You may have already heard that SCOTUS affirmed arbitrators’ authority to interpret contractual prerequisites to arbitration last week in BG Group, PLC v. Republic of Argentina. But that is just one of a number of recent decisions from high courts on the deference due arbitrators.
In the BG Group case, the D.C. Circuit had vacated an arbitration award, finding the arbitration panel overstepped its authority by hearing the case before certain conditions precedent had been met. (My preview of the case is here.) In a 7-2 decision written by Justice Breyer, the Court gave this helpful roadmap to its analysis:
we shall initially treat the document before us as if it were an ordinary contract between private parties. Were that so, we conclude, the matter would be for the arbitrators. We then ask whether the fact that the document in question is a treaty makes a critical difference. We conclude that it does not.
Why is the conditions precedent issue for the arbitrators in an ordinary contract? SCOTUS repeatedly cites its 2002 decision in Howsam and explains that ”courts presume that the parties intend arbitrators, not courts, to decide disputes about the meaning and application of particular procedural preconditions for the use of arbitration…includ[ing] the satisfaction of ‘prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate.’” Because the section of the treaty at issue dealt with a condition precedent to arbitration, the Court found it was properly a question for the arbitrators, and the fact of the treaty did not change that analysis one bit.
After concluding the arbitrators properly had authority to determine whether the conditions precedent were satisfied, the Supreme Court easily determined that the arbitrators’ substantive determination about those conditions precedent did not “exceed their powers” under the highly deferential standard of Stolt-Nielsen. While this case is about international arbitration, its analysis begins as a normal contract analysis and in that way is a helpful reminder even in FAA cases about which decisions belong squarely with the arbitrator(s).
The U.S. Supreme Court is not the only one that has been busy confirming arbitration awards, however.
West Virginia recently confirmed an arbitration award after hearing arguments that the arbitrators lacked authority to interpret a lease. In CDS Family Trust, LLC v. ICG, Inc., 2014 WL 184441 (W. Va. Jan. 15, 2014), the high court of West Virginia disposed of the arguments in support of vacatur easily by noting that the losing party had not raised those arguments to the arbitration panel and that the arbitrators were at least arguably construing the lease, citing Sutter.
In McAlpine v. Priddle, 2014 WL 685854 (Alaska Feb. 21, 2014), the Supreme Court of Alaska affirmed an arbitration award in favor of an attorney in a dispute with a client. In response to most of the client’s arguments for vacatur, the court found that “[u]nder our precedent, neither the panel’s factual findings nor its legal conclusions are reviewable.” Even the arbitrators’ finding that the fee agreement was not falsified or a fraudulent copy was not reviewable.
In Hawaii State Teachers Assoc. v. Univ. Laboratory School, 2014 WL 783135 (Hawaii Feb. 27, 2014), the Supreme Court of Hawaii enforced the parties’ agreement that “the arbitrator shall first determine the question of arbitrability” and found that the union was therefore entitled to arbitrate its claim that its grievance is arbitrable.
By Liz Kramer