Would you trust your $12 million arbitration to accountants rather than lawyers? Sometimes it makes sense. In_Apache v. YPF SA, delegating an accounting dispute to accountants was right. The problem was in the procedures and protections for a party believing the accountants got it wrong.

Apache sold its entire business in Argentina to YPF for $700 million. The Sale and Purchase Agreement allowed for adjustments to the consideration based on a variety of factors. The parties traded accounting statements, and a dispute arose over a “Lock Box Working Capital” amount and “Leakage”. YPF contended that Apache owed $12 million.

According to the SPA:

  • Disputed amounts would be referred to independent accountants for “Final Determination … .”
  • The Determination “shall be final and binding … .”
  • The dispute resolution procedure was detailed.
  • The Determination “shall include the reasoning supporting the Determination”.

The dispute was submitted to KPMG, whose engagement letter outlined the procedures it would use. There would be a joint Determination by two partners and a written report. Either party could challenge any “patent arithmetical inaccuracy in the Determination”. No substantive evidence or pleading was allowed in a challenge.

KPMG’s Determination was signed by two partners and declared that it constituted KPMG’s “Final and Binding Determination”, and that Apache owed $9.8 million. Attached was a table itemizing the adjustments, an award, and a report of the basis for the amount awarded.

Among other complaints, Apache challenged the Determination, as was its right, but the challenge pointed out no “patent arithmetical inaccuracies”. Rather, Apache complained that because of the lack of KPMG’s workpapers, calculations, and spreadsheets it was unable to determine if mathematical errors had been made. In other words, KPMG had not “shown its work”. KPMG responded that Apache’s objection did not point out patent arithmetical inaccuracies, but rather was substantive evidence or pleading, which KPMG declined to consider.

The court’s analysis

Apache’s statutory basis for vacating the award was that “the arbitrators exceeded their powers or so imperfectly executed them that a mutual final and definite award upon the subject matter submitted was not made.” Good luck with that; the court disagreed.

The court noted (as, it seems, they all do) that review of an arbitration award under the Federal Arbitration Act is “one of deference”, and judicial review is “extraordinarily narrow”.  The court noted that Apache failed to identify patent arithmetical errors and reiterated the terms of the engagement letter. KPMG had the right to disregard what the court deemed to be Apache’s “substantive pleading”.


Sometimes the question is not so much who determines the outcome of an arbitration. Leaving a dispute to professionals with expertise is often best. For example, title disputes arising out of PSA’s are frequently presented to Board Certified title lawyers. Apache’s real problem here was the process. In retrospect, had a party wanted to review workpapers and calculations, the agreement should have provided for access. Think about that the next time you draft such an agreement.

Here’s the only way Apache will ever know what’s in the workpapers.