Key Takeaways
- • Landmark annulment in Chile: The Santiago Court of Appeals set aside an international arbitration award for the first time under Chile's modern arbitration statute (LACI, enacted 2004), breaking two decades of consistent pro-enforcement jurisprudence and marking a watershed moment for the arbitral seat.
- • USD 920 million salmon deal dispute: Buyers of a Chilean salmon producer sought either full price reimbursement or USD 620 million in damages for alleged environmental compliance misrepresentations; the tribunal awarded USD 217 million in price reduction, which the court found exceeded the parties' submission.
- • Extra petita violation: The court annulled the award because the tribunal granted price reduction—a remedy grounded in Chilean Civil Code provisions—that neither party had explicitly requested, violating Article 34(2)(a)(iii) of the Chilean Arbitration Law (mirroring UNCITRAL Model Law Article V(1)(c) of the New York Convention).
- • Common-law drafting meets civil-law foundations: The core issue reflects a structural mismatch in cross-border M&A: representations and warranties are foreign to civil-law codes, leaving tribunals to fill gaps by analogy to indigenous remedies like price reduction, creating unpredictable exposure to annulment.
- • Practical drafting imperative: Parties structuring deals under civil-law governance must explicitly define R&Ws as autonomous binding promises, make indemnification the exclusive remedy, specify damages mechanics (baskets, caps, survival periods), and waive statutory remedies—or risk having tribunals recharacterize claims and courts set aside awards.
Summary
On July 21, 2026, the Kluwer Arbitration Blog published a detailed analysis of Food Investment SpA et al. v. Asesorías e Inversiones Benjamín S.A. et al., a landmark Chilean court decision annulling an international arbitration award—the first such annulment under Chile's 2004 arbitration statute. The case underscores a critical vulnerability in cross-border M&A practice: the collision between common-law contract drafting and civil-law substantive law.
The underlying dispute centered on a Share Purchase Agreement for the sale of a Chilean salmon producer. The buyers alleged that the sellers willfully misrepresented the company's environmental compliance, seeking either full termination and reimbursement of the USD 920 million purchase price, or alternatively, USD 620 million in damages reflecting the overprice for a non-compliant asset. The buyers argued that the sellers' bad faith conduct should render the SPA's liability limitations—including its damages cap—unenforceable. The three-arbitrator tribunal, seated in Santiago under Chilean law and administered by CAM Santiago, rejected the bad-faith finding but identified a material breach: the sellers had failed to disclose that they suspected imminent regulatory tightening and potential sanctions for company overproduction. Rather than granting either termination or the damages the buyers had sought, the majority invoked the Chilean Civil Code's price-reduction provisions as expressing the "general spirit" of Chilean legislation and awarded approximately USD 217 million in partial price restitution. One arbitrator dissented, concluding no breach had occurred and the damages claim was unfounded.
The sellers challenged the award on three grounds: denial of the right to be heard on the restitution remedy, excess of the tribunal's mandate, and violation of public policy. The Santiago Court of Appeals, in a 2–1 decision, annulled the award solely on the second ground: the tribunal had acted extra petita by granting a price-reduction remedy that no party had requested, thereby exceeding the scope of submission under Article 34(2)(a)(iii) of the Chilean Arbitration Law. The court found this vice inseparable from the remainder of the award and therefore set it aside in full. The dissenting judge would have upheld the award, arguing that overprice was litigated throughout and tribunals may recharacterize claims under *iura novit curia* principles.
The annulment represents a genuine inflection point for Chile's arbitral reputation. Since 2007, the Santiago Court of Appeals had rejected more than twenty prior annulment petitions, establishing a two-decade record of pro-enforcement jurisprudence. Australis is not a retreat from that stance but rather an affirmation of a foundational principle: arbitrators' authority derives solely from party consent, and if the parties did not submit a claim, the tribunal lacks power to decide it. This standard mirrors the practice in leading arbitral seats, including France (where courts have set aside awards granting "loss of chance" damages never pleaded), Switzerland (where the Federal Tribunal has partially annulled awards recharacterizing relief), England (where courts confirm tribunals may not decide unraised issues), and the United States (where Section 10(a)(4) of the Federal Arbitration Act permits vacatur for exceeding powers).
The deeper lesson extends beyond Chile to every civil-law jurisdiction where representations and warranties—quintessentially common-law constructs—are grafted onto contracts governed by substantive law that neither recognizes them as a distinct institution nor provides a tailored cause of action for their breach. When tribunals confront this gap, they frequently fill it by analogy to indigenous remedies: price reduction, hidden-defect actions, and redhibitory provisions descended from Roman law. The Australis majority did precisely that. To mitigate this exposure, parties must either elect a governing law already accommodating R&Ws (such as New York law, where warranties are a mature construct and indemnification is routine) or, where local law or mandatory rules foreclose that choice, craft the contract itself to define R&Ws as autonomous binding promises guaranteeing specified facts, establish indemnification as the sole remedy with explicit baskets, caps, survival periods, and claims procedures, expressly waive statutory remedies to the extent permitted by mandatory law, and directly address sandbagging—the buyer's pre-closing knowledge or due-diligence findings—rather than leaving it to civil-law doctrines of good faith. This prescription applies equally across French, Spanish, and other continental and Latin American jurisdictions where similar threshold contests and extra petita exposure can surface.
The underlying dispute centered on a Share Purchase Agreement for the sale of a Chilean salmon producer. The buyers alleged that the sellers willfully misrepresented the company's environmental compliance, seeking either full termination and reimbursement of the USD 920 million purchase price, or alternatively, USD 620 million in damages reflecting the overprice for a non-compliant asset. The buyers argued that the sellers' bad faith conduct should render the SPA's liability limitations—including its damages cap—unenforceable. The three-arbitrator tribunal, seated in Santiago under Chilean law and administered by CAM Santiago, rejected the bad-faith finding but identified a material breach: the sellers had failed to disclose that they suspected imminent regulatory tightening and potential sanctions for company overproduction. Rather than granting either termination or the damages the buyers had sought, the majority invoked the Chilean Civil Code's price-reduction provisions as expressing the "general spirit" of Chilean legislation and awarded approximately USD 217 million in partial price restitution. One arbitrator dissented, concluding no breach had occurred and the damages claim was unfounded.
The sellers challenged the award on three grounds: denial of the right to be heard on the restitution remedy, excess of the tribunal's mandate, and violation of public policy. The Santiago Court of Appeals, in a 2–1 decision, annulled the award solely on the second ground: the tribunal had acted extra petita by granting a price-reduction remedy that no party had requested, thereby exceeding the scope of submission under Article 34(2)(a)(iii) of the Chilean Arbitration Law. The court found this vice inseparable from the remainder of the award and therefore set it aside in full. The dissenting judge would have upheld the award, arguing that overprice was litigated throughout and tribunals may recharacterize claims under *iura novit curia* principles.
The annulment represents a genuine inflection point for Chile's arbitral reputation. Since 2007, the Santiago Court of Appeals had rejected more than twenty prior annulment petitions, establishing a two-decade record of pro-enforcement jurisprudence. Australis is not a retreat from that stance but rather an affirmation of a foundational principle: arbitrators' authority derives solely from party consent, and if the parties did not submit a claim, the tribunal lacks power to decide it. This standard mirrors the practice in leading arbitral seats, including France (where courts have set aside awards granting "loss of chance" damages never pleaded), Switzerland (where the Federal Tribunal has partially annulled awards recharacterizing relief), England (where courts confirm tribunals may not decide unraised issues), and the United States (where Section 10(a)(4) of the Federal Arbitration Act permits vacatur for exceeding powers).
The deeper lesson extends beyond Chile to every civil-law jurisdiction where representations and warranties—quintessentially common-law constructs—are grafted onto contracts governed by substantive law that neither recognizes them as a distinct institution nor provides a tailored cause of action for their breach. When tribunals confront this gap, they frequently fill it by analogy to indigenous remedies: price reduction, hidden-defect actions, and redhibitory provisions descended from Roman law. The Australis majority did precisely that. To mitigate this exposure, parties must either elect a governing law already accommodating R&Ws (such as New York law, where warranties are a mature construct and indemnification is routine) or, where local law or mandatory rules foreclose that choice, craft the contract itself to define R&Ws as autonomous binding promises guaranteeing specified facts, establish indemnification as the sole remedy with explicit baskets, caps, survival periods, and claims procedures, expressly waive statutory remedies to the extent permitted by mandatory law, and directly address sandbagging—the buyer's pre-closing knowledge or due-diligence findings—rather than leaving it to civil-law doctrines of good faith. This prescription applies equally across French, Spanish, and other continental and Latin American jurisdictions where similar threshold contests and extra petita exposure can surface.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.