Authorizes the vacating of an arbitration award on the basis of arbitrator disregard of the law

◆ The sponsor's argument

Why the sponsor says this is needed

Under existing law, an arbitration award can be vacated if "completely irrational", a high standard for the losing arbitral litigant to over- come. As noted by Professor Siegel, even an arbitrator's "manifest disregard of the law" is not a basis for vacating an award in New York State. New York Practice, Firth Edition, Sec. 602. While arbitration can be a useful tool for persons to settle disputes in a more timely and cost-effective way, such resolutions should not be totally divorced from applicable standards of law. Thus, a measured and prudent way in which arbitrators should be required to reasonably follow applicable legal standards in resolving disputes would be permit awards to be vacated if arbitrators evidence a "manifest disregard of the law". This standard has been used in federal practice for many years as a basis to vacate arbitration awards. In fact, the Circuit Court of Appeals, Second Circuit has well-honed this standard as follows: "...first, whether the governing law alleged to have been ignored by the arbitrators was well defined, explicit, and clearly applicable, and, second, whether the arbitrator knew about the existence of a clearly governing legal principle but decided to ignore it or pay no attention to it". Schwartz v. Merrill Lynch & Co., Inc., 665 F. 3d 444 (2011). In setting such a clear standard of law for the vacating of arbitration awards, this bill would provide greater clarity to the Courts in deter- mining whether an award would be subject to vacatur due to failure to follow applicable law. Such a standard would also compel arbitrators to make a good faith and reasonable attempt to follow provisions of substantive law, which they presently are not required to do.

This is the sponsor's own case for the bill, quoted from their memorandum. It is not Agora's description of what the bill does.