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"Manifest Disregard" in International Arbitration - WAMR 2006 Vol. 17, No. 12

Author(s): 
Lawrence W. Newman
David Zaslowsky
Page Count: 
4 pages
Media Description: 
PDF from World Arbitration and Mediation Report (WAMR) 2006 Vol. 17, No. 12
Published: 
December, 2006
Jurisdictions: 
International,
United States
Practice Areas: 
Interpretation of the Award,
Arbitral Decisions,
FAA
Author Detail: 

 

Lawrence W. Newman and David Zaslowsky are partners in the Litigation Department of the New York office of Baker & McKenzie LLP.

PDF53.36 KB

$40.00
Description: 

 

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Commentary
 
“Manifest Disregard” in International Arbitration
by Lawrence W. Newman and David Zaslowsky
 
At a recent seminar on international arbitration at which one of the authors spoke,
a panelist observed that one of the advantages of arbitrating in his country compared to
the United States is that there exists the potential that a U.S. court will vacate an arbitral
award if it believed that the arbitrator did not properly apply the law. Such a perception
among foreign lawyers makes it worthwhile to look at the reality of the application by
U.S. courts of the “manifest disregard of the law” standard for vacating arbitral awards.
Such a look is warranted further by recent decisions in which two Circuit Courts seem to
have gone in opposite directions in applying the standard.
Evolution of the “Manifest Disregard” Standard
In Wilko v Swan,1 a 1953 decision, the Supreme Court of the United States stated:
In unrestricted submissions, such as the present margin agreements
envisage, the interpretation of the law by the arbitrators in contrast to
manifest disregard are not subject, in the federal courts, to judicial review
for error in interpretation.2
Succeeding generations of losing parties in arbitration have relied on Wilko’s “manifest
disregard” phrase in efforts to vacate domestic arbitration awards. Although “manifest
disregard” is not included in the Federal Arbitration Act as one of the grounds for
vacating an award, various circuit courts of appeal have recognized manifest disregard of
the law by the arbitrators as a ground for vacating awards. Even so, the standard has
been applied narrowly and generally requires that a court find “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.”3