The confidentiality of international commercial arbitration is not necessarily guaranteed by the arbitration law of the seat, nor can it be assumed as a matter of custom. Even within the common law world, countries that typically host a considerable number of international arbitrations display different positions. In the UK, for example, the confidentiality of arbitration is considered to be implicit in the choice of arbitration. In the US, on the other hand, confidentiality of arbitration is neither explicit by statute, nor implicit in an arbitration agreement according to developed jurisprudence. The extent of confidentiality in arbitrations seated in the US is a function of the agreement of the parties, any order of the Tribunal entered within the scope of its powers, and – very significantly – the prospect of judicial proceedings relating to the arbitration. When arbitration reaches the US courts, as it so often does, fundamental principles may collide: open courts principles, on one hand, arbitral confidentiality, on the other.

In the US, some recent appellate case law concerning this dimension of the confidentiality landscape suggests that arbitral confidentiality may be gaining some ground on open courts principles in the competition for the sympathies of US federal district judges – at least in New York, where so much of US law affecting international arbitration is made.  This is an interesting development, given that those of us who practice here start from the assumed premise that, when an enforcement or vacatur case is commenced in a US district court, the pre-award confidentiality of the arbitration, whether stipulated or ordered, counts for very little, and public access to the entire judicial docket is to be expected.

In this Commentary, we begin with a tour of the common law world outside the US, then return “home” to discuss the recent US appellate cases (and some of their District Court applications) that might tempt us to think a change of judicial attitude toward arbitral confidentiality could be emerging.

The Position Outside North America

Under Singapore’s International Arbitration Act, all proceedings “under this Act in any court are to be heard in private, unless the Court otherwise directs.” The statute states restrictions on public reporting of the private proceedings, and allows the court to make exceptions to the presumption of complete privacy based upon a determination of public interest, or the consent of the parties, or a showing of good cause.  (Sections 22 and 23 of Singapore’s International Arbitration Act).

Hong Kong’s Arbitration Ordinance contains similar provisions to those in Singapore, and while the Ordinance provides that a party may publish information about the arbitration in connection with enforcement of a legal right including enforcement or set aside of an award, this is aligned with a “closed court” approach where the court’s docket is not itself open to public inspection. (Hong Kong Arbitration Ordinance, Sections 16-18). In simplest terms, a party may say what it will in a petition to vacate an arbitration award, but its audience upon the filing of the petition will be only the court unless the court otherwise directs.

Australia’s International Arbitration Act invokes the same confidentiality presumption in different terms, broadly defining “confidential information” to embrace essentially all aspects of the arbitral proceedings, and prohibiting disclosure of confidential information, even in proceedings to enforce an award or obtain other relief under the Act, unless the disclosure “is necessary for the purposes of this Act,” and is “ no more than reasonable for that purpose.”

The UK Arbitration Act 1996 contains no comparable provisions, and while there was discussion within the UK arbitration bar as to whether the 2025 revisions to the Act might address this matter, ultimately arbitral confidentiality in the courts was not addressed. So the matter has been left, as it long has been, to common law development. The most famous landmark in that common law development was a 2004 UK Court of Appeal case, the City of Moscow case [City of Moscow v. Bankers Trust, [2004] All ER (Comm) 193 (Mar. 25, 2004)] wherein the principal judgment given by Lord Mance articulated that judicial proceedings related to arbitrations involve two dimensions of public interest:

“Such proceedings are no longer consensual. The possibility of pursuing them exists in the public interest. The courts, when called upon to exercise the supervisory role assigned to them under the Arbitration Act 1996, are acting as a branch of the state, not as a mere extension of the arbitral process. Nevertheless, they are acting in the public interest to facilitate the fairness and well-being of a consensual method of dispute resolution, and both the Rules Committee and the courts can still take into account the parties’ expectations and regarding privacy and confidentiality when agreeing to arbitrate.”

Recent commentary on UK practice stemming from City of Moscow describes the state of play this way: “[T]he starting point for arbitration claims under [UK Civil Procedures Rules], except where the court is asked to determine points of law, is that they are generally heard in private. However, this is only the starting point and the public interest must be taken into consideration in each case.” (This was observed by authors affiliated with Herbert Smith Freehills in a 2022 blog post on the Thomson Reuters Arbitration Blog dated February 4, 2022, “Privacy and Confidentiality of arbitration – related court proceedings: a culture clash”, http://arbitrationblog.practicallaw.com (last visited June 22, 2025)

The Position in Canada

In Canada, many provincial statutes grant the courts discretion to treat as confidential any document filed in a civil proceeding, and therefore to be sealed and omitted from the public record. However it is “well established that the ‘open courts principle’ is protected by the constitutional guarantee of freedom of expression and is essential to the proper functioning of [Canadian] democracy.” [Taseko Mines Ltd. v. Franco-Nevada  Corp., 2023 ONSC 2055 (Can LII) at para. 120]. Jurisprudence from Canada’s Supreme Court instructs federal and provincial courts to issue confidentiality-based sealing orders only where “(1) public disclosure would pose a serious risk to an important public interest, (2) no reasonably alternative measures would prevent this risk, and (3) the benefits of the order outweigh any negative effects.” [Id.].

The modern jurisprudence in Canada concerning the place of arbitration confidentiality in relation to the open courts principle is traceable to a mid-1990s case in the Ontario Superior Court known as the Pizza Pizza case. [887574 Ontario Inc. v. Pizza Pizza Ltd., 1994 CarswellOnt 1214 (OSC 1994)]. In that case, the parties proceeded through arbitration knowing that — by agreement, and by arbitral and judicial orders —  it would only be confidential until the award was filed in court. After the judicial filing of the Award, the Court found that the agreement to arbitrate did not in and of itself present public policy grounds for a judicial sealing order to extend confidentiality during the course of the judicial proceedings.

The window for arguments to extend arbitral confidentiality to court proceedings related to the arbitration appears to have opened slightly in 2010, in Telesat Canada v. Boeing Satellite Systems International, Inc. [2010 ONSC 22 (Can LII)].  The sealing order made in the Telesat case strikes the chord of arbitral confidentiality as a distinct dimension of public policy.  But in Telesat the arbitration was ongoing; the court’s sealing order was made in the context of an interlocutory appeal from a procedural order concerning the admissibility of certain evidence and an alleged disqualifying bias of the Tribunal Chair. In this context, the Court stated: “In my opinion a properly limited confidentiality order would promote the use of private commercial arbitration and would thereby promote the modern approach to the autonomy of the arbitral process. It would run contrary to the public interest in favour of encouraging private dispute resolution if a party seeking procedural review under the Arbitration Act, for issues such as alleged bias or unfair treatment, could defeat the confidentiality of an on-going arbitration and thereby undo one of the critical advantages of the arbitration process.” [Id. at para. 27].

Readers in all jurisdictions will want to keep Telesat in mind when judicial proceedings other than award enforcement and annulment occur. The open courts principle has a different weight when a non-dispositive judicial adjudication is sought – and in the arbitral context this could include a wide array of proceedings including motions to compel or enjoin arbitration, to enforce arbitral subpoenas or provide other judicial support for obtaining non-party evidence, to disqualify a Tribunal or an arbitrator. Courts may be inclined to share the Telesat court’s view that where an ongoing arbitration is confidential, that confidentiality should not be disturbed where the court is acting only in an ancillary role.

In Canada there was a chance in 2017 for arbitral confidentiality as a public policy value to be extended to a final award enforcement case, in the Donato case [2249492 Ontario Inc. v. Donato, 2017 ONSC 4975 (Cal LII)] but the Court, while sounding the right notes about arbitration and public policy, was unwilling to enter a blanket confidentiality order (and there was no proposal from the sealing order applicant for a more selective restriction on access to the record). Thus the Court stated (in excerpts I condense for concision): “I accept that there is a legitimate public policy interest in encouraging private dispute resolution through arbitrations by protecting the autonomy of the arbitral process…. [However][i]f the confidentiality order sought … were to be granted simply on the ground that the court proceedings involve a private and confidential arbitration, and that the public interest favours such orders to promote arbitrations and protect the expectations of privately and confidentiality of the parties to the arbitration, the consequence would be …[the] widespread granting of sealing orders [that] could tend to diminish public confidence in the administration of justice.” [Id. at paras. 25 and 27, internal quotation marks omitted].

If Donato is a good indication, there may be considerable judicial sentiment in Canada to carry forward the confidentiality of arbitration into the judicial enforcement/vacatur process, but that indiscriminate record-sealing is a bridge too far in a country with such a well-established open courts tradition that is perceived as a fundamental attribute of a democratic legal order.

But suppose the enforcement and set aside case concerned only a single issue: alleged arbitral bias as indicated by certain instances of conduct during the proceedings by an arbitrator, and that the sealing order application contended that the judicial record was encumbered by reams of exhibits and briefs from the arbitral proceedings that had no bearing on the outcome of the enforcement case? Would a judge be less inclined in such a case to worry that granting a sealing order upon portions of the record not material to the court’s decision would nevertheless “diminish public confidence in the administration of justice”? Perhaps.

But in a recent award enforcement case in the Alberta Court of King’s Bench [Inter Pipeline Ltd. v. Teine Energy Ltd., 2024 ABKB 740 (Can LII), Dec. 5, 2024], the Court had no sympathy for the argument, as framed by the sealing order applicant, that the confidential nature of arbitration is a “public interest” factor, to which the open courts principle might yield some terrain. Unfortunately the “public interest” argument of the applicant focused on arbitration’s contribution to conservation of public judicial resources, and the court found that argument unpersuasive. On this basis the case may well be an outlier, and the Telesat case, with its reference to “protecting the autonomy of the arbitral process” may be better barometer of judicial sentiment across the Great White North.

The Position in the US Second Circuit and its New York District Courts

Recent cases concerning judicial docket sealing in arbitration cases in the US Second Circuit Court of Appeals – probably the most active federal appellate court in the US for commercial arbitrations – share a common pattern. Claimants who had prevailed in final awards in contractually-confidential employment arbitrations filed award enforcement petitions in the District Court for the Southern District of New York (mainly the Manhattan portion of New York City) and sought to have their awards and related submissions to the Court maintained on the Court’s Internet-accessible public docket even after the awards had been  promptly satisfied by the losing parties. The evident objective was for the Claimants’ counsel to recruit new claimants to bring similar arbitrations against the same Respondents based on similar grievances (thereby overcoming the class arbitration waivers the employees had signed). Unsealing the award-confirmation documents on the docket, in this situation, was seen by the Second Circuit in each case as a perverse invocation of the open courts principle, because the applicant in each instance no longer had standing to proceed with an award-confirmation action once the award had been satisfied.

It would have been sufficient, in each case, for the Court to have said only that the arbitration documents on the docket ceased to be “judicial documents” that should be public under open courts principles once the award-confirmation actions were made moot by the award debtors’ full compliance. But in each case, the Second Circuit did not stop there, but also referred to the Federal Arbitration Act as the source of a public policy favoring confidential arbitration. Thus, in In re IBM Arbitration Agreement Litigation, 76 F.4^th 74, 81 (2d Cir. 2023), the Court based its decision in part on “the FAA’s strong policy protecting the confidentiality of arbitral proceedings.”  In Stafford v. IBM, 78 F.4^th 62, 71 (2d Cir. 2023), the Court stated that “[c]onfidentiality is a paradigmatic aspect of arbitration,” and cited older cases in which the court had “affirmed decisions to keep judicial documents subject to confidentiality provisions in arbitration or settlement agreements under seal.”    The Court in Stafford referred to “the FAA’s strong policy in favor of confidentiality” and observed that “courts must rigorously enforce arbitration agreements according to their terms.” Id. at 69. And in Billie v. Coverall North America, Inc., 2024 WL 4380618 (2d Cir. Oct. 3, 2024), the Court quoted the Stafford decision’s reference to “confidentiality [a]s a paradigmatic aspect of arbitration.”

Prospects for Evolution

Do these Second Circuit cases place us on the cusp of a new era of confidential treatment of arbitration-related matters in US district courts, or has the Court only provided an opportunistic dictum about confidentiality in cases that really stand only for the proposition that the district courts’ public dockets should not be exploited to breach arbitral confidentiality when (1) there is no genuine dispute for the courts to address, and therefore (2) there is no basis to invoke the presumption of public access to the “judicial documents” that the courts examine to make decisions?

It is probably too early to tell. In a 2024 case that involved the actively-contested confirmation of a final arbitration award, the district court rejected a proposed sealing order and, while it cited Stafford, it did not give weight to the FAA’s recognition of contractually-agreed arbitral confidentiality as a distinct public policy counterweight to open courts principles. Major League Baseball Players Ass’n v. Arroyo, 2024 WL 3028432 at **2-4 (S.D.N.Y. June 17, 2024). In the most recent reported case , a US district court in New York relied on these Second Circuit cases as controlling precedents requiring that the award confirmation submissions remain under seal. But this was another no-controversy case (and therefore effectively no role for the presumption of public access): “[P]etitioner’s bid to confirm the arbitral award in unopposed…. Thus there is no need to unseal any of the documents in question to enable the public to better understand a judicial opinion resolving a contested issue arising from an arbitration.”  Chapey v. Khan, 2025 WL 1078300 at *2 (S.D.N.Y. Apr. 9, 2025) (emphasis supplied).

There may be an opportunity here for the community of arbitrators and arbitration counsel to influence the direction of the courts’ practices. As a first step, confidentiality orders agreed by counsel and approved by the Tribunals could more consistently – as they often do – obligate any party making any application for judicial relief, including confirmation or vacatur of any award, to seek judicial approval for filing under seal, to file under seal initially where such filing is permitted by the district court’s rules of practice (or where this is not permitted, to commence the proceedings by making the motion for leave to file under seal), and to affirmatively support the exercise of the court’s discretion to respect arbitral confidentiality by keeping the record sealed. A confidentiality order having such specificity may tend to inhibit a common arbitration guerrilla tactic – the interlocutory filing of a lawsuit on a public docket (e.g. to enjoin the arbitration, or to assert a claim by or against a non-signatory that is allegedly non-arbitrable, or – as was true in the Chapey v. Khan case – nominal compliance with a confidentiality order obligation to file under seal, but with accompanying submissions that are, as the district court observed in agreement with Respondent’s assessment “in all but name a request to unseal”).  This obligation may be tempered by an exception that permits a party to advocate before the Court for unsealed filings where public exposure may be necessary to remedy previous breaches of the confidentiality of the arbitration by or on behalf of an adverse party that may have resulted in public dissemination of disinformation, where the party observing the obligation of confidentiality may have no other effective recourse to correct public disinformation.

Further, there could be an opportunity for district courts to develop – with support from counsel advocating a broader judicial berth for arbitral confidentiality – a more nuanced approach to the balancing of open court principles and arbitral confidentiality.

The argument(s) might go something like this:

1. Confidentiality as a “paradigm” attribute of arbitration, protected by the FAA at least where it is expressly adopted by agreement of the Parties, loses much of its value in attracting parties to arbitration if confidentiality must be sacrificed as a condition of seeking judicial relief related to the arbitration. The more judicial relief that is required, under current law and practice, the more the parties’ agreement to arbitrate privately and confidentially is denied enforcement by the courts. This judicial practice, and the principles underlying it, are effectively a federal common law limitation on the promise of FAA Section 2 and its jurisprudence that agreements to arbitrate will be enforced according to their terms (where those terms include the confidentiality of the arbitration).
2. Most commercial arbitrations do not implicate matters of broad “public interest.” They may be interesting to some narrow segment of the public, but not for reasons that are recognized within the constitutional (First Amendment) rationale for public access to judicial documents. Under existing law, only the First Amendment rationale should create a nearly unrebuttable presumption of public access to judicial proceedings. The other rationale, the common law rationale, that public access is valued to hold judges accountable for the integrity of their work and their adherence to the rule of law, should be acknowledged to be a relatively weaker presumption, one that is more amenable, as compared to the First Amendment imperative, to exceptions based on other public policy values like arbitral confidentiality.
3. As was suggested in the Telesat case in Ontario discussed above, the common law rationale for public access (monitoring judicial integrity and adherence to the rule of law) is more compelling when a court is making a final disposition, to confirm or vacate an award, and is less compelling when the court is performing a facilitative function such as enforcing an arbitral subpoena or addressing a motion affecting the scope of a sitting Tribunal’s jurisdiction over issues or persons. And the courts should particularly strive to protect the agreed-upon confidentiality of the arbitration while it is in progress, as the day when any public exposure of the case in a confirmation/vacatur context might never arrive if the case is resolved before a final award or if there is voluntary compliance with the final award. The development of case law in this area would also tend to inhibit the tactical resort to collateral judicial proceedings by a party seeking to exert settlement pressure on its adversary by public exposure through public court dockets.
4. The common law rationale for public access to judicial documents does not necessarily require instantaneous public access at the time such documents are uploaded to an electronic court docket. A confidentiality agreement of the Parties, or a procedural order of the Tribunal establishing confidentiality, if applicable prima facie to documents being filed on a court docket that is accessible to the public absent a sealing order, should be a sufficient basis for a US court asked to grant relief under the FAA to order the submissions the remain under seal at least for a period sufficient to enable the court to determine which of the documents are judicial documents because they are required for the court’s performance of its adjudicatory function. The time of such a determination often will be, but will not necessarily be, the time of an adjudication – for example, after entry of a judgment vacating, or confirming or denying confirmation of, an arbitral award. That is the time – unless there is a First Amendment interest of the public in following the proceedings as they unfold – when the integrity of the Court’s decision-making is most effectively examined, and such deferred publication would enable courts to strike a more refined balance between open courts principles and the FAA’s protection of agreed arbitral confidentiality.
5. One salutary aspect of this approach is that a party will be discouraged from deploying excessive and unnecessary publication of arbitral documents, that do not meaningfully bear on the adjudication, as a cudgel to induce compliance with the award or acceptance of a settlement. Should either objective be achieved, there will be no adjudication, and the common law rationale for public access to arbitral documents as judicial documents will evaporate, just as it did in Stafford. The common law rationale for publication should prevail over the confidentiality that the FAA protects (either because it results from the direct agreement of the parties results indirectly from a procedural order made in the agreed arbitral process) when there has been (or at least rather clear will be, as when the matter is fully submitted) an adjudication whose legitimacy should be exposed to public examination — not when such an adjudication is merely a possibility.

I had the privilege to be a panelist at California International Arbitration Week in Los Angeles on March 11, 2025, joining a panel of distinguished colleagues in a program on award drafting presented by the International Committee of the College of Commercial Arbitrators. Below is a slightly edited and expanded version of my remarks at that event. For quite some time I have been unable to find the time to post on this site as frequently as I would like, and award drafting has been a major contributor to the drought.  I hope you will enjoy these remarks.

A reasoned award may have many audiences. So the drafter of the Award is well advised to identify those audiences and chart their objectives and agendas before she begins to write. I speak here of the drafter of the analysis sections of the Award, who may or may not also be the drafter of preliminary summaries of the proceedings and the contentions of the Parties, these being portions of the Award, if the setting calls for such preliminary summaries, the drafting of which might be delegated to a Tribunal Law Clerk acting in such a capacity with the consent of the Parties.

The first audience for the draft is of course the non-drafting members of a three-member tribunal. In an ideal world (not always the case in practice) the tribunal will have deliberated to a consensus point of view or at least a majority position on each claim for relief – as to liability, and remedy in general if not also specifically the sum of damages in a damages case. The tribunal will have discussed the need for and timing of submissions on costs, the adequacy of the parties’ submissions on all issues but particularly on issues that often are neglected by the parties such as interest (pre-award, post-award, post-judgment, at what rate(s), and with what compounding if any). Deliberations may produce ideas for remedies, especially “equitable remedies” in common law parlance, that are not fully aligned with the relief articulated in the Claimant’s submissions. The deliberation is the time when such remedies, if they appeal to the tribunal, should be formulated in sufficient detail that the tribunal might reach a decision about inviting the Parties to submit further comments on the tribunal-proposed solution. Ideally this will be at a time before the clock begins to run, under the applicable rules, for delivery of the Award. And this will be a time when the first audience, the other members of the tribunal, may have more flexibility than they might have later on to entertain remedial solutions that are not strictly within what the Parties have presented.

It may be that one or another of the non-drafting arbitrators is not quite convinced of the correct position and/or the correct reasoning on one or more issues. It may be, unfortunately, that one arbitrator is non-committal due to inadequate preparation. This ought not to happen but it can do so; and for this arbitrator the drafter’s draft may need to persuade and may need to be more heavily annotated to key portions of the record than might otherwise be felt necessary. It also occurs that the drafting arbitrator hails from a different country and a different legal culture than the non-drafters – resulting in different a priori expectations about the structuring of the award even if there is a general consensus about the outcome. This is the type of issue that the astute tribunal chair will begin to tackle early on – whether by Zoom or over lunches and dinners during hearings. Here is a good point to mention the possible utility to the drafter of inviting written case analysis outlines from the non-drafters. The time invested may enable the drafter to better appreciate the views of her colleagues, to assimilate those views into the draft, and to identify in a timely way any issues that might ultimately be a basis for a concurring or dissenting opinion. The desirability of identifying such issues at the outset of the drafting process is obvious.

Let us move along now to a few words on the audience that consists of institutions that scrutinize awards before issuance, namely, “the Boss is always right”; the Parties selected this “Boss”; and the resulting regimentation of form – Parties, Tribunal, Proceedings, Contentions – is an albatross hung about all of our necks.

As to the next audience – the Parties – in the form of a question: Is it true that we mainly write for them, and especially for the loser who, if satisfied that all of its arguments were carefully and eloquently rather than peremptorily dismissed, will be inclined to lick its wounds, comply with the award, and move on? The answer must be “sometimes.” Because it is only sometimes, and perhaps increasingly rarely, that high-stakes business and investment disputes proceed with the same equanimity between the parties as did the negotiation of the contract or underlying investment treaty.

But if you as a tribunal know from an early stage that this will be a scorched earth case, bound to be fought on to the annulment or set aside stage and even through additional appeals, is there much you would do differently? Probably not. Essentially the same effort you ought to make to address in a thorough way each of the losing party’s arguments is the baseline level of effort to be exerted to satisfy a court of primary jurisdiction that there are no grounds under its law for annulment. And one says “baseline” level of effort because it is your charge as a tribunal to be sensitive to particular standards for set aside in the primary jurisdiction court, and also to idiosyncratic grounds to refuse recognition that might infect proceedings in other places where your award may have to be brought for recognition and enforcement. By “idiosyncratic” I mean to invite Tribunals to be watchful about what happens to awards in countries that, while they may be parties to award enforcement conventions, may be hostile to awards from particular foreign jurisdictions or may be subject to influences from a losing party or its allies or proxies. Maybe this point can be summed up by saying that it will often be inadvisable to give short shrift even to weak arguments because one thinks the award is relatively immune from de novo review.

One more audience deserves mention, and that is the “public,” consisting mainly of practicing attorneys and arbitrators who might read the Award or read about the Award in publications that follow our work. If you know that the Award will be filed on a public court docket, especially one in a prominent arbitration center to which Jus Mundi applies its algorithms, or if you know that any confidentiality restrictions in  your case, whether by law, rule or order, do not prevent the Parties from making public disclosure of the Award, the tribunal should consider the award’s messaging for this broader community. This may simply take into account the fact that awards are increasingly being sought out by counsel for citation as precedent on procedural and substantive issues. But it may also entail messaging in the Award about the conduct of the Parties and their counsel, how any misconduct was treated, and how such treatment might serve as an example for other tribunals and a contribution to arbitration community discussion of evolving best practices.

Finally, two more topics: procedural fairness, and equitable relief.

There can be a temptation to write at length a recital of the procedural history of the case. But unless this is a matter of necessity in the institutional setting of the arbitration (see “the Boss is always right,” above) it is debatable whether it is worthwhile to do this in the award. It may worthwhile to do this in the preparation for writing the award, so that in a case with volumes of submissions an obscure but significant matter is not overlooked in the award. But this can be a step in preparing to write rather than in writing, unless the writing is enforced as a drafting protocol by the institution.  Where the tribunal should concentrate its energy, in regard to procedural fairness, is on the losing side’s actual procedural grievances — and these will often have been stated expressly, as in a protest against an adverse ruling on a procedural matter. Here the tribunal – while being mindful not to be seen as overly defensive by a reviewing court – may want to speak clearly and directly to the reviewing court especially if the procedural order in question did not fully articulate the tribunal’s reasons.

As to equitable relief, leave no detail unattended. Courts are not generally in the business of reading arbitral tea leaves or carrying out the spirit of an arbitral injunction by putting flesh on a skeleton. Your injunctions and orders for specific performance should be written as clear judicial mandates, offering clear standards for compliance that will leave neither the Court nor the obligor of the injunction with any arguable uncertainty about whether there has been compliance. “Enforcement granted” and “vacatur denied” should be sufficient for your equitable relief award to become a judgment for equitable relief that is readily enforced according to the powers of the enforcing court.

MY “PET PEEVE”: Unwarranted rigidity of Award format. Beyond what format contentions are imposed upon us, Award-writing should be creative not formulaic.

Today, in a first for Arbitration Commentaries since its creation in 2009, this Post is devoted to dispute resolution between the people of the United States and the Executive Branch of their federal government.

May 1, 2025 is Law Day in America, a national celebration of the Rule of Law, a day that has been dedicated to that cause since the observance was first proclaimed by President Eisenhower in 1958.

Lawyers and non-lawyers will gather in support of the Rule of Law on courthouse plazas and in town squares across the United States. More information is provided through the links below.

https://lawdayofaction.org/

https://www.americanbar.org/groups/public_education/law-day/

https://www.nycbar.org/blogs/rally-for-the-rule-of-law-thursday-may-1-at-100-p-m-in-foley-square/

Here I make a special plea to the arbitration community: not only to attend a Law Day event if you will be near to one, but to encourage your colleagues who are active members of large law firms to enable their partners, associates and staff to join the ranks of those who will attend. The turnout for these events is essential to their message.

Republished below is a message to the New York legal community about Law Day, issued on April 22 by the Executive Director of the Association of the Bar of the City of New York.

L

Dear Readers:

Apologies to those of you who enjoy these posts, for a relatively long hiatus. It has been a busy time these past several months. Today’s post is lengthy, warranting its organization into numbered paragraphs.

1. A 2-1 divided panel decision of the US Court of Appeals for the District of Columbia Circuit on August 9, 2024, in an Investor-State award enforcement case implicating the New York Convention and the “arbitration exception” of the Foreign Sovereign Immunities Act (FSIA), deserves serious attention because of what did not happen. Two judges of the Court rejected the dissenting judge’s contention that the New York Convention does not govern investment arbitration awards against a State when the State’s liability-creating actions under a bilateral investment treaty (BIT) were taken “in a sovereign capacity.” The district court’s enforcement of a $55 million award in favor of a Chinese investor against Nigeria was affirmed, and the applicability of the New York Convention to arbitrations under BITs (but outside of the ICSID Convention framework) between private investors and States that host the investments, remained as it has long been understood. Zhongshan Fucheng Industrial Investment Co. v. Federal Republic of Nigeria, 2024 WL 3733341 (D.C. Cir. Aug. 9, 2024).
2. A political undercurrent to this Commentary is inevitable. First, the dissenting judge joined the DC Circuit in December 2017 directly from service as Deputy White House Counsel to the then-President of the United States, and came to the Court with a corresponding political profile including a publicized affiliation with the Federalist Society (as well as sterling professional credentials). Second, the case involves, directly, an award in favor of a Chinese investor under a China-Nigeria BIT, and, nearly as directly, the relevance of a distinction for purposes of FSIA immunity from suit between the sovereign acts of a sovereign and the private acts of a sovereign. Third, in the background — but how far back may be debated — is the issue of the aforementions ex-President’s official immunity from suit, which was not finally decided by the US Supreme Court in July 2024; it remains for the US District Judge to sort misconduct alleged in the indictments into official (“sovereign”) and non-official (“private”) categories, and for that refined version of presidential immunity to be reviewed in the DC Circuit (absent a Justice Department decision to terminate the prosecution, or a presidential pardon). The reasoning of the dissent in the Zhongshan case – in support of an apparently unprecedented interpretation of the New York Convention – and how the panel majority answered it, invite us to consider how ardent political conservatism in the federal judiciary may be transmitted through legal reasoning to potentially reshape international arbitration law – perhaps in service of laying a jurisprudential foundation for envisioned legal targets of a conservative political agenda.
3.  The underlying facts of the case, briefly, are these. A federated state of Nigeria called Ogun set up a free trade zone in a joint venture with one Chinese investor, and another Chinese investor set up a business there, also under contract with Ogun, investing millions to develop an industrial park with community facilities. Ogun terminated this investor’s contract unilaterally, and Nigerian federal police reinforced the ouster of the Chinese investor by arresting and abusing at least one of its executives. So there was no dispute that, for purposes of the New York Convention, the Investor had a commercial relationship with Ogun state. Nigeria did contend both that Nigeria had no “legal relationship” (in a New York Convention sense) with the Investor, and that even if there was such a relationship it was not “commercial” because the Investor contracted only with Ogun state. (Nigeria when it ratified the Convention in 1959 had adopted the reservation that it would only apply the Convention to commercial disputes). The DC Circuit rejected both arguments, and on these questions the dissent did not quarrel. But there remained one further element necessary to establish that the Convention governed the award: that Nigeria must be a “legal person” under Convention Art. I(1) (which states that the Convention applies to awards “arising out of differences between persons, whether physical or legal”).  Nigeria argued that the alleged violation of its BIT obligation of fair and equitable treatment (among other obligations) was not the action of a “legal person” under the Convention because Nigeria acted – including in the abusive federal police arrest and mistreatment of the Investor’s executive — in a sovereign capacity. On this issue the dissent sided with Nigeria, the majority with the Investor.
4. The dissent begins its “legal person” analysis with a “textualist” exploration into the legal meaning of “person” beginning in the 1950s – the gestation period of the Convention, starting with the ICC’s draft in 1953. The exercise – focused on American legal and general dictionaries, and domestic statutes and case law – seems strikingly misdirected in regard to a multilateral instrument with a multinational drafting history.  Answering the majority’s criticism on this very point, the dissent states that “ordinary English usage is particularly relevant because the Convention was drafted in English and finalized in New York City.” (In precise terms, the U.N. headquarters complex was from the outset an international territory, pursuant to a treaty with the United States. And while the travaux préparatoires of the Convention had English as their official language, the drafting committee members were from Australia, the UK, Belgium, Ecuador, India, Sweden and the USSR). This is unconvincing textualism is seemingly agenda-driven. All the more troubling is that Nigeria conceded its “legal person” status under the Convention for its actions in a private, not sovereign, capacity. The textual exercise did not, and could not, yield held evidence to support a unqualified capacity-of-action distinction.
5. A further problem with this textual approach, as the majority states, is stare decisis. In DC Circuit cases such as Tatneft v. Ukraine, and Olin v. Libya, and Stileks v Moldova, and Chevron v. Ecuador, and even in the U.S. Supreme Court in BG Group v. Argentina, it has been accepted that an Award involving a Host State’s breach of international law obligations toward an investor under a BIT falls under the Convention and forms a basis for subject matter jurisdiction under the FSIA’s arbitration exception. In Stileks, for example, the Respondent Republic of Moldova had lost an Energy Charter Treaty arbitration on the basis of acts that were unambiguously sovereign – the Claimant had failed to obtain relief in Moldovan courts in “decade-long proceedings [that] were unsuccessful, due in significant part to the Moldovan government’s actions.” But Moldova among its many arguments against FSIA jurisdiction under the arbitration exception did not contend that it was not a “legal person” under the Convention, and neither the district court nor the DC Circuit had raised this potential barrier to subject matter jurisdiction sua sponte. The dissent in Zhongshan makes a valiant effort to rebut the stare decisis point. But the dissent’s argument devolves, in essence, to a position that nothing less than an express holding on an expressly litigated issue qualifies as settled jurisprudence. The discussion of Tatneft is illustrative. The dissenter correctly observes that the DC Circuit in Tatneft found FSIA non-immunity of Ukraine based on the waiver exception, not the arbitration exception – a waiver based on Ukraine having become a Contracting State of the New York Convention. But if Ukraine was not a “legal person” under the New York Convention, in regard to its arbitration with Tatneft, its signature on the New York Convention could scarcely operate as a waiver of sovereign immunity for Tatneft’s US award- enforcement case. Not so fast, says the dissent (in substance), because Ukraine did not advance a Convention non-personhood argument, and the Court opted not to raise it sua sponte. This is a highly technical limitation on stare decisis, in regard to a potential defect in FSIA subject matter jurisdiction in the “home court” for FSIA case law. Although it is not stated directly by the majority, the underpinning for its established jurisprudence position seems to be that when the DC CIrcuit repeatedly declines to raise sua sponte a potential defect in FSIA subject matter jurisdiction, that pattern of inaction stands as solid evidence that the argument animating the potential defect has no traction.
6. The panel majority furnishes its answer to the “legal person” question in roughly five dimensions (text, precedent, drafting history, treaty practice, U.S. Executive Branch construction), and the dissent counters on each. That makes this sprawling tome of a decision not comprehensively treatable in a medium like this Blog. Having treated text and precedent above,  I now take drafting history as the last dimension on which to take the measure of the dissent’s mission. Comparison of the majority and dissent in the treatment of drafting history is a useful way to measure objectivity: drafting history rarely yields a definite and direct answer, so the jurist’s use of such evidence can be revealing of an underlying agenda.
7. In simplified terms, the majority and dissent were in a debate over portions of the travaux that declared that the Convention “does not deal with arbitration between States.” That was not conclusive however, because it is necessary to understand why the Convention does not expressly state whether it covers, or does not cover, State-to-State arbitrations.  If the reason is that States are categorically not “legal persons” under the Convention, then an Investor v State arbitration could be no more within the Convention than a State v. State case. Even the dissent is not prepared to go this far. But if the drafting group said the Convention “does not deal with” State v State mainly because the Convention is concerned with awards arising from commercial disputes, then the character of State’s actions as “sovereign” or “private” – the distinction at the core of the dissent’s “not a person” position – does not answer the question of whether the State’s acts impacted a commercial relationship.
8. Underlying this debate over the original Convention meaning of “legal person,” of course, is the fact that BITs as we know them today existed nearly not at all when the Convention was working its way through the United Nations in the 1950s. The prevailing norm for investment encouragement and protection was the “Friendship, Commerce & Navigation” (FCN) treaty – a centerpiece of U.S. post-war treaty-making from the late 1940s to the 1960s — which were purely public law instruments because they created no provisions for direct enforcement of duties owed — for the benefit of citizens of the States — between States under International law. (The 1954 FCN between the U.S. and Israel, for example, articulated many of the international law obligations now commonly adjudicated in Investor-State arbitration, but provided for dispute resolution before the International Court of Justice, i.e., State v. State). Before reaching its treatment of the travaux, the majority situates the China-Nigeria BIT (and BITs in the precedents cited) textually in the private law camp by virtue of (i) the declared objective to encourage foreign investment by private investors,  (ii) the BIT’s separate dispute resolution frameworks for State-State and Investor-State arbitration, and (iii) the standing offer of the State to arbitrate with Investor over alleged violations of the investment protection obligations undertaken in the BIT. The ensuing dialogue between the majority and the dissent over the meaning to be derived from the sidelining of State v State arbitration in the Convention’s drafting history really concerns whether (and if so when) the Host State as a violator of privately- arbitrable BIT obligations avoids the grasp of the New York Convention because the privity of treaty contract in the BIT is, as it was in FCNs, State to State.
9. Confronting the same relatively indefinite indications in the travaux, the majority and the dissent diverge initially, and perhaps most importantly, on the relationship of the drafting history to the text – “legal person” — which is shaped in turn by their divergent views of what the text implies on a standalone examination. For the majority, the starting point is that there is no textual indication that “legal person” requires a case-by-case inquiry in its application to State actors, and this, combined with Nigeria’s admission (and other contextual and historical evidence) that States are Convention “legal persons” at least sometimes, meant that drafting history would have to have clarity to overcome a presumption that no such distinctions were intended. Quoting the US Supreme Court: “[C]herry-picked generalizations from the negotiation and drafting history … cannot be used to create a rule that finds no support in the treaty’s text.” The dissent starts from a different premise: the “text and context strongly suggest … that the Convention does not extend to disputes arising from sovereign acts governed by public law.” From this starting point, the dissent seeks from the travaux not clarity but only corroboration. Indeed, the dissent’s point of departure is well-captured in the phrase deployed to sum up the Investor’s argument: “hid[ing] elephants in mouseholes.”  That is to say, the dissent starts from the position that “legal person” is a treaty “mousehole” too cramped to accommodate the “elephant” of Investor-State arbitration over sovereign acts affecting BIT obligations that the Investor enforces through arbitration as an intended beneficiary and arbitration offer recipient.
10. The main (but not only) piece of drafting history debated between the dissent and the majority was a section of a Committee report concerning a change in the name of the draft Convention. The drafters said they changed “International Arbitral Awards” to “Foreign Arbitral Awards” because the former connotes State-to-State arbitration, which the Convention “does not deal with,” whereas the Convention does concern awards made in the territory of a country other than the one where recognition is sought. For the dissent, this was proof positive that States are not Convention legal persons, because personhood could not conceivably depend on who is the adversary: effectively “once a non-person, always a non-person.” But that seems an argument that proves too much, especially since Nigeria and the dissent both accepted that Nigeria was a Convention Art. I(1) legal person at least in some circumstances. The majority on the other hand viewed this passage as “indeterminate” because the language could be seen either as an express exclusion of State v. State arbitration or only as an explanation for aligning the Convention’s title with its main focus. One might go further, and worry that the dissent’s take on this nugget of drafting history is a troubling example of confirmation bias in treaty interpretation.
11. It is telling – as a measure of agenda-driven legal reasoning – that the dissent holds tenaciously to the view that this Chinese investor’s claims against Nigeria were “public law” claims, and therefore just as excluded from Convention coverage as State v. State claims arguably were. But in doing so the dissent slides past, without comment, the majority’s fundamental distinction: the China-Nigeria BIT in its Art. 9 concerning Investor-State arbitration, called upon any arbitral tribunal to “adjudicate in accordance with the law of the Contracting Party to the dispute… as well as the generally recognized principles of international law.”  I note this not as the predominant element in the majority’s reasoning – it is one of many – but only because it is the one that most poignantly indicates that the dissent was unmoved even at a point where its “public law” reasoning had essentially run out of runway. Much if not all of the travaux evidence of Convention meaning, invoked by the dissent on the “legal person” issue, would appear to support the majority position that the Convention covers the Chinese investor’s BIT arbitration award against Nigeria, and the dissent appears to manage this contradiction by being unyielding in the position that the BIT claims were “public law” claims.
12. There are reasons here to be worried about the fragility of arbitration jurisprudence and the risk of its subservience in the hands of (sometimes) agenda-driven jurists to considerations that may have little to do with arbitration or the New York Convention. That the dissent took such pains to extract from available sources a distinction between sovereign acts and the private acts of a sovereign, on a question of immunity from suit, in service of excusing Nigeria from enforcement of an award in favor of a Chinese investor under a BIT in which it consented to arbitrate, and under the New York Convention of which it was one of the original ratifiers in 1959, suggests that a different agenda, more political and more domestic, may have been in play in the writing of the dissent.

Alter ego entities are a pervasive presence in complex international commercial arbitrations

If those entities are named as Respondents, and they are non-signatories of the arbitration agreement, two procedural courses are possible. The first, and perhaps the more common, is that the alter egos will raise an objection to arbitral jurisdiction, and participate in the arbitration subject to that objection. This participation may or may not entail an express submission of the alter ego issue to the arbitrators – and whether there has been such a submission of course affects the scope of judicial review of the Tribunal’s decision on the alleged alter ego’s jurisdiction objection. Much less often (so it seems based on experience and the dearth of reported decisions), the alleged alter ego will seek a judicial determination at the start of the arbitration to declare that they are not bound to participate, or the Claimant will move in a competent court to compel the reluctant alter ego to arbitrate.

But in many cases the Claimant may elect to leave the alleged alter egos off the roster of named Respondents, reserving the question of their responsibility to satisfy a favorable award for later determination in the courts. In that setting, US arbitration law has for 60 years remained under the influence (and here in New York, the control) of a US Second Circuit Court of Appeals decision, the Orion Shipping case (Orion Shipping & Trading Co. v. Eastern States Petroleum Corp., 312 F.2d 299 (2d Cir.), cert. denied, 373 U.S. 949 (1963)).

In Orion Shipping, the Court held that an arbitration award – a US-seated international award that was treated under FAA Chapter 1 because this was seven years before the US incorporated the New York Convention into domestic law through FAA Chapter 2 — could not be confirmed under the FAA, under an alter ego theory, against the parent company of one of Respondents named in the arbitration and in the award, and observed that an award confirmation action under FAA Chapter 1 was not the proper time to attempt to pierce the corporate veil, due to the potentially complex fact-finding this inquiry would involve.

While Orion Shipping has survived as the law in the Second Circuit, not even one other federal court of appeals has ruled on the same issue, and Orion Shipping has had a very mixed reception in federal district courts outside the Second Circuit where it is not a controlling precedent. Two dimensions of Orion Shipping raise questions about the wisdom of its holding: first, it was based on pragmatic concerns rather than an authoritative construction of the Federal Arbitration Act, and second, the pragmatic concern of saddling confirmation actions with the complex evidentiary issues that an alter ego adjudication might involve arguably call for a discretionary rule not per se rule requiring two consecutive post-award lawsuits.

Orion Shipping is back in arbitration world “headlines” again, courtesy of a recent award enforcement case in the Southern District of New York, Eletson Holdings, Inc. v. Levona Holdings Ltd., 2024 WL 1702397 (S.D.N.Y. Apr. 19, 2024). In the Eletson arbitration, Claimant did not name the alter egos as Respondents but only as the collaborating miscreants of the named Respondent.  Claimant did however seek to arbitrate the alter ego issues; this was done; and the final award made comprehensive factual and legal determinations of the existence of the alter ego relationships. The Eletson confirmation/vacatur case was complex and multi-faceted, and in this Post you will be mercifully spared discussion of everything other than the alter ego issue!

When the time came to seek confirmation of the award, Claimant’s counsel did not seek confirmation against the alter egos.  At that point (if not sooner), we may surmise that Claimant had come into contact with the Orion Shipping case law. So instead of asking the Court to confirm the award against the alter egos, Claimant asked the Court to confirm the award’s alter ego determinations – an understandable play for some potential issue preclusion against the alter egos, in an eventual separate litigation to enforce against the award confirmation judgment against them. But the Court  (correctly) rejected this out of hand – saying, in substance, “the FAA puts us in the business of confirming awards, not findings of fact in awards uncoupled from the party bound by the award.” And to quote rather than paraphrase the Court: “Eletson may yet have the opportunity to seek to hold the alter egos responsible for Levona’s obligations under the award. But not having sought to make the alter egos a party to the arbitration, they must do so through a separate action for veil piercing. They may not do so through findings and an award as to which the alter egos had no opportunity to be heard.”

Before I unleash my diatribe on why “a separate action for veil piercing” should be consigned to the dustbin of outdated arbitration law, let’s pause for a moment to ask what the arbitrator in Eletson might have done to make this situation better. This is a “what makes a good arbitrator?” question.

We might all (or almost) agree that it is not for the Tribunal to advise a Claimant to make a judicial motion to compel arbitration, or to advise a Claimant to join new parties as Respondents. But when the Claimant asks for an award against non-parties on an alter ego theory, or an award against the named Respondent determining that certain non-parties are its alter egos, and the Respondent counters by contesting veil-piercing on the facts, why should the arbitrator only resolve the disputes as the Parties have framed them? The Parties’ framing of the issue may leave gaps that would encumber effective award enforcement. Should the “good arbitrator” merely take the arguments as presented by the Parties and leave the Parties to worry about award confirmation and enforcement? Or would it be preferable for the “good arbitrator” to ask: “Claimant seeks an award against non-parties B and C on the basis that they are alter egos of Respondent A, or in the alternative at least an award binding Respondent A on this issue. The Parties are invited to address in the Pre-Hearing Memorials (i) the legal basis for the Tribunal’s power to make an award against entities that are neither parties to the arbitration nor signatories of the arbitration agreement, and (ii) if such power were found not to exist, the reasons justifying the Tribunal making alter ego determinations that bind only the named parties?”

A closely-related question: Should “the good arbitrator” know or find out the law bearing on judicial enforcement of awards against alleged alter egos of the named party that the award would bind? If the arbitrator knows about the Orion Shipping line of cases but the Parties – as indicated by their briefs – do not, shall the arbitrator remain silent and only “call balls and strikes” among Parties’ pitches? Suppose the Tribunal adds to its request for briefing “Please give consideration, to the extent relevant, to the Orion Shipping line of cases.”  Is that out-of-bounds proactivity? Or precisely the kind of reservoir of arbitration-specific legal knowledge that the effective Tribunal should bring to bear if the Parties do not do so and it matters?

In the not-to-be-forgotten de Gusa case in the Second Circuit in 2017 (CBF Industria de Gusa S/A v. AMCI Holdings, Inc., 850 F.3d 58 (2d Cir. 2017), the Court somewhat re-shaped the Orion Shipping doctrine by allowing — at least — a narrow exception in the context of New York Convention recognition and enforcement of an award made outside the United States:  such recognition and enforcement may be pursued under the Convention and FAA Chapter Two directly against alleged alter egos of the award debtor where the award debtor itself is a defunct entity not capable of being a Respondent in the recognition and enforcement case. I refer to  “at least … a narrow exception” not because this is what the Second Circuit said, but because alter ego entities seeking to avoid having awards enforced against them under the New York Convention and FAA Chapter Two, and seeking to retain the procedural advantages of playing out a more labored two-litigation process under Orion Shipping, may argue that this is the actual “holding” of de Gusa. And by “holding” I mean to say the narrowest discernible legal principle required to resolve the case. Arguably that narrow principle is that there is no reason to require (i) first, a successful Convention/FAA enforcement case (somewhere) against the award debtor, resulting in a Judgment, and then (ii) an action to enforce the Judgment against the alter egos under applicable state law, where the legal extinction of the award debtor as an entity capable of being sued makes enforcement against the award debtor impossible.

Deciphering the holding of de Gusa – “holding” in the broader sense of what the Court was telling us about the law — is a tall order for a mortal lawyer. I confirmed my mortality in an earlier long-form effort, titled (in short-form) “Deciphering De Gusa,” and published at Volume 29 No. 4 of the American Review of International Arbitration at p. 475 (2018).

But here is my 2024 interpretation: Whether to apply the rule of Orion Shipping to the recognition and enforcement under the Convention of a foreign award — that is to say, whether a US Court sitting as a “secondary jurisdiction” should apply Orion Shipping, is not mandated by the Convention or the Orion Shipping case itself, and therefore is a matter of discretion in the District Court. (On remand in de Gusa, the District Court exercised that discretion to permit Convention recognition and enforcement of the award against the alter egos of the defunct award debtor, even though that award debtor was a party to the enforcement case and the award had not been recognized and enforced anywhere else (316 F.Supp.3d 635 (S.D.N.Y 2018)). By implication, rather than by affirmative statement by the Second Circuit panel, that panel’s decision leaves Orion Shipping as “good” Second Circuit law, binding on the US district courts in the Second Circuit (i) in a domestic arbitration where award confirmation is governed entirely by FAA Chapter 1, and (ii) as the Eletson case indicates, probably also in US-seated international arbitrations.

But there is more.  Per the Second Circuit in de Gusa, the rule in Orion Shipping fits into the enforcement regime of the New York Convention (and in turn FAA Chapter 2) because it is a ” rule[] of procedure of the territory where the award is relied upon.” (Art. III of the Convention).  But the “rule of procedure” when a district court in the Second Circuit sits as a “secondary jurisdiction” to recognize and enforce a foreign award is no longer the rule of Orion Shipping, but instead the newer rule of de Gusa: that Orion Shipping is not a mandatory rule but a rule of discretion. That is to say, the district court may decide to permit, or to disallow, direct enforcement of the award under the Convention against alter egos of the award debtor.  On the Second Circuit’s remand of the de Gusa case to the US District Court for the Southern District of New York, that Court declined to apply Orion Shipping and gave recognition and enforcement to the Award against alter egos of the award debtor (316 F.Supp.3d 635 (S.D.N.Y 2018) and, at a later stage, 650 F.Supp.3d 228 (S.D.N.Y. 2023).  What is mandatory when a foreign award is brought to the US for recognition and enforcement under the Convention, said the Second Circuit, is that refusal of recognition and enforcement may only be based on one of the defenses stated in the New York Convention. Consider just how sensibly this might play out: the alter ego Respondents invoke Convention Art. V(1)(b) and say they were unable to present their case; the Petitioner (award creditor) argues that they are alter egos and their case was therefore effectively presented by the award debtor; and the alter ego issue thus becomes a Convention defense issue and is fully resolved in the enforcement case.

And while the de Gusa Second Circuit panel did not elaborate on this point, that would appear to imply that an alter ego respondent might succeed in resisting enforcement — but only if the implications of its alter ego status can be situated in a New York Convention Article V defense. And indeed that was the framework for further litigation on enforcement of the award in de Gusa, the most recent chapter of which was in January 2023, when the alter egos failed on their motion for summary judgment, seeking determinations without trial that (i) they lacked “capacity” under Convention Article V(1)(a) and that they had been “unable to present their case” to the Arbitral Tribunal, under Convention Article V(1)(b). (650 F.Supp.3d 228 (S.D.N.Y. 2023)).

If one is a judicial tea leaf reader, one might well conclude that the Second Circuit panel that decided de Gusa was prepared to dispose of Orion Shipping as a mandatory rule in all US-seated arbitrations, domestic and international. One might well conclude that the only reason it did not do so was judicial restraint: the Court elected to decide only the case that was before it . And perhaps that explains why, six years later, we still have Orion Shipping as a mandatory rule for US-seated arbitrations, and why that rule was enforced — without discussion of its virtues or vices — by the US district court judge in the Eletson case. Eventually some aggrieved award creditor pursuing alter egos will take the issue to the Second Circuit and — if you believe the indications in my crystal ball — the Second Circuit will convert the Orion Shipping rule into a rule of discretion in all award confirmation cases under FAA Chapters 1 and 2.

If the alter ego defendant, in an enforcement case brought on a US-made Convention award, also must fit its defenses into the framework of Convention Article V, little or nothing remains of the Orion Shipping rule. The Second Circuit did not say this with clarity in de Gusa. But a distinction for US-made Convention awards, where the US district court sits in “primary jurisdiction,” is not meaningful. The Convention’s Article V defenses become the focus of the enforcement case, unless there is a separate “rule of procedure” recognized by Article III of the Convention that makes the alter egos an improper party to the enforcement case until an unless there has been an award enforcement — whether in the same case or elsewhere – against the award debtor. But in de Gusa the Second Circuit stated that such a “Texas Two-Step” looks too much like the “double exequatur” that the New York Convention was adopted to abolish. I see no reason why that principle has less force in regard to a US-made Convention award than a foreign-made Convention award.  Judicial restraint can be problematic when an appellate court with great influence in international arbitration solves a problem for only a portion of the cases wherein the problem arises. The Eletson case appears to be the first post-de Gusa case in a federal district court in the Second Circuit, but the frequency of published decisions is only one measure of the scope of the problem. Those of you who arbitrate regularly as counsel or arbitrators know that alter egos of the contract-signatory respondent are a regular feature of international arbitrations.

What is the prescription for the law in the Second Circuit?  Probably to abrogate Orion Shipping, entirely and conclusively. One of the main reasons alter egos exist is to create legal separation between the potential obligor (whether of an arbitration award or otherwise), and the nominal owner of the obligor’s assets. Orion Shipping sought to promote prompt and efficient confirmation of awards, by shutting out the fact-intensive and potentially time-consuming process of litigating the existence, or not, of an alter ego relationship.  The point of prompt and efficient confirmation is to move the award creditor swiftly to eligibility to use the enforcing state’s methods for execution on judgments. But if the award-debtor has arranged to be judgment-proof, and the main hope for execution is against the alter egos, the “Texas Two-Step” mostly serves to delay the award-creditor’s ability to move on from enforcement to execution. If only the named award debtors may be respondents in the enforcement case, while the alter egos remain on the sidelines pending entry of an award enforcement judgment, the award debtor who is keen on a shell game to move assets from one alter ego entity to another to stay at least one step ahead of execution against assets, gains undue advantages — the systemic advantages of crowded federal court dockets where Convention award enforcement is rarely a top priority, and award enforcement judgments may be challenged on appeal to buy more time, and the additional opportunities to buy time by raising Convention defense issues under Article V that may ultimately lack merit but do require careful briefing and study by the Courts.  From a public policy perspective — viewing satisfaction of enforced awards as an element of public policy — bringing the alter ego shell game under early judicial control in the award-enforcing court makes a great deal of sense.  This solution also takes into account the limited ability of Tribunals to solve the alter ego issue within the arbitral procedure. The Claimants either will or will not seek to join the alter egos as Parties (Thoughtful counsel in many arbitrations will name the alter egos as Respondents and seek to have those issues resolved by the Tribunal. If the alter egos object to jurisdiction, but do not immediately go to court, the issue gets arbitrated, and if the alter egos are unhappy with the Tribunal’s determination that they were indeed alter egos and therefore bound to arbitrate the merits, that displeasure can become part of the confirmation/vacatur process.  The competent court then decides the alter ego issue, whether under a deferential standard because the issue was submitted to arbitration, or under a de novo standard if the issue was arbitrated over the alter ego parties’ objection that it should not have been arbitrated. In either case, the alter ego issue is resolved in the confirmation/vacatur case, not deferred to a later separate lawsuit.)

Let’s look hopefully toward an early opportunity for the Orion Shipping rule to to meet its final demise.

There are many good reasons for the Supreme Court of the United States to grant the petitions for writ of certiorari now before the Court in two cases involving the question of whether international arbitrators’ undisclosed professional relationships justify vacatur on the basis of evident partiality.  The main theme of each of those cert. petitions – that there is a “split” among the federal judicial circuits concerning the relevant test derived from the Court’s 1968 decision in the Commonwealth Coatings case – is sensibly crafted to attract the enthusiasm of the Court. But for those of us who, perhaps more acutely than the Justices of the Supreme Court, have an anxious preoccupation with the subject of arbitrator disclosure, a compelling reason for the Court to take the cases is because the US arbitration community would benefit from authoritative guidance on how the “evident partiality” standard of the Federal Arbitration Act (“FAA”) Section 10(a)(2) applies to the active arbitrator’s multi-layered web of professional and personal relationships in a highly­-networked global community. That type of community did not exist in 1968 – two years before the US acceded to the New York Convention – and its eventual existence was neither considered nor anticipated in the quaint domestic setting of Commonwealth Coatings.

What the Supreme Court actually held in Commonwealth Coatings has been debated now for 55 years in US federal courts and in the arbitration community. That debate has swirled because the Supreme Court has declined to shed light on how the “evident partiality” test for vacatur applies in different contexts. The consequence has been that advocates and courts have on various occasions taken out of context phrases from the opinion of the Court authored by Justice Black (often said to have been only a “plurality opinion” although it was not denominated as such), and the concurring opinion authored by Justice White, and have struggled to extend them to a variety of situations that scarcely resemble Commonwealth Coatings.

Commonwealth Coatings involved a local construction arbitration in Puerto Rico, over sums unpaid to a paint-job subcontractor. The tribunal was composed of two party appointees who were non-neutral by agreement and a presiding arbitrator whom the parties expected to be a neutral. The presiding arbitrator’s “day job”  was as an engineering consultant, and he had provided such services, off-and-on over a five-year period before the arbitration, to the Respondent in the arbitration. This was not disclosed by the presiding arbitrator or by the Respondent, and Claimant only learned of it after losing the case. The Court described this undisclosed business relationship in the following terms: “[T]he [Respondent’s] patronage was repeated and significant, involving fees of about $12,000 over a period of four of five years, and the relationship even went so far as to include the rendering of services on the very projects involved in this lawsuit.”

These facts were essential to the Court’s holding. The Court’s objection to the non-disclosure, in FAA “evident partiality” terms — and here I quote from Justice Black’s “opinion of the Court”  — was that “neither this arbitrator nor the [Respondent] gave to petitioner [Claimant in the arbitration] even an intimation of the close financial relations that had existed between them for a period of years.” Justice Black then entered upon a discussion of a 1927 Supreme Court case in which it had been decided that a criminal defendant was denied the constitutional right to a fair trial because, under the Ohio local criminal court’s rules and practices, the judge derived income from court fees taxed against convicted defendants.  The Opinion of the Court in Commonwealth Coatings  then interpolated this principle into FAA Section 10: “Since in the case of courts this is a constitutional principle, we can see no basis for refusing to find the same concept in the broad statutory language that governs arbitration proceedings and provides that an award can be set aside on the basis of ‘evident partiality’ or the use of ‘undue means’.”

The paragraph containing this quotation concludes with the sentence hosting the catch-phrase that has made Justice Black’s Opinion famous. The catch-phrase is “might create an impression of possible bias.” The full sentence reads: “We can perceive no way in which the effectiveness of the arbitration process will be hampered by the simple requirement that arbitrators disclose to the parties any dealings that might create an impression of possible bias” (emphasis supplied, purposefully). In this 2024 retrospective, taking into account five decades of concern with potential overreach of the phrase “might create an impression of possible bias,” perhaps it is useful to ask, by way of limitation: what did the Supreme Court mean by “dealings”? It seems to be a question worth considering. One can only imagine how many briefs in how many courts over the span of 55 years have argued that Commonwealth Coatings requires all arbitrators in FAA cases, on pain of potential award vacatur, to disclose “any matter”  or “any information” or “any relationship” or “any facts” that “might create an impression of possible bias.”  But it seems entirely possible that Justice Black and his colleagues — including the concurring Justices White and Marshall — used “dealings” more narrowly, in alignment with the facts of the case to refer to the business activities that are regularly engaged in by the arbitrator for profit, and the potential influence of the profit motive on the arbitrator’s objectivity. Such an interpretation seems to harmonize Justice Black’s opinion with Justice White’s concurrence, cutting against a tendency in some of the lower federal court case law to view those opinions as pronouncing different standards.

There is evidence of this in Justice White’s concurrence. Clearly Justice White was focused on  arbitrators’ “business relationship with the parties before them” and “any financial transactions which he has had or is negotiating with either of the parties.” He then described the holding of the Court to be that “where the arbitrator has a substantial interest in a firm which has done more than trivial business with a party, that fact must be disclosed.”  And it is worthwhile to observe that there is no hint in Justice Black’s Opinion that Justice White misstated the holding of the Court.

I see quite a bit of unity in the White and Black opinions in Commonwealth Coatings, and it may well be that the divergence that has been ascribed to those opinions by some lower federal courts has resulted from efforts to apply Commonwealth Coatings to disclosure scenarios at a considerable remove from the one that case presented.

These remarks surely apply to the non-disclosure facts presented by the certiorari petitions in the Andes and Grupo Unido cases. Each involves non-disclosures by arbitrators who, at the times of their appointments, were lawyers in private practice, serving both as arbitration advocates and as arbitrators. Neither case has to do with a business relationship between the arbitrators (or their law firms) and any of the parties. Andes concerns nondisclosure of an arbitrator’s concurrent service on a different tribunal with a party’s counsel. Grupo Unido concerns (inter alia) nondisclosure of a presiding arbitrator’s concurrent service on a second tribunal with one of the co-arbitrators. (Related to this, but not dealing with Grupo Unido itself, is the Post on this Site entitled “On Overlapping Appointments” dated November 2, 2022. It is easily located using the Search by Keyword feature in the right-hand margin).  These are arbitrators in an arbitration world that bears no resemblance to the local construction industry of San Juan, Puerto Rico in the 1960s.  A compelling reason for the Supreme Court to grant certiorari, from the perspective of our community, has much to do with giving guidance to participants in the contemporary world of complex high-value arbitrations, international and domestic, where busy arbitrators constantly encounter other busy arbitrators in contexts, well known to all of you, ranging from other tribunals to workshop faculties to Bar Association task forces.

The cert. petitions in Grupo Unido and Andes cast a spotlight on the unstable relationship between arbitrator disclosure and arbitrator bias.  That relationship is unstable, in the US market, because rules about arbitrator disclosure mainly come from the rules and standards of arbitration-sponsoring institutions (with the overlay of soft law, notably the IBA Conflict of Interest Rules), while rules about arbitrator bias mainly come from jurisprudence under the FAA in cases where a losing party seeks to have an award vacated, or refused confirmation, because an arbitrator was “evident[ly] partial[]” or “corrupt.” Which set of rules should guide an arbitrator in deciding what disclosures to make?  Does the answer vary from case to case? From one federal judicial circuit to another? From one institution to another?

The Grupo Unido and Andes decisions in the federal courts of appeals reflect a view that the FAA is only concerned with undisclosed professional relationships that are prima facie indicative of bias. That Prominent Arbitrator A in Case 1 promotes the candidacy of Prominent Arbitrator B in Case 1 to chair the Tribunal in Case 2 in which Prominent Arbitrator A serves as a party appointee – one of the nondisclosure scenarios in Grupo Unido —  doesn’t meet the prima facie test according to the Eleventh Circuit in Grupo Unido.  To be sure, chair appointments in big cases are lucrative, and in some sense marketable to get more of them. But the concern of a losing party that Prominent Arbitrator A had purchased Arbitrator B’s adoption of the position of the party that appointed Prominent Arbitrator A, or at least purchased a more sympathetic audience for the position of that party, is speculative not reasonable unless other unfavorable and undisclosed relationship facts indicate that Arbitrator B withheld disclosure to conceal the fact that her or his vote and/or sympathy was in some sense for sale.  This seems to be a sensible view, and the problem that justifies the granting of cert. in both cases is that it is not consistently shared across all federal courts actively and regularly concerned with international arbitrations.

Consider, for example, a case that is to be argued in the US Ninth Circuit Court of Appeals in April 2024, called Equicare Health Inc. v. Varian Medical Systems, Inc. (No. 23-15698 in the 9^th Circuit, for those of you with PACER accounts who may wish to track down the briefs).  This is an appeal from a US District Court judgment in the Northern District of California that vacated an ICDR arbitration award on grounds of evident partiality due (mainly) to a wing-arbitrator’s non-disclosure. What did the wing arbitrator fail to disclose – evidently unwittingly?: That years earlier, in a long-since-settled legal malpractice case, he and his law firm as local counsel for an out-of-California law firm, had been represented by a legal team that included (in the final stages before settlement) a lawyer now appearing before the Tribunal as a partner of a different law firm. And (assuming the accuracy of the appellant’s version of the facts) that lawyer had taken only a back-office brief-writing role in the malpractice case; and her presence on the malpractice defense team had been entirely unknown to the arbitrator/former client, such that her appearance in the arbitration triggered no connection that would have caused him to make a disclosure.

Those of you who are intrepid enough to read the District Court’s opinion granting the motion to vacate in the Equicare case (2023 WL 3089093 (N.D. Cal. April 19, 2023)) may share my consternation that the Court appears to hold that FAA Section 10 “evident partiality” is present when an arbitrator, innocently or through inadvertence, fails to discover his or her own transitory and attenuated prior status as a client of a law firm whose legal team on the matter included an attorney now appearing before him. Even more disconcerting,  the District Court supports this conclusion with the observation that the non-disclosure violated the terms of the ICDR’s arbitrator questionnaire that requires that all such relationships be disclosed, and the consequence was to deprive the losing party (the vacatur movant) of the ability, in the initial striking and ranking of the ICDR’s candidate list, to strike from the list the arbitrator that it instead ranked without taking into account the undisclosed facts.

This is troublesome for at least a few reasons. First, a party may strike an arbitrator from an institution-provided candidate list for any reason, and so at the selection stage party autonomy includes the right to speculate about a candidate’s predisposition. A party striking and ranking an institution’s list, when the list is composed after pre-screening candidates by asking them to make conflicts disclosures, is perfectly entitled to prefer candidates whose disclosures do not invite speculative suspicion of bias. But it does not follow that a candidate’s innocent nondisclosure at that stage of information that entails at most a speculative concern about bias, rises to the status of award-vacating evident partiality when the same information surfaces after the case has concluded.  To do so wrongly conflates party autonomy in arbitrator selection with the impression of arbitrator bias that compromises an award. Further, disclosure standards such as the broad disclosure instructions given by the AAA/ICDR in its disclosure questionnaire are not sensibly understood as a guide to the meaning and application of “evident partiality” in FAA Section 10. Those instructions would seem to have a two-fold purpose: (1) to better ensure full disclosure of material information by calling on arbitrators to disclose all information about relationships without making threshold judgments about materiality, and (2) fostering a perception among arbitration users, who make choices among institutions, that the AAA/ICDR’s broad disclosure philosophy provides a certain level of assurance that its Tribunals will observe high ethical standards of independence and impartiality. The FAA’s “evident partiality” standard is applied, however, when the arbitration has ended (or partially ended in a Partial Final Award or an Interim Measures Award), and so it is concerned with the striking of an appropriate balance between overturning conflict-clouded results and defeating the very purpose of arbitration by requiring completed cases to be repeated before new tribunals.

One of the most useful contributions the Supreme Court of the United States could make, by accepting certiorari in the Grupo Unido and Andes cases, would be to deliver guidance clarifying when an undisclosed professional relationship of an arbitrator is insufficient to justify setting aside an award, even though the non-disclosure may well have violated the reasonable disclosure expectations of the losing party derived from institutional rules and practices, state procedural law and soft law like the IBA Conflicts Rules.  A logical consequence of such a ruling from the Supreme Court might well be that arbitral institutions and state arbitration laws would more explicitly adopt disciplinary remedies for disclosure omissions by their arbitrators  — and/or more transparency about the criteria guiding their challenge decisions on nondisclosure issues — so that jeopardy to the arbitrator’s standing and eligibility to serve, rather than jeopardy to the award, would more often govern the disclosure decisions of arbitrators in situations akin to Grupo Unido and Andes.