Daniel Lund III | Phelps Dunbar
A respondent party in a pair of international arbitrations on the losing end of roughly $285,000,000 in adverse awards attacked the awards based upon arbitrator bias.
“If there is one bedrock rule in the law of arbitration, it is that a federal court can vacate an arbitral award only in exceptional circumstances. … The presumption against vacatur applies with even greater force when a federal court reviews an award rendered during an international arbitration.”
Applying the Federal Arbitration Act (according to the court, the international arbitrations were “seated” in the United States and fell under the New York Convention, such that the FAA is required to be the basis for vacatur efforts), the court examined assertions that certain alleged non-disclosures by the panel “concealed information related to the arbitrators’ possible biases and thereby ‘deprived [respondent] of [its] fundamental right to a fair and consensual dispute resolution process.’” The aggrieved party urged that one arbitrator’s undisclosed nomination of another arbitrator to serve as president of another arbitral panel – “a position that sometimes pays hundreds of thousands of dollars” – possibly influenced the second arbitrator to side with the first. Assertions were also levied that the arbitrators’ undisclosed work with the attorneys for the claimant in other arbitrations “allowed them to become familiar with each other, creating a potential conflict of interest.”
The appellate court, finding that nothing occurred which was nefarious, wrote: “It is little wonder, and of little concern, that elite members of the small international arbitration community cross paths in their work. As one of the [claimant’s] expert witnesses testified, ‘[w]orldwide, there are only several dozen arbitrators who would be attractive candidates’ for ‘a proceeding such as the Panama 1 Arbitration.’ We refuse to grant vacatur simply because these people worked together elsewhere.”
Digging deeper, the appellate court assessed the circumstances under Article V of the New York Convention, “which provides a defense to an arbitral award if ‘[t]he recognition or enforcement of the award would be contrary to… public policy… . Undeniably, there is a public policy in the United States against ‘evident partiality.’ … But, as we have already discussed, that public policy was not violated in this case.”
Finally, the appellate court examined whether the matter of the lack of initial disclosures violated the parties’ agreement to arbitrate or United States law: “The record does not reflect an issue with the composition of the tribunal due to the arbitrators’ late disclosures. … The parties appointed arbitrators, who affirmed their independence and disclosed any potential conflicts. … [Respondent] challenged the arbitrators based on the late disclosures, and the ICA followed the proper procedure when denying that challenge. … True, the ICA noted that Gaitskell should have disclosed his case where McMullan appeared and that von Wobeser should have disclosed his case with Jana. But it did not disqualify either arbitrator for those reasons because it did not find any facts that led it to question either arbitrator’s independence or impartiality.”
Of course, the decision here could have gone either way, reinforcing the maxim directed to arbitrators: fully disclose!
Grupo Unidos por el Canal, S.A. v. Autoridad Del Canal de Panama, 78 F.4th 1252 (11th Cir. 2023)
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