requalification “was not even announced” before the award. A short question to the parties before closing the proceedings could have changed the result.

So, in high-value M&A arbitration, where the SPA is governed by a civil law legal system, the difference between damages, restitution and price reduction is not merely academic. It decides which contractual clauses should be applied and whether the award survives. At least under Chilean law, arbitral tribunals owe the parties a decision on the exact case submitted, considering the remedies claimed, the contract signed, and the applicable specific civil law categories.

Good News for Santiago as a Seat

Some observers may read the annulment of the country’s most prominent award as a bad sign for arbitration in Chile. The better reading is the opposite. In more than twenty years under Law No. 19,971, Chilean courts had never annulled an international award. That record could be praised as arbitration-friendly, but it could also suggest that annulment existed only on paper.

This judgment shows that judicial control in Chile is real and works within narrow limits. The Court did not review the merits, the evidence, or the tribunal’s interpretation of the SPA. It relied on the single ground that matched the defect and did not decide the case on the broader grounds of due process or public policy. A seat where an award can never be annulled should worry users as much as a seat where awards fall easily. Predictable, narrow, and reasoned court control is part of what makes a seat trustworthy. This decision, now final, stands as the leading Chilean precedent on the limits of the arbitral mandate.

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ABOUT THE AUTHOR

Pedro Zelaya Etchegaray is an independent arbitrator based in Santiago de Chile, Ph.D. in Private Law, Professor at the University of Chile Law School, and founding partner of ZELAYA ETCHEGARAY & Co.

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*The author had no involvement, in any capacity, in the Australis arbitration or the setting-aside proceedings.

*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.