Page 84 - M & A Disputes

Subsequent to this Supreme Court opinion, lower courts have grappled with whether the manifest disre-
gard of the law standard has been eliminated altogether or whether that standard remains a gloss on the
preexisting statutory grounds for vacatur found in Sections 10 and 11 of the FAA. Presently, there are
conflicting results among the appeals courts. For example, the First Circuit has found that the Hall Street
decision confirmed "that manifest disregard of the law is not a valid ground for vacating or modifying an
arbitral award in cases brought under the Federal Arbitration Act" (see Ramos-Santiago v. United Parcel
Service, 524 F. 3d 120 [1st Cir. 2008]). In contrast, the Second Circuit held that manifest disregard of
the law remains a valid rationale for vacating arbitration awards (see Stolt-Nielsen SA v. AnimalFeeds
International Corp., 548 F. 3d 85 [1st Cir. 2008]). Consequently, until the Supreme Court clarifies the
true impact of Hall Street, courts may remain split; therefore, parties cannot be certain whether manifest
disregard of the law remains a proper basis for vacating a neutral’s or an arbitrator’s award. Just as
much, arbitrators and neutrals should remain mindful that the manifest disregard of the law standard
continues to survive, at least in some jurisdictions.

UAA

With regard to a federal act, each state has adopted its own version of the UAA.

International Issues Regarding the Enforceability of Awards

In another review of an international arbitration case in the United States, a different judicial circuit held
that the New York Convention fn 3 was the exclusive method for review of a Florida arbitration when the
dispute was between a United States insurer and a German corporation: Industrial Risk Insurers v.
M.A.N. Gutehoffnungshutte, 141 F.3d 1434 (1998). Under the New York Convention, the manifest dis-
regard of the law standard does not apply, and instead, the most consistent ground for disputing an
award is the contrary to public policy standard, which is an even higher threshold, with hardly any in-
stances of successful challenges. For a court to rule that the arbitration award is contrary to a country’s
public policy, it would likely have to constitute a direct affront to the country’s moral or economic
norms. "Enforcement of foreign arbitral awards may be denied on this basis only where enforcement
would violate the forum state’s most basic notions of morality and justice" (see Parsons & Whittemore
Overseas Co. v. Societe Generale de L’Industrie du Papier, 508 F.2d 969, 974 [2nd Cir. 1974]).

International Centre for Settlement of Investment Disputes

Under Article 52 of the Convention on the Settlement of Investment Disputes between States and Na-
tionals of Other States (the ICSID Convention), an arbitration award can only be annulled under five
enumerated grounds, and they are all high bars to reach. When the dispute exists between a private party
and foreign nation, the ground of manifest disregard of the law does not exist. Under the ICSID Conven-
tion, an arbitration award is to be recognized by a court as though it were a final judgment of a court of
that state. fn 4 As a result, the grounds for vacatur are limited, and they do not include a manifest disre-
gard of the law or a violation of public policy.

fn 3 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards dated June 10, 1958.

fn 4 Foreign Relations and Intercourse, U.S. Code 22, Section 1650A, affirms the deference paid to arbitration awards pursuant to the
Convention on the Settlement of Investment Disputes between States and Nationals of Other States:

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