Opinion ID: 783608
Heading Depth: 2
Heading Rank: 1

Heading: The Mutual Marine Arbitration (Scheindlin, J.)

Text: 9 Before the Organizational Meeting, the Panel ordered the parties to exchange brief position statements. MMO notified the Panel that it would make a pre-hearing motion seeking security and submitted its Statement of Position one week before the Meeting. MMO argued that: (1) such security was required under New York Insurance Law § 1213; (2) the security was also required by the Umbrella Agreement; and (3) unless there were a provision precluding security, the arbitrators had the inherent power to order such relief. 10 Banco's Statement of Position posited that, as an instrumentality of a foreign state, it was immune under the FSIA from having to post pre-hearing security. It claimed that such immunity could only be waived by an explicit contractual provision, and requested the Panel to withhold any determination on MMO's claim for pre-hearing security until after the parties had an opportunity to engage in discovery and to present their evidence at a hearing. 11 At the Organizational Meeting, the Panel heard the parties' arguments and ruled that it was authorized under the Umbrella Agreement to order pre-hearing security. It instructed the parties to confer about the proper amount of that security. 12 After receiving documents reflecting the sums MMO claimed were due and after conducting a telephone conference, the Panel issued an interim order directing Banco to post as security an irrevocable letter of credit for $708,714.04. Banco moved for reconsideration. The Panel denied Banco's motion in a second interim order. 13 Banco then moved to vacate the Panel's interim orders in the United States District Court for the Southern District of New York (Scheindlin, J. ). The district court, as a threshold issue and a matter of first impression, determined that the Panel's interim orders constituted arbitral awards and were therefore reviewable. The court denied Banco's motion, finding that the Panel did not act in manifest disregard of the law or exceed the scope of its authority by awarding pre-hearing security. See Banco de Seguros del Estado v. Mutual Marine Offices, Inc., 230 F.Supp.2d 362, 371-75 (S.D.N.Y.2002) ( Banco I ). 14 Banco moved before Judge Scheindlin for reconsideration asserting that: (1) the court should have employed a de novo standard in reviewing the arbitral awards; (2) the arbitration award was against public policy; (3) the court erred in finding that the panel did not act in manifest disregard of the law; and (4) the Panel erroneously relied on the terms of the Umbrella Agreement in finding that Banco was required to post pre-hearing security. 15 The district court granted the motion to reconsider solely because it had overlooked Banco's public policy argument raised on the initial motion. The district court then found that: (1) the standard of review was proper; (2) Banco did not cite any controlling authority or any factual matter overlooked by the court when it determined that the Panel did not act in manifest disregard of the law; and (3) even if the Umbrella Agreements did not expressly provide for an award of pre-hearing security, case law cited to the Panel provided an adequate basis to confirm the interim orders. Banco de Seguros Del Estado v. Mutual Marine Offices, Inc., 230 F.Supp.2d 427, 429-30, 431-32 (S.D.N.Y. 2002) ( Banco II ). Finally, the district court found that, although Banco identified an explicit public policy, it failed to show how enforcing the arbitral award explicitly conflicts with that public policy. Id. at 431. 16