D. Restricting Direct and Collateral Challenges in US to Arbitration Awards
Back to Chapter 1 - Contents
- US Supreme Court Narrowing Grounds to Challenge Arbitration Awards
(a) In Hall St. Assocs., LLC v. Mattel, Inc., 128 S.Ct. 1396 (2008), the US Supreme Court ruled that statutory grounds for vacating or modifying an arbitration award were exclusive and could not be expanded by contractual agreement.
(i) Although the decision involved domestic conduct and review, the US Supreme Court's decision will undoubtedly find applicability in international settings.
(ii) Mattel was awarded damages in an arbitration between Mattel and Hall Street over the indemnification costs to clean a leased site. The Oregon District Court vacated the award on the grounds that the parties' arbitration agreement required the court to vacate an award if the arbitrator's conclusions of law were erroneous. However, the Federal Arbitration Act's list of grounds for vacating or modifying an award did not include erroneous conclusions of law. On appeal, the Supreme Court held that the statutory grounds for vacating or modifying an award were exclusive and could not be expanded through contractual agreement.
- Unwillingness to Permit Collateral Attack in US on non-US Arbitral Award
(a) In Gulf Petro Trading v. Nigerian Nat'l Petrol. Corp., 512 F.3d 742 (5th Cir. 2008), the Fifth Circuit rejected a Texas oil company's challenge to a Swiss arbitration, holding that US courts could only review arbitration awards from other countries to determine whether the award should be enforced, not whether it was valid.
(i) An arbitration panel in Switzerland held that a Texas oil company, Petrec, lacked the capacity to maintain its claims against a Nigerian oil company, NNPC. Petrec subsequently brought suit alleging that the arbitration award was procured by fraud, bribery, and corruption. The Fifth Circuit concluded that US federal courts lacked subject matter jurisdiction over the suit, which it identified as a collateral attack on a non-US arbitral award.
(ii) The Fifth Circuit noted the distinction made by the New York Convention between a country of primary jurisdiction (the country where an arbitral award is made) and a country of secondary jurisdiction (all other countries), and explained that the New York Convention essentially limited the review of awards in courts of secondary jurisdiction to whether such awards should be enforced. The fraud, bribery, and corruption claims constituted collateral attacks on the award because the purported harm suffered was not caused by the alleged acts, but rather by the impact of the alleged acts on the award.
(b) Despite its holding, the court acknowledged, in dictum, that a claim of a civil rights violation that occurred during an arbitration proceeding may not constitute a collateral attack.
Chapter 1 - Table of Contents