Enter to open, tab to navigate, enter to select
Interim arbitral award confirmable under Federal Arbitration Act (NY District Court)
Practical Law Legal Update 8-588-8546 (Approx. 3 pages)
Interim arbitral award confirmable under Federal Arbitration Act (NY District Court)
by Practical Law Arbitration
| Published on 18 Nov 2014 • USA (National/Federal) |
In Companion Prop. & Cas. Ins. Co. v. Allied Provident Ins., Inc., the US District Court for the Southern District of New York considered a request to enforce an interim arbitral award requiring the respondent to post security.
The US District Court for the Southern District of New York has confirmed its power to confirm an interim arbitral award for payment of security.
The claimant (Companion) brought an ad hoc arbitration in New York against the Respondent (Allied) when Allied failed to pay amounts allegedly due under a reinsurance agreement. Companion sought and obtained an interim order for payment of security reflecting Allied's contractual obligation to collateralize its debts. When Allied ignored the interim award, Companion petitioned the court to confirm it.
The court reviewed the case law that supports the court's power to confirm interim awards of security and noted that "[w]ithout the ability to confirm such interim awards, parties would be free to disregard them, thus frustrating the effective and efficient resolution of disputes that is the hallmark of arbitration." Having concluded that it had the power to confirm the interim award, the court held that it should confirm as long as there is a "barely colorable justification." On that standard, the court concluded that the award was confirmable under section 9 of the Federal Arbitration Act (FAA) (9 U.S.C. § 9) because the agreement between the parties required that the respondent provide collateral for its obligations.
The court also denied Allied's cross-petition to vacate the award, brought under section 10 of the FAA (9 U.S.C. § 10). Allied failed to establish any of the following:
- Arbitrator misconduct. (Two of the three arbitrators proceeded in the absence of the third, who had become gravely ill.)
- Arbitrators exceeding their powers. (As long as the tribunal gave each party an adequate opportunity to present its evidence and argument, it did not need to hold a hearing with live witnesses prior to issuing the interim award.)
- Arbitrators' evident partiality. (An email among the panel members noting that Companion would be prejudiced by delay, absent security from Allied, does not evidence partiality to Companion.)
Finally, the court rejected Allied's request to disqualify the entire panel based on the illness of the arbitrator appointed by Allied. The court noted that the appropriate course of action is for Allied to appoint a replacement arbitrator. For more information on replacing arbitrators in ad hoc arbitration, see Practice Note, Ad hoc arbitrations without institutional support: Drafting ad hoc clauses.