In Part I (here) we explained why the standard for challenging an award based on its outcome is important in reinsurance arbitration practice. And, after briefly reviewing pre-Stolt-Nielsen law on outcome-based standards of review, we explained how Stolt-Nielsen has established a fairly searching, standard of review. This Part II explores the legal and practical implications of that standard of review.
B. Legal Implications of the Stolt-Nielsen Decision’s Manifest Disregard of the Agreement Standard of Review
1. Courts May Interpret Stolt-Nielsen’s Outcome-Based Standard of Review Liberally
Reinsurance- and other commercial-arbitration awards are now subject to the same standard of review as labor-law awards – and in Stolt-Nielsen, the Court applied that standard of review pretty liberally. The Court has put to rest the notion that Federal Arbitration Act Section 10(a)(4) vacatur is limited to questions concerning whether the arbitrators decided a matter falling within the scope of the parties’ arbitration agreement or submission. The outcome of the arbitration is now subject to at least some, limited scrutiny.
The focus will now be on whether the arbitrators interpreted, applied and enforced the contract, and applied applicable law or norms. Express or implied reliance on extra-contractual considerations, such as public policy, may spoil an award, unless those extra-contractual considerations are grounded in applicable law. Not heeding clear and unambiguous contract language, effectively deleting or disregarding contractual provisions or otherwise rewriting the contract may also subject the award to vacatur. Continue Reading »