Shall we applaud, or regret, the latest decision from a panel in the US Second Circuit Court of Appeals concerning the quality of proof needed to vacate an international arbitration award for “evident partiality or corruption”? (Kohel Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable Trust, No. 12-3247-CV (2d Cir. Aug. 30, 2013). Shall we applaud the fact that an arbitral award survived a motion to vacate by the losing side, and see this as another heartening judicial vindication of the arbitral process and an admirable exercise in judicial non-intervention– even though the “process” in this case was an unreasoned majority decision of a three-member rabbinical tribunal operating with non-neutral party appointees and under no rules and no governing law? Shall we applaud a decision that announces a legal standard of “abundantly clear” proof of corruption and bias, and finds the proof in this case unacceptably murky because it consisted of nothing more than a hearsay report of one neutral bystander who claimed to have heard the presiding arbitrator state that the Claimant would have the decision it wanted in a few more days?
Or shall we regret the fact that this Second Circuit panel, even while repeating the settled proposition that proof of actual bias is not required and that objective facts warranting an inference of bias will suffice, seems to inject rigidity into that supposedly flexible standard by holding that the evidence of bias or corruption must be “abundantly clear,” indeed “clear and convincing”? Have we not seen a flurry of recent commentary urging flexibility in the standards applicable to proof of arbitral corruption, to take into account the offense against public policy that arbitral corruption represents, and the intractable difficulty of proving misconduct that is inevitably disguised and concealed? Why do we not see this theme in the Second Circuit’s decision?
I suggest this is not destined to be a landmark case in the jurisprudence of “evident partiality or corruption” as a basis for annulment under US law. The case against the presiding arbitrator rested on hearsay, and the arbitration itself was un-transcribed, depriving the courts of any direct look at the challenged chairman’s conduct. Those who hope for judicial sensitivity to the difficult task of proving arbitral corruption should not despair, but should instead reasonably hope that even a standard of “abundant clarity” will be judiciously applied according to the context in every case.
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This month’s review of the applaudable and regrettable would be incomplete without a brief word about a decision from the US Eleventh Circuit Court of Appeals that also concerned alleged arbitrator bias. (FDIC v. IIG Capital LLC, 2013 WL 4007573 (11th Cir. Aug. 7, 2013). We can applaud the fact that the Court rejected as a non-starter (i.e. not even deserving of an evidentiary hearing) the contention that there might have been improper contact between an eminent arbitrator and the eminent arbitration specialist appearing before him as counsel, when the latter at the invitation of the former joined as a faculty member for a symposium held while the case was sub judice. We can regret that evidently neither of these widely-admired members of our community saw fit to disclose the matter. In an IBA-colored world of disclosure categories, could there not be a True Blue List — matters not requiring disclosure but which if disclosed as a matter of prudence would do far more good than harm by simply keeping the arbitral air fresh and breathable? Professional conference contact during the case between arbitrator and counsel, or between arbitrator and arbitrator, is on my True Blue List.
