Opinion ID: 1435659
Heading Depth: 3
Heading Rank: 1

Heading: Review of Arbitral Awards Under the New York Convention

Text: Federal jurisdiction over the final arbitral award in favor of Telenor arises from Chapter 2 of the Federal Arbitration Act (FAA), 9 U.S.C. §§ 201-08, which empowers the federal courts to enforce arbitrations, such as this one, governed by the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38 (the New York Convention or the Convention). See 9 U.S.C. § 201 (The Convention ... shall be enforced in United States courts in accordance with this chapter.); id. § 203 (An action or proceeding under the Convention shall be deemed to arise under the laws and treaties of the United States. The district courts of the United States ... shall have original jurisdiction over such an action or proceeding....); Vaden v. Discover Bank, ___ U.S. ___, n. 9, 129 S.Ct. 1262, 1271 n. 9, 173 L.Ed.2d 206 (2009). [3] Given the strong public policy in favor of international arbitration, review of arbitral awards under the New York Convention is very limited in order to avoid undermining the twin goals of arbitration, namely, settling disputes efficiently and avoiding long and expensive litigation. Encyclopaedia Universalis S.A. v. Encyclopaedia Britannica, Inc., 403 F.3d 85, 90 (2d Cir.2005) (citation, internal quotation marks, and ellipsis omitted). Storm's arguments on appeal implicate three types of such limited review. 1. Defenses to Enforcement of the Arbitral Award. Pursuant to the New York Convention as incorporated by the FAA, a district court, upon petition by a party to a qualifying arbitral award, shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the ... Convention. 9 U.S.C. § 207. The Convention sets forth seven grounds for denial of confirmation, including, of relevance to this appeal, if recognition or enforcement of the award would be contrary to the public policy of [the] country [in which that relief is sought], New York Convention, art. V(2)(b). [4] The party opposing enforcement of an arbitral award has the burden to prove that one of the seven defenses under the New York Convention applies. Encyclopaedia Universalis, 403 F.3d at 90. The burden is a heavy one, as the showing required to avoid summary confirmance is high. Id. (citations, ellipsis, and internal quotation marks omitted); see also Zeiler v. Deitsch, 500 F.3d 157, 164 (2d Cir.2007) (same). 2. Arbitrability. A dispute is arbitrable only if the parties contractually bind themselves to arbitrate it. See, e.g., AT & T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (noting that arbitration is a matter of contract); see also First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) ([T]he arbitrability of the merits of a dispute depends upon whether the parties agreed to arbitrate that dispute.). A question of arbitrability is therefore raised when, as here, someone asserts that an arbitral award should not be enforced because there was no effective agreement to arbitrate the dispute. Review of arbitrability questions is subject to two important presumptions: First, the federal policy in favor of arbitration requires that `any doubts concerning the scope of arbitrable issues' be resolved in favor of arbitration.' Shaw Group Inc. v. Triplefine Int'l Corp., 322 F.3d 115, 120 (2d Cir.2003) (quoting Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). Second, arbitrability questions are presumptively to be decided by the courts, not the arbitrators themselves. See id. ([W]hen the doubt concerns who should decide arbitrability ... [t]he law [presumptively] favor[s] judicial rather than arbitral resolution.); see also First Options, 514 U.S. at 944-45, 115 S.Ct. 1920. We have written that the latter presumption can be rebutted only by clear and unmistakable evidence from the arbitration agreement, as construed by the relevant state law, that the parties intended that the question of arbitrability shall be decided by the arbitrator. Bell v. Cendant Corp., 293 F.3d 563, 566 (2d Cir. 2002) (internal quotation marks and emphasis omitted); see also Shaw Group, 322 F.3d at 120-21. [5] The presumption that the court should decide arbitrability questions also applies when a party seeks to compel arbitration under the New York Convention. See New York Convention, art. II(3)(providing that the court shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the ... agreement is null and void, inoperative or incapable of being performed). We addressed such a motion to compel in Sphere Drake Ins., Ltd. v. Clarendon Nat'l Ins. Co., 263 F.3d 26 (2d Cir.2001), writing that when the making of the agreement to arbitrate is placed in issue ... the court must set the issue for trial, so long as the party putting the agreement to arbitrate in issue ... present[s] `some evidence' in support of its claim. Id. at 30(quoting Interocean Shipping Co. v. Nat'l Shipping & Trading Corp., 462 F.2d 673, 676 (2d Cir.1972)). Depending on the type of claimed inarbitrability, we noted that the party might also be required to make a specific challenge to the arbitration clause. See id. at 31-32 (noting that in setting an arbitrability issue for trial, a party alleging that a contract is void need not challenge the arbitration clause, but a party alleging that a contract is voidable must challenge the arbitration clause in particular); see also supra n.[4]. 3. Manifest Disregard. Federal courts with jurisdiction to enforce an arbitral award may also consider whether the award was in manifest disregard of the law. See Stolt-Nielsen SA v. Animal-Feeds Int'l Corp., 548 F.3d 85, 91-92, 94-95 (2d Cir.2008). [6] The boundaries of the manifest disregard concept are not precisely defined, but the term clearly means more than error or misunderstanding with respect to the law. Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bobker, 808 F.2d 930, 933 (2d Cir.1986). A mere demonstration that an arbitration panel made the wrong call on the law does not show manifest disregard; the award should be enforced ... if there is a barely colorable justification for the outcome reached. Wallace v. Buttar, 378 F.3d 182, 190 (2d Cir.2004) (emphasis in original) (internal quotation marks omitted). Examples of manifest disregard therefore tend to be extreme, such as explicitly reject[ing] controlling precedent or otherwise reaching a decision that strains credulity or lacks even a barely colorable justification. Stolt-Nielsen, 548 F.3d at 92-93 (internal quotation marks omitted). It is, in a word, rare to obtain relief from an arbitral award under this doctrine. Id. at 91 & n. 7 (internal quotation marks omitted). The manifest disregard inquiry has three steps: First, we must consider whether the law that was allegedly ignored was clear, and in fact explicitly applicable to the matter before the arbitrators.... Second, once it is determined that the law is clear and plainly applicable, we must find that the law was in fact improperly applied, leading to an erroneous outcome.... Third, once the first two inquiries are satisfied, we look to the subjective element, that is, the knowledge actually possessed by the arbitrators. In order to intentionally disregard the law, the arbitrator must have known of its existence, and its applicability to the problem before him. Id. at 93 (quoting Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 389-90 (2d Cir.2003)).