Opinion ID: 783608
Heading Depth: 3
Heading Rank: 2

Heading: Manifest Disregard of Law

Text: 41 Banco also contends that the MMO and McKinley Panels acted in manifest disregard of the law by ordering it to post pre-hearing security. We disagree. We review de novo a district court's application of the judicially created doctrine of manifest disregard of law. Westerbeke, 304 F.3d at 208 n. 7. 42 A court will vacate an arbitral award on this ground only if a reviewing court ... find[s] both that (1) the arbitrators knew of a governing legal principle yet refused to apply it or ignored it altogether, and (2) the law ignored by the arbitrators was well defined, explicit, and clearly applicable to the case. Greenberg v. Bear, Stearns & Co., 220 F.3d 22, 28 (2d Cir.2000) (citation omitted). 43 The appellant repeatedly emphasizes our holding in Stephens v. Nat'l Distillers and Chem. Corp., 69 F.3d 1226 (2d Cir.1995). Its faith is misplaced. Stephens dealt with prejudgment security in the context of litigation, not arbitration. See id. at 1230. It found that immunity under the FSIA should apply broadly in federal litigation and held that the posting of security required under New York Insurance Law § 1213(c) constituted a prejudgment attachment from which foreign sovereigns were immune. Id. at 1229, 1230. In doing so, Stephens wrestled with a crucial distinction suggested earlier in Sperry Int'l Trade, Inc. v. Gov't of Israel, 689 F.2d 301 (2d Cir.1982). 44 In Sperry we affirmed an arbitration award that ordered the parties to place the proceeds of a disputed Letter of Credit in a joint escrow account pending a final determination. We volunteered, in a footnote, that the arbitrators' award is an in personam order, not an attachment order of the sort prohibited by § 1609. Id. at 305 n. 7. Stephens eliminated this laconic distinction, but, significantly, did not disavow the outcome in Sperry allowing the arbitration panel's escrow award to stand. See Stephens, 69 F.3d at 1230; see also Skandia Am. Reins. Corp. v. Caja Nacional de Ahorro y Segoro, No. 96 Civ. 2301, 1997 WL 278054, at  (S.D.N.Y. May 23, 1997) (rejecting argument that defendant could not be required to post prejudgment security in an arbitration because Stephens did not involve an arbitration action). 45 In addition to distinguishing Stephens, the district court below cited several cases that justified the Panels' inference that pre-hearing security could lawfully be imposed. See Int'l Ins. Co. v. Caja Nacional de Ahorro y Seguro, No. 00 C 6703, 2001 WL 322005 (N.D.Ill. April 2, 2001) (finding that Argentina, by signing the Convention on the Recognition Enforcement of Foreign Arbitral Awards (the New York Convention), waived its immunity to prejudgment security ordered by a district court while it is reviewing an arbitral award (which is permitted under the New York Convention)); Skandia, 1997 WL 278054, at - (same); see also Home Ins. Co. v. Banco de Seguros del Estado, 98 Civ. 6022 1999 U.S. Dist. LEXIS 22478, at -21 (S.D.N.Y. Feb. 26, 1999) (confirming an arbitration panel's interim order requiring Banco to establish an escrow account to secure any eventual arbitral award). 46 In any event, it can hardly be said that the FSIA clearly prohibits the relief ordered by the Panels. The Panels, therefore, did not ignore or refuse to apply well defined, explicit, and clearly applicable law, Greenberg, 220 F.3d at 28, and, as such, did not act in manifest disregard of the law.