## Facts

- A hotel construction contract for the Crown Bay Resort Hotel in the Turks and Caicos Islands was formed after a performance-bond surety elected to complete the project and created Bay Hotel and Resort Ltd. as employer.
- The written contract used an AIA standard form, chose the law of the project location (Turks and Caicos) as the contract law, and required arbitration under the AAA Construction Industry Arbitration Rules.
- Cavalier Construction Co. Ltd. (Bahamas) was the named contractor, but construction work was carried out in practice by its Turks and Caicos affiliate, Cavalier Construction Co. Ltd. (Turks and Caicos Islands).
- Disputes arose concerning delay, workmanship, and payment; the named contractor commenced AAA arbitration against the employer.
- By agreement, the arbitration was held in Miami, Florida, before a three-arbitrator AAA tribunal; a scheduling order required a “reasoned award.”
- Over the employer’s objection, the tribunal allowed joinder of the local affiliate and later issued an award in favor of both entities “jointly.”
- The tribunal issued a principal award (about US$4 million) and later supplemental awards providing additional reasons and addressing costs.
- The employer and surety sought to set aside the award in the Turks and Caicos Islands, arguing (among other things) that the award was not “reasoned” and that joinder and relief for the affiliate exceeded arbitral authority.

## Issues

1. Whether the tribunal’s award, in the context of AAA arbitration and the parties’ scheduling order, satisfied the requirement of a “reasoned award.”
2. Whether the tribunal had jurisdiction to join a non-signatory affiliate over objection and to render a monetary award in that affiliate’s favor.
3. Whether the named contractor could recover damages where the affiliate performed the work, such that the named contractor allegedly suffered no recoverable loss.
4. How the parties’ choices of project law, arbitral rules, and Miami as the arbitral forum affected review of the award, including issues concerning interest.

## Decision

- The Privy Council upheld the award as sufficiently “reasoned” when assessed in light of the AAA rules and AAA arbitral practice, including the supplemental reasons.
- The Privy Council held the tribunal lacked jurisdiction to make a substantive award in favor of the non-consenting affiliate; arbitral power to bind or benefit additional entities depends on consent.
- The Privy Council rejected the argument that the named contractor suffered no loss; as the contracting party, it could recover damages despite performance being carried out through an affiliate.
- The appeal by the employer and surety was dismissed in substance, and the award remained enforceable in favor of the named contractor (with the affiliate not entitled to be an awardee).
- A cross-appeal concerning interest did not change the substantive outcome.

## Legal Principles

- A contractual requirement for a “reasoned award” is interpreted in the procedural setting chosen by the parties; under AAA rules, a reasoned award need not resemble a judicial judgment and may be satisfied by essential findings and conclusions, including by supplemental reasons.
- Arbitral jurisdiction is rooted in party consent: institutional rules and contractual clauses addressing joinder/consolidation do not, without clear consent, authorize the tribunal to add non-parties and grant them substantive relief.
- A contracting party may recover contractual damages even if performance is carried out by an affiliate, where the contracting party remains legally responsible and economically exposed under the performance arrangements.
- In international arbitration, courts reviewing awards commonly give effect to the parties’ selection of arbitral rules and forum when determining the expected form of the award and the limits of tribunal authority.

## Conclusion

The Privy Council sustained enforcement of the contractor’s AAA award as adequately reasoned under the parties’ chosen arbitral regime, but reaffirmed that consent limits arbitral jurisdiction by barring monetary relief for a non-consenting affiliate, while allowing the contracting party to recover despite affiliated performance.


Bay Hotel & Resort Ltd. v. Cavalier Constr. Co. Ltd., [2001] UKPC 34 (P.C. 2001)