June 1st, 2010
Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Grounds for Vacatur, United States Supreme Court, labor arbitration
Part II
A. Introduction
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 »
May 18th, 2009
Arbitrability, Authority of Arbitrators, Nuts & Bolts, Nuts & Bolts: Reinsurance, Reinsurance Arbitration
Introduction
In today’s Nuts & Bolts post we take a brief look at honorable engagement clauses, which are sometimes referred to as “honorable undertaking” clauses. Honorable engagement clauses are, for practical purposes, a species of choice of law clause. Generally, they confer upon arbitration panels a degree of freedom to depart from the strict rules of law and evidence, and to interpret the contract as an honorable engagement rather than literally according to its terms. They are premised on the now arguably outmoded historical concept that a reinsurance contract is more than a contract, but an honorable undertaking, a deal that is closed when the parties shake hands over a cocktail (or three), and one by which the parties are honor-bound to abide. They also recognize that reinsurance is an arcane business with its own peculiar set of customs, practices and norms, and that, if the parties so agree, arbitrators should be reasonably free to apply these norms in deciding a case, even if a court faced with the same facts would or could not.
Honorable engagement clauses are more common in older reinsurance contracts than in those written today. But many reinsurance disputes arise out of long-tail asbestos or environmental claims arising out of decades-old contracts, a great many of which contain these clauses. And the clauses can have some significant implications in those disputes. Continue Reading »
