The following is an edited and condensed transcript of a broader panel discussion titled “Cutting-Edge Topics in Commercial Arbitration,” conducted on April 11, 2018, at New York Law School. The recording can be accessed at http://nyls.mediasite.com/mediasite/Play/ 5f43f8a8bc58426fa16ce18b904e8d361d.
Jeffrey T. Zaino: Can an arbitrator’s independent legal research cause a court to vacate the arbitral award?
Steven Skulnik: There are two well-established principles that are at play, here. One is substantive, and one is procedural. The substantive one is that the arbitrator does not have to apply the law at all or apply it correctly for the award to be confirmed. In fact, he doesn’t even have to understand the law. He can read anything he wants to inspire his award.
So, when can an award be vacated, insofar as the arbitrator’s application of the law is concerned? Under very limited circumstances. In the Second Circuit there is a doctrine called “Manifest Disregard of the Law.” It has been deemed obsolete in other circuits. In those circuits, even if an arbitrator manifestly disregards the law, the award will still be confirmed. But in the Second Circuit, the principle is that the party challenging the award must show that the arbitrators knew of a governing legal principle and refused to apply it, or ignored it altogether, and that the law was well-defined, explicit, and clearly applicable to the dispute.