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On 24 June 2026, the Court of Appeals of Santiago (First Chamber), by a 2-to-1 majority, annulled an international commercial arbitration award rendered in a high-value dispute arising out of the sale of a Chilean salmon-farming company Australis Seafoods S.A. The Court held that the arbitral tribunal exceeded the scope of the parties’ submission to arbitration by reshaping the buyers’ pleaded contractual damages claim into a restitutionary claim for a reduction of the purchase price – a cause of action that the claimant had never pleaded.1
The decision is significant because it addresses the limits of the principle iura novit curia in the context of the legal characterisation of claims that may affect the application of limitation of liability clauses in commercial disputes.2 Chile’s annulment regime (Law No. 19,971) adopts the UNCITRAL Model Law and is applied by the Courts of Appeal on a “minimum intervention” basis: annulment is an exceptional remedy confined to the strict grounds set out in Article 34, and is not a re-hearing on the merits.3
1. Background
On 28 February 2019, Food Investment SpA, Joyvio Group Co., Ltd., and BJ Joyvio Zhencheng Co., Ltd. (the “Buyers”) entered into a share purchase agreement (“SPA”) with Inversiones ASF Limitada, Asesorías e Inversiones Benjamín S.A., Inversiones Arlequín Dos Limitada, and Inversiones Ruiseñor Dos Limitada (the “Sellers”) for the acquisition of Australis Seafoods S.A.
The SPA contained representations and warranties (“R&Ws”) that were relevant to the determination of the purchase price. One of the most significant R&Ws concerned the company’s environmental compliance and sufficiency of its operating permits, in particular the salmon production capacity of the company’s facilities specifying a particular level of production that fell within the applicable regulatory limits.4 The Buyer’s position was that the target company’s production capacity was a determining factor of the company’s profitability and therefore of the purchase price.
However, after the transaction had completed, Chilean authorities changed their interpretation of the applicable regulations. Compliance with this new interpretation meant that the company’s permissible annual production was substantially below the levels that had been projected at the time of the SPA.5 The Buyers contended that the price paid (USD 920,132,462 in total) was therefore higher than the amount the Buyers would have been willing to pay had this interpretation been in force at the time of the signing of the SPA.6
2. The Arbitration
The Buyers commenced arbitration before the Centro de Arbitraje y Mediación de la Cámara de Comercio de Santiago A.G. (“CAM Santiago”), alleging the breach of R&Ws. They advanced (i) as their principal claim, termination of the contract (resolución) and damages; and (ii) in the alternative, a stand-alone claim for damages. The Buyers based both claims on the Seller’s alleged wilful misconduct (dolo). The SPA, however, contained a limitation of liability clause.7 Under Chilean law, a claimant must establish wilful misconduct (dolo) to override such a clause; mere negligence or simple breach is insufficient. The Buyers argued that the Sellers were aware of the impending change in the authority’s regulatory approach and had already held internal discussions concerning it, yet had not disclosed this during the SPA process and had made R&W inconsistent with it.
The tribunal (i) found that wilful misconduct (dolo) was not established; (ii) confirmed that all clauses of the SPA, including the limitation of liability clause, remained in force; (iii) rejected the principal claim for termination, because that claim was premised on the Sellers’ wilful misconduct, which had not been proven; but (iv) held that the limitation of liability clause did not apply to the relief it was granting, because it was not awarding damages but rather ordering a restitution based on price adjustment.8 On this basis, the tribunal ordered the Sellers to repay the portion of the price that exceeded the company’s EV/Kg value – the metric used to calculate the contract price – in an amount in excess of USD 217 million9 to the production levels permitted.
In a key passage, the tribunal stated: “[T]he tribunal considers that it should grant the claimants what they describe as ‘compensation’, which, in other words, simply means ordering the restitution of that portion of the purchase price exceeding the company’s EV/Kg, which was the metric used to calculate the final contract price.”10 In short, because the R&Ws concerning regulatory compliance were found to be incomplete, the tribunal found that the contractual formula for determining the price adjustment had been applied based on incorrect production assumptions, and therefore, a restitutionary price adjustment was warranted – falling, on this analysis, outside the scope of the limitation of liability clause entirely.11
3. The Annulment Decision
The Sellers sought to set aside the award on the grounds that the tribunal had exceeded the scope of the submission and violated public policy by transforming the Buyers’ contractual damages claim into an unpleaded restitutionary claim for a reduction of the purchase price.
Although the Court recognised that iura novit curia permits arbitrators to adopt legal reasoning different from that advanced by the parties, it held that the principle does not allow them to alter the relief sought or reconstruct the case on a legal basis never submitted. As the Court of Appeal emphasised, a tribunal’s decision must remain compatible with the way in which the claim was framed and must be confined to the terms on which the litigation was joined: while an adjudicator may resort to legal reasoning different from that advanced by the parties, it cannot disregard the meaning, scope and contours of the petitions and defences they have formulated. In this case, the Court concluded, there was no legal identity between what the tribunal decided, and the subject matter submitted to its determination. By treating the award as a restitutionary price adjustment (which was not subject to the contractual limitation of liability clause), the tribunal had impermissibly recharacterised the claim. In the Court’s words:
“[I]t can only be concluded that the arbitral award is inconsistent with the description of the case presented by the parties and that, consequently, the ground for setting aside provided for in Article 34(2)(a)(iii) of the International Commercial Arbitration Act is established, namely where ‘the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration.’ Indeed, as stated above, the award upheld a claim different from the one brought and argued in the arbitral proceedings, replacing a recognised claim for damages based on the respondent’s wilful conduct with a restitutionary claim for a reduction of the purchase price.”12
The 2-to-1 majority decision annulled the award in its entirety on the basis that the recharacterization was so fundamental that it affected basic presuppositions for the validity of the entire arbitration.
4. Practical Implications and Key Takeaways
This decision carries important lessons for practitioners in international commercial arbitration.
- Excess of mandate and limits of iura novit curia in international arbitration. The decision indicates that courts may intervene where a tribunal restructures the parties’ case on a legal basis never submitted, treating this as a matter going to the scope of the submission to the arbitration. However, the dissenting opinion suggests that the boundary between permissible legal characterisation and impermissible reframing is not always clear, and is a matter that counsel and arbitrators should anticipate and address proactively.
- Clarity and precision of submissions can be critical. Claimants should ensure that they expressly plead all relevant legal bases for relief, including any alternative restitutionary theories. General or passing references in submissions will not necessarily suffice to place a claim within the scope of the arbitration.
The Court’s decision illustrates the value of careful contractual negotiation and drafting, and, in the event of a dispute, precise and comprehensive pleading and careful analysis of the bounds of an arbitral tribunal's mandate. The transactional and disputes teams at Baker Botts would be pleased to share their considerable experience and advise on these or other issues.
With thanks to Baker Botts intern Javier Salgado for his highly valuable contribution to this article.
Footnotes
1 Court of Appeals of Santiago, Case No. Civil-17067-2025, Decision of 24 June 2026 (“Decision”), operative part I (annulment of the award in its entirety). The ground relied upon is Article 34(2)(a)(iii) of the International Commercial Arbitration Act, Law No. 19,971 (Chile), based on the UNCITRAL Model Law on International Commercial Arbitration.
2 Decision, para. 21 (“Vigésimo Primero”).
3 Decision, paras 1-2 (“Primero”; “Segundo”).
4 Decision, para 4 (“Cuarto”) and para 5 (“Quinto”), referring to the 100,000 tonnes considered for the determination of the Enterprise Value.
5 Decision, dissent, paras 9–10, referring to award paras 383–385 and 640–660 (change in the regulator’s criteria after closing).
6 The representations and warranties concerned, among other matters, the company’s environmental compliance, and the sufficiency of its operating permits, including its authorisation to produce at the levels used to determine the Enterprise Value (a projected harvest of up to 100,000 tonnes). See Decision, paras 5–6.
7 Section 8.2 of the SPA.
8 Decision, para 16 (“Décimo sexto”), reproducing award para 648 (clause 4.2(i)); and dissent, para 10.
9 Decision, para 16 (“Décimo sexto”), reproducing award paras 650–651; dissent, para 12 (referring to a condemnation in excess of USD 217 million).
10 Decision, para 16 (“Décimo sexto”), reproducing award para 650 (unofficial Translation).
11 Decision, para 16 (“Décimo sexto”), reproducing award para 648 (clause 4.2(i)); dissent, para 10.
12 Decision, para 25 (“Vigésimo quinto”) (unofficial translation).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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