Why Arbitration Awards Aren’t Often Vacated
A ruling by the Eleventh Circuit Court of Appeals last week upholding an arbitral award, despite the failure of the arbitrators to make certain pertinent disclosures, reminds the legal world how difficult it is to have the grounds acknowledged that will vacate an arbitration decision.
The case involved an international arbitration before the International Chamber of Commerce (ICC) stemming from the design and construction of the Panama Canal expansion, which was “severely delayed and disrupted” and over twenty months late. Following an arbitration hearing on the merits, the panel of three arbitrators ordered the contractor to pay Panama nearly a quarter billion dollars in damages.
After the contractor dug deeper into the arbitrators’ backgrounds, it was revealed that they had worked with each other or with Panama’s counsel in the past. For example, two of the arbitrators had each served as a co-arbitrator (in unrelated matters) with a lawyer who represented Panama. Yet, when the contractor moved to disqualify the arbitrators and set aside the award due to the discovery of the new information, the motion was denied.
However, this shouldn’t come as a surprise.
Courts are generally very reluctant to interfere with arbitration awards. In most jurisdictions, the grounds for vacating an arbitration award are intentionally limited to promote the finality and efficiency of the arbitration process. These grounds can vary somewhat depending on the jurisdiction and the governing arbitration laws, but they often include:
- Lack of Jurisdiction: If the arbitrator exceeded their authority or if the dispute was not within the scope of the arbitration agreement, the award could be vacated.
- Fraud, Corruption, or Misconduct: If there is evidence that the arbitration process was tainted by fraud, corruption, or serious misconduct that affected the outcome, a court might consider vacating the award.
- Evident Partiality or Bias: If there is proof that the arbitrator exhibited clear and unmistakable bias or partiality that had a material impact on the award, this might be grounds for vacating.
- Denial of Due Process: If a party was denied the opportunity to present their case, was prevented from presenting evidence, or otherwise deprived of a fair hearing, a court might consider vacating the award.
- Exceeding Authority or Contrary to Public Policy: If the arbitrator goes beyond the scope of their authority or if the award violates public policy, some jurisdictions might allow for the award to be vacated.
Arbitration awards are designed to provide a final and binding resolution to disputes, and the limited grounds for vacating them reflect the desire to maintain the efficiency and effectiveness of the arbitration process. If you’re facing a situation where you believe an arbitration award should be vacated, call Pike & Lustig’s experienced business litigation attorneys at 561-291-8298 today.