Award Annulled in Chilean Salmon Saga: Key Aspects of Chile’s First Set-Aside

This blogpost updates our previous analysis on the Australis case (link). In that earlier blogpost, we discussed the award (“Award”) rendered by an arbitral tribunal in Chile in a high-profile arbitration, notable both for the magnitude of the claims involved (USD 1.4 billion approx.) and the issues at stake, including breaches of representations and warranties arising out of a sale and purchase agreement (“SPA”) pursuant to which a group of Chilean Companies (the “Sellers”) that owned Australis Seafoods S.A. (“Australis”), sold the company to the Chinese group Joyvio (“Joyvio” or “Buyers”).

After the Sellers filed an application to set aside the Award under Chilean Law No. 19,971 on International Commercial Arbitration (“LACI”), which is based on the 1985 UNCITRAL Model Law, the matter proceeded to oral argument before the Santiago Court of Appeals (the “Court”).

On 24 June 2026, the Court granted the application, marking the first time in its history that it had set aside an international arbitral award (the decision is available here). As discussed below –in line with what we anticipated in our first post– the Court found that the Award had incurred in serious procedural defects that caused relevant damages to the Sellers, and could only be remedied through its complete annulment.

We conclude that, although this is the first annulment of an international arbitral award in Chile, far from threatening Chile’s reputation as a safe seat for arbitration, it is a precedent that, in addition to being consistent with the Court’s jurisprudence, protects arbitral practice in our country.

Recap of the Australis case

The arbitral award dismissed most of Joyvio’s claims, including its main claim for termination of the SPA for concealment or fraud concerning certain information related to environmental criteria, which had an impact on the production levels authorized in the salmon industry; it also dismissed the remedies that depended on establishing concealment or fraud, such as restitution of the price for approximately USD 920 million, and damages for a total of USD 1.4 billion.

However, and even though the arbitral tribunal dismissed the fraud claim, it ordered a reduction of the sale price –a matter that was not requested by the Buyers– based on production levels in accordance with the new criteria implemented by the authority after the transaction (“Price Reduction Remedy”).

The Sellers filed a set aside application against the Award based on three grounds under the LACI: (a) breach of due process under article 34(2)(a)(ii); (b) the Award was extra petita under article 34(2)(a)(iii); and (c) the Award was contrary to Chilean public policy under article 34(2)(b)(ii).

Setting Aside the Award on Extra Petita Grounds

The Court set aside the Award on extra petita grounds by a 2-1 majority. Never, in more than thirty setting aside applications, had applicants been able to convince the Court that the threshold for annulment had been met. This included five earlier applications that were dismissed based on extra petita ground (all decisions of the Santiago Court of Appeals: 9 September 2013, case No. 1971-2012; 29 April 2014, case No. 6975-2012; 1 September 2016, case No. 2685-2016; 17 March 2021, case No. 7413-2019; 12 May 2023, case No. 10750-2022).

The Court first recognized that the application was based on extra petita, a ground that, due to its specific nature, had to be analysed before the other grounds, which were “intended to capture a wide variety of situations” (§26, Court’s Decision). Having found that the Award was extra petita, the Court considered unnecessary to review the remaining grounds of the application.

At the same time, the Court carefully adhered to a principle that governs the LACI: the minimal intervention by local courts in international arbitration proceedings, under which annulment is exceptional and cannot be used as a substitute for broader forms of judicial review. Accordingly, the Court reaffirmed that annulment cannot be invoked to review “the facts or the law, as if it were an appeal”, nor to challenge “the scope or interpretation of the substantive rules applied by the arbitrators to resolve the dispute, as if it were a cassation on the merits” (§1, Court’s Decision).

Against that backdrop, the Court identified two main reasons for concluding that the Award was extra petita within the meaning of article 34(2)(a)(iii) of the LACI (i.e., included “a dispute not contemplated by the arbitration agreement” and contained “decisions that exceed the terms of the arbitration agreement”) when it granted the Price Reduction Remedy.

First, consistent with the exceptional nature of set aside proceedings, the Court did not revise the facts of the case or the arbitral tribunal’s reasoning; instead, it carried out an exercise between §4 and §12 in order to understand the scope of the dispute submitted to arbitration. The Court objectively analysed the claims and grounds presented by Joyvio; the defenses raised by the Sellers against the claims; and the arbitral tribunal’s reasoning. On this basis, the Court became fully convinced, in one respect, that the Sellers had only submitted a request for damages as a consequence of fraud or concealment (which is why they argued that the liability caps agreed in the SPA were not applicable); and in another respect, that the Award granted a remedy –Price Reduction Remedy– that was never pleaded, argued, or discussed during the arbitration.

Second, the Court rejected both the tribunal’s and Joyvio’s argument that the Buyers’ claims should be understood in a broad and generic sense, so as to include any type of remedy that amounted to a reduction of the SPA price. The Court was especially critical of the vagueness in the arbitral tribunal’s reasoning and of the legal error it committed in confusing claims that, legally, were different (§15 and §17, Court’s Decision); it was also critical of Joyvio’s attempt to subsume the Price Reduction Remedy within the compensatory claims of its statement of claim, noting that this position was inconsistent with Joyvio’s procedural conduct throughout the arbitrations, where it only sought compensation for willful misconduct. As the Court observed “legal language has a technical character that guarantees precision, objectivity and unequivocal interpretation, and the term damages is proper to indemnity or compensatory claims” (§24, Court’s Decision).

Ultimately, the Court’s analysis demonstrates that it engaged with the substance of the case not to opine on the facts or to challenge the arbitral tribunal’s arguments, but rather to properly understand the controversy submitted by the parties, and to contrast it with what was decided in the Award.

The Court Considered the Extra Petita Defect to Have Serious Legal Consequences

An additional element that the Court took into account was that the Award would have caused serious damages to the Sellers: having ruled out the existence of willful misconduct, the arbitral tribunal should have dismissed the damages claim or, in any event, should have respected the limitation of liability that was agreed in the SPA (under Chilean law, that limit can potentially be lifted in the case of willful misconduct). However, the arbitral tribunal not only decided to find in Buyers’ favor anyway, but also declined to apply the limitation of liability when granting the Price Reduction Remedy, given that this type of claim does not require proof of willful misconduct and is not subject to a liability limitation (§15 and §18, Court’s Decision).

The Court’s Decision Reinforces Chile’s Standing as a Safe seat for International Arbitration

Although some may view the annulment of an international arbitral award as detrimental to Chile’s reputation as an arbitration-friendly jurisdiction, we believe the decision has the opposite effect.

First, the Award suffered from serious procedural defects that could be identified objectively and evidently (without any need to reinterpret facts or tribunal’s findings). Knowing that Chilean courts will react and set aside such a defective award is a clear sign that due process will be enforced in any arbitration proceeding.

Second, the Court took care to reaffirm several pro-arbitration principles, including, as we saw, the principle of minimal intervention, the prohibition on reviewing the merits of an award, the exceptional nature of the setting aside application, and the exhaustive nature of its grounds.

Finally, we believe that the Court’s judgment is consistent with its prior line of case law. Firstly, because in the five previous cases in which set aside applications had been based on extra petita grounds, the Court found reasons to justify that there had been no breach of the principle of procedural congruence, given that the challenged arbitral awards had granted claims that were raised and discussed during the respective arbitrations. That was not the case in Australis.

Moreover, the extra petita defect in Australis was manifest and had serious consequences for the Sellers, so it was not a matter of annulling the Award for merely formal or aesthetic reasons. This criterion has been confirmed in several rulings of the Court which have required that the alleged grounds have a sufficient degree of significance and amount to “violations of extreme gravity of the fundamental principles and rules of Chilean law” (Ferrovial Agroman Chile S.A. v. Figueroa, Santiago Court of Appeals, 10 February 2023, case No. 5459-2020).