The idea of recourse against an arbitrator is naturally repugnant to experienced arbitrators and lawyers accustomed to arbitration. We have a certain inclination to assume that arbitration is fair and arbitrators are wise, and I would not presume to challenge those assumptions. But the topic before us requires us to consider that extremely unlikely hypothetical event: that one of us is asked what can be done about an unjust award by an arbitrator who has behaved improperly.

The answer, in the United States, is not to waste time attacking the arbitrator; there simply is no recourse against an arbitrator personally. There may, however, be recourse against the award based on the conduct of the arbitrator, on a limited number of grounds provided by statute or judicial decision.

I. Immunity of the arbitrator

In the federal courts of the United States,1 "an arbitrator is immune from suit for all arts which he performs in his capacity as an arbitrator".2 This immunity extends even "to cases where the authority of an arbitrator to resolve a dispute is challenged".3 The primary policy underlying this doctrine is that of "protecting the integrity of the arbitration or decision-making process from reprisals by dissatisfied parties".4 As explained in a widely-quoted statement by a state court in New York:

Arbitrators exercise judicial functions and while not eo nomine judges they are judicial officers and bound by the same rules as govern those officers. Considerations of public policy are the reasons for the rule and like other judicial officers, arbitrators must be free from the fear of reprisals by an unsuccessful litigant. They must of necessity be uninfluenced by any fear of consequences for their acts.5

The same immunity extends to "boards which sponsor arbitration", such as the AAA and the ICC.6

One of our federal courts of appeals articulated the rationale for arbitral immunity as follows:

[I]ndividuals … cannot be expected to arbitrate disputes if they can be caught up in the struggle between the litigants and saddled with the burdens of defending a lawsuit.7

This comment highlights a weak spot of American arbitral immunity: The general American rule is that the loser of a lawsuit does not pay the winner's attorney's fees. An arbitrator who is sued may consequently have to pay a heavy penalty in the form of the fees of the lawyer defending him, even if the court finds that he is immune from suit.

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For example, a federal district judge dismissed on the grounds of immunity a suit that sought damages for "cruel and unusual punishment" against an arbitrator. But the judge refused to order the plaintiff to pay the arbitrator's attorneys fees, because no statute entitled the arbitrator to collect them:

However groundless this pro se complaint may be, it does not justify an award of attorney's fees where, as here, there is no statutory basis asserted for such an award.8

Courts have similarly refused to award sanctions for frivolous claims against parties who sue arbitrators.9

Another weak spot in American arbitral immunity derives from our rues of discovery. The discovery provisions of the Federal Rules of Civil Procedure apply in proceedings under the United States Arbitration Act, and there is a real risk that those rules can be used to harass an arbitrator.10 While courts have been protective of arbitrators from whom post-award discovery has been sought,11 the arbitrator from whom discovery is sought may still have to pay his own legal fees.

Because of the legal-fee Achilles' heel in our doctrine of arbitral immunity, an arbitrator is generally safer if he performs his function under the aegis of an established organization, such as the AAA, which has a tradition of defending its arbitrators when they are attacked.

If the arbitrator is himself immune from attack (even if exposed to expense), what remedy can a party outraged by his conduct pursue? The only course open is to attack the award.

II. Attacks on arbitration awards

The immunity of arbitrators is a common-law rule created by judges. The grounds for attacking arbitration awards are spelled out by statute, in the United States Arbitration Act,12 but the grounds spelled out in the statute are not the only ones available. American law would not be complete without additional grounds for contesting awards created by judges.

With respect to international awards, the New York Convention provides, as this group knows well, its own list of reasons why an award may be refused enforcement, but none of them explicitly involves the conduct of the arbitrator.13 American courts have not resolved whether the list in the Convention is exclusive as to awards in international arbitration proceedings, or whether the list in our statute may be applied in addition to it.14 In spite of this uncertainty, it seems unlikely that our statute would be applied to an award rendered abroad which is presented to an American court for enforcement under the Convention, although parties have tried to argue that the grounds for vacating awards in our statute amount to a statement of "public policy" as used in the Convention.15 The statute explicitly permits an American federal district court to vacate an award entered in that court's district based on the grounds enumerated, however, and a court is not likely to be deterred from doing so merely because the arbitration was international.

There are far too many court decisions on challenges to arbitration awards to allow for a comprehensive discussion here of all the possible reasons. We will concentrate on those that call the conduct of the arbitrator into question, and leave for another colloquium such matters as an award contrary to public policy.16

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A. Statutory grounds for vacating awards

Section 10(a) of the United States Arbitration Act permits a federal court to vacate an arbitration award for four reasons related to the conduct of the arbitrators.17

We will look briefly at each of these grounds.

1) Corruption or fraud

"Where the award was procured by corruption, fraud, or undue means." § 10(a)(1).

Luckily for the reputation of arbitration, cases of corruption and fraud appear to be exceedingly rare. One federal appeals court found that the conduct of a neutral arbitrator in not disclosing a 20-year friendship with a party arbitrator, combined with the egregious behavior of the two of them in proceeding without one of the parties or the arbitrator named by that party, amounted to fraud.18 The conduct recited by the court seems highly improper, rather than fraudulent as we commonly understand the term, but the court was applying a specialized labor arbitration statute that made fraud the only available reason to void the award. The lesson for our purposes may be that a court that finds the behavior of an arbitrator sufficiently outrageous will find a way to vacate his award.

2) Partiality

"Where there was evident partiality or corruption in the arbitrators, or either of them." 10(a)(2).

Defining what a "partial" arbitrator is has baffled some of our finest judges. The only attempt by our nine-judge Supreme Court to do so resulted in a four-two-three split, with the two joining the four in their result but not their reasoning. The four, led by the date Justice Black, would have held that arbitrators "must avoid even the appearance of bias".19 The two, led by Justice White (these names are real) were more realistic, and wrote - in what many accept as the narrow holding of the Court:

The Court does not decide today that arbitrators are to be held to the standard of judicial decorum of … judges. It is often because they are men of affairs, not apart from the marketplace but of the marketplace, that they are effective in their adjudicatory function. … This does not mean the judiciary must overlook outright chicanery … But it does mean that arbitrators are not automatically disqualified by a business relationship with the parties before them if both parties are informed of the relationship in advance, or if they are unaware of the facts but the relationship is trivial. I see no reason automatically to disqualify the best informed and must capable potential arbitrators.20

Lower courts attempting to apply this standard have concluded that, for example, the mere fact that a neutral arbitrator was also a witness in another arbitration involving the same law firms representing the parties in the case before him did not provide grounds for vacating his award for partiality.21 That same court later settled on this formulation in a case where it held that a father-son relationship between an arbitrator and the president of a labor union that was a party to the case before him was evidence of partiality:

[W]e hold that "evident partiality" within the meaning of 9 U.S.C. § 10 will be found where a reasonable person would have to conclude that an arbitrator was partial to one party to the arbitration.22

In another context, that sort of judicial test has been described as "We know it when we see it".

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Another court of appeals addressed the failure of a lawyer who had acted as arbitrator to disclose that his law firm had acted for the parent company of one of the parties, even though he was personally unaware of the fact. The court vacated his award, on the basis that his failure to inquire and make disclosure created a "reasonable impression of partiality".23This court came down on Justice Black's side - that is, that an appearance of bias is enough to impeach an award - but with some allowance in Justice White's direction that what amounts to an appearance of bias in an arbitrator is different from what it would be in a judge:

Expert arbitrators will nearly always, of necessity, have numerous contacts within their field of expertise. Thus, arbitrators will have many more potential conflicts of interest than judges. In arbitration, moreover, only disclosure and not recusal is required.24

An arbitrator is thus under constantly increasing pressure to disclose every possible basis for an appearance of bias at the commencement of an arbitration. One who fails to do so leaves his award wide open to a subsequent attack.

3) Misconduct

"Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced." 9 U.S.C. § 10(a)(3).

This statutory definition of what type of misconduct by an arbitrator will call his award into question rests heavily on the concept of due process of law that permeates much of our jurisprudence. For example, one of our district courts vacated an award because the arbitrator had taken evidence in such a way as to deny one party "an opportunity to complete its presentation of proof".25 The court found a violation of this section of the Arbitration Act:

[P]rinciples of fundamental fairness required that the Union be given a full opportunity to present its case to the arbitrator for consideration.26

A similar concern for procedural fairness led one of our federal courts of appeals to reverse a lower court's order confirming an award and to vacate the award, because the arbitrators, while deliberating, had telephoned one party to request information without the knowledge of the other party.27 The court found that conduct to be a violation of the AAA rules that governed the proceeding and misbehavior warranting vacating the award under the Arbitration Act - a violation of the right of the excluded party to a "fundamentally fair hearing".28

This reasoning was summed up in a recent decision by another court of appeals:

A federal court may vacate an arbitrator's award under 9 U.S.C. § 10(a)(3) only if the arbitrator's refusal to hear pertinent and material evidence prejudices the rights of the parties and denies them a fair hearing.29

It is not grounds to vacate an award, that court noted, if the arbitrator refuses to hear evidence that is cumulative or irrelevant.30 The arbitrator need only "give each party the opportunity to present its arguments and evidence".31

With regard to our hypothetical unjust award, this line of attack will only be helpful if the arbitrator, in addition to being wrong, was also so unreasonable in how he conducted the hearing that the party aggrieved was not given a fair chance to be heard.

4) Exceeding authority

The final line of attack on an award enumerated in Section 10 of the Arbitration Act is: [Page119:] "Where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made." § 10(a)(4).

Many cases interpreting this provision stray into the broader question of what matters are properly arbitrable, which is well beyond our scope. Narrowly read, this section of the law simply provides a way to discipline an arbitrator who has disregarded limitations expressed or implied in the arbitration agreement between the parties. The test is whether "the arbitrator exceeded the powers delegated to him by the parties".32 For example, an award that purported to bind a third party who had not signed the agreement providing for arbitration was held to exceed the arbitrator's powers.33 An arbitrator strays beyond the contract that provides for his services at the peril of having his award set aside.

B. Non-statutory grounds: manifest disregard of law

Some of the federal courts in the United States allow an arbitration award to be challenged on the grounds of "manifest disregard" of the law by the arbitrator. The origins of this rule, which is not found in the Arbitration Act, is a comment - almost an aside - by the Supreme Court that:

The interpretations of the law by the arbitrators in contrast to manifest disregard are not subject, in the federal courts, to judicial review for error in interpretation.34

Building on that foundation, some of our courts have accepted "manifest disregard of the law" as a basis for vacating an arbitration award,35 while others have declined to do so.36

Those courts that recognize this rule apply it as a rule of arbitrator misconduct, not as a basis for reviewing errors of law. As one court of appeals explained:

Although the bounds of this ground have never been defined, it clearly means more than error or misunderstanding with respect to the law. The error must have been obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator. Moreover the term "disregard" implies that the arbitrator appreciates the existence of a clearly governing legal principle but decides to ignore or pay no attention to it.37

An award will thus be set aside on the basis of manifest disregard only when "the arbitrator deliberately disregards what he knows to be the law".38 Otherwise, most courts take the view that "where 'a ground for the arbitrator's decision can be inferred from the facts of the case, the award should be confirmed'".39

If, therefore, an unjust arbitrator has been imprudent enough to leave a record that a rule of law was brought to his attention, but disregarded, his award may (in some parts of the United States) be attacked on that basis. If the same arbitrator is clever enough to realize that "an arbitrator is simply not required to state the reasons for his decision",40 however, a party challenging the award will have to refute "every rational basis upon which the arbitrator could have relied".41

Conclusion

That there is no recourse against an arbitrator personally does not mean that there is no remedy for an unjust arbitration award improperly entered by a biased arbitrator. The hundreds of reported American cases contesting [Page120:] arbitration awards testify to a widespread feeling among losers in arbitration proceedings that it still may be worthwhile to try to persuade a judge that injustice was done.

Most of those efforts are unsuccessful, and arbitration would be a faster, cheaper process if it were even more difficult than it is to attack an arbitration award. But for the very rare case of an arbitrator who has been corrupted, or concealed a bias, or refused to hear material evidence, or exceeded the scope of the arbitration agreement, or made it clear that he is ignoring well-established law, American federal courts will provide a party with an opportunity to have its case heard again.

1
Each of the 50 states and the District of Columbia has a statute and court decisions governing arbitration, but that body of law is far too voluminous to address in one speech. International arbitrations are governed primarily by federal law and treaty law which forms part of federal law, and this discussion will accordingly be confined to federal law.

2
Tamari v. Conrad, 552 F.2d, pp. 778, 780 (7th Cir. 1977)(citing Calvi v. ILGWU, 311 F.2d, pp. 113, 11415 (3rd Cir. 1962)).

3
Tamari, 552 F.2d at p. 780.

4
UAW v. Greyhound Lines, Inc. , 701 F.2d, pp. 1181, 1186 (6th Cir. 1983).

5
Babylon Milk & Cream Co. v. Horvitz, 151 N.Y.S.2d, pp. 221, 224 (Sup. Ct. 1956), aff'd 4A.D.2d, p. 777 (1957) (quoted in Greyhound Lines, 701 F.2d at p. 1186).

6
Corey v. New York Stock Exchange, 691 F.2d, pp. 1205, 1211 (6th Cir. 1982).

7
Tamari, 552 F.2d at p. 781.

8
Calzarano v. Liebowitz, 550 E Supp., pp. 1389, 1391 (S.D.N.Y. 1982).

9
Wasyl, Inc. v. First Boston Corp. , 813 F.2d, p.1579, 1582-83 (9th Cir. 1987)

10
See Andros Compania Maritima v. Marc Rich & Co. , 579 F.2d, pp. 691, 702 (2d Cir. 1978); Fed. R. Civ. P. 81(a)(3).

11
E.g. Andros Compania Maritima, 579 F.2d at pp. 701-702.

12
9 U.S.C. § 10. Most state arbitration laws contain similar provisions.

13
New York Convention, Article V. The New York Convention is codified in the United States at 9 U.S.C. § 201.

14
See Andros Compania Maritima, 579 F.2d at p. 699, no. 11.

15
E.g. Fertilizer Corp. of India v. IDI Management, Inc. , 517 F Supp., pp. 948, 953-54 (S.D. Ohio 1981).

16
See New York Convention, Section V.2(b). See also, e.g., Exxon Shipping Co. v. Exxon Seamen's Union, 11 F.3d, p. 1189 (3d Cir. 1993).

17
9 U.S.C. § 10(a).

18
Pacific & Arctic Ry. and Navigation Co. v. United Transportation Union, 952 F.2d, pp. 1144, 1148-49 (9th Cir. 1991).

19
Commonwealth Coatings Corp. v. Continental Casualty Co. , 393 U.S., pp. 145, 150 (1968).

20
Commonwealth Coatings, 393 U.S. at p. 150.

21
International Produce, Inc. v. A/S Rosshavet, 638 F.2d, pp. 548, 551 (2d Cir.), cert. denied 451 U.S. 1017 (1981).

22
Morelite Construction Corp. v. New York City District Council Carpenters Benefit Funds, 748 F.2d, pp. 79, 84 (2d Cir. 1984).

23
Schmitz v. Zilveti, 20 F.3d, pp. 1043, 1049 (9th Cir. 1994).

24
Schmitz, 20 F.3d at pp. 1046-47 (citations omitted).

25
Teamsters Union v. E.D. Clapp Corp. , 551 F. Supp., pp. 570, 578 (N.D.N.Y. 1982).

26
Id.

27
Totem Marine Tug & Barge, Inc. v. North American Towing, Inc. , 607 F.2d, pp. 649, 652-53 (5th Cir. 1979).

28
Totem Marine, 607 F.2d at p. 651 (quoting Bell Aerospace Co. v. Local 516, UAW, 500 F.2d, p. 923 (2d Cir. 1974)).

29
Robbins v. Day, 954 F.2d, pp. 679, 685 (11th Cir. 1992).

30
Id.

31
Id.

32
Eljer Mfg., Inc. v. Kowin Development Corp. , 14 F.3d, pp. 1250, 1256 (7th Cir. 1994).

33
Id.

34
Wilko v. Swan, 346 U.S., pp. 427, 436-37 (1953), overruled on other grounds, Rodriguez v. Shearson/American Express, 490 U.S. 477 (1989).

35
E.g. Advest, Inc. v. McCarthy, 914 F.2d 6 (1st Cir. 1990).

36
E.g. Robbins v. Day, 954 F.2d, pp. 679, 683-84 (11th Cir. 1992).

37
Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bobker, 808 F.2d, pp. 930, 933 (2d Cir. 1986).

38
Eljer Mfg., 14 F.3d at p. 1254.

39
Robbins, 954 F.2d at 684 (quoting Raiford v. Merrill Lynch, Pierce, Fermer & Smith, Inc. , 903 F.2d, pp. 1410, 1413 (11th Cir. 1990)).

40
Eljer Mfg. , 14 F.3d at p. 1254.

41
Robbins, 954 F.2d at p. 684.