Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

You are here: Home / Archives for Arbitration / Court Decisions / Arbitration Process Issues

Arbitration Process Issues

EN BANC DECISION HOLDS THAT MCCARRAN-FERGUSON ACT DOES NOT REVERSE-PREEMPT THE CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS

by

The Fifth Circuit has affirmed en banc a panel decision holding that while the McCarran-Ferguson Act reverse-preempted “Acts of Congress,” that term did not encompass international treaties, which controlled in the face of contrary state law. We reported on the panel decision in an October 14, 2008 post. The district court denied a motion to compel arbitration of a contractual dispute among three insurers, finding that a Louisiana statute barring mandatory arbitration provisions in insurance contracts superseded the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. On an interlocutory appeal, the Fifth Circuit panel reversed. Rehearing en banc was granted, vacating the panel opinion. Sitting en banc, the Fifth Circuit concluded that because McCarran-Ferguson does not apply to the Convention or its implementing law (the Convention Act), the district court’s order should be vacated and the case should be remanded for further proceedings. The Court indicated that it “was persuaded that state law does not reverse-preempt federal law in the present case for two related but distinct reasons: (1) Congress did not intend to include a treaty within the scope of an ‘Act of Congress’ when it used those words in the McCarran-Ferguson Act, and (2) in this case, it is when we construe a treaty – specifically, the Convention, rather than the Convention Act – to determine the parties’ respective rights and obligations, that the state law at issue is superseded.” Safety National Casualty Corp. v. Certain Underwriters at Lloyd’s, No. 06-30262 (5th Cir. Nov. 9, 2009).

This post written by Brian Perryman.

COURT RULES AGAINST CLAIM THAT PARTY-APPOINTED ARBITRATOR IN THREE MEMBER PANEL WAS IMPARTIAL

by

Employers Insurance Co. of Wausau brought a petition in Wisconsin Federal Court, in connection with an arbitration proceeding arising from a reinsurance dispute, seeking to have the Court appoint the neutral third arbitrator as the parties’ chosen arbitrators were unable to do so. The respondents cross-petitioned, alleging that (1) enforcement of the arbitration provision was barred by the statute of limitations, estoppel and laches; and (2) the respondents’ party-appointed arbitrator was not impartial and should be disqualified. The Court granted the petition and appointed a neutral third arbitrator, and denied the cross-petition in its entirety, finding that the questions about statutes of limitations and laches should be arbitrated and that there was no showing that the respondents’ selected arbitrator was biased. The cross-petitioners moved for reconsideration of the Order, which motion was denied by Order dated October 23, 2009. The cross-petitioners thereafter filed Notice of Appeal to the Seventh Circuit Court of Appeals. Employers Insurance Company of Wausau v. Certain Underwriters at Lloyds of London, No. 09-cv-201 (W.D. Wis. Sept. 28, 2009).

This post written by John Pitblado.

SPECIAL FOCUS: THIRD CIRCUIT TELENOR DECISION REGARDING THE PRECLUSIVE EFFECT OF A COLLUSIVE FOREIGN COURT JUDGMENT AND THE NECESSITY FOR A TRIAL TO DETERMINE THE ARBITRABILITY OF A DISPUTE

by

On October 26, 2009 we posted a brief item on Telenor Mobile Communications AS v. Altimo Holdings & Investments Limited, 07-4974 (2d Cir. Oct. 8, 2009), in which the Third Circuit held that: (1) the district court did not err in not holding a trial to determine whether a dispute before it was arbitrable based upon a dispute as to whether the person who signed the contract containing an arbitration provision had apparent authority to sign the document on behalf of a corporate party, when the factual record clearly demonstrated that the signer had apparent authority to do so; and (2) the district court did not act in manifest disregard of law by confirming an arbitration award that failed to give preclusive effect to a collusive judgment of a Ukrainian court adjudicating an issue before the arbitration panel. Blogmaster Rollie Goss submits a more detailed SPECIAL FOCUS post on this interesting case.

This post written by Rollie Goss.

SECOND CIRCUIT AFFIRMS CONTEMPT ORDER IN KYISTAR DISPUTE

by

In a companion opinion to the Second Circuit affirming the district court’s grant of a motion to confirm the final arbitral award in a dispute involving Kyivstar G.S.M. (“Kyivstar”) (see our October 26, 2009 post), a Ukrainian mobile telecommunications company, the Second Circuit has affirmed the decision of the district court finding Storm LLC (“Storm”) and its corporate parents (collectively, the “Respondents”) in civil contempt for the failure to comply with the final arbitration award and denying the Respondents’ motion for an order to amend the contempt order to delay sanctions and eliminate the requirement that Storm deposit its shares of Kyivstar with the court to secure compliance with the award.

In this appeal, Storm’s corporate parents disputed the determination that they were alter egos of Storm, which made them jointly liable for contempt, and the conclusion that the award required Storm’s affiliates to divest their interest from a Turkish telecommunications company rather than Astelit, LLC, a Ukrainian telecommunications company, and asked the circuit court to remand the divestiture question to the arbitration panel for clarification. The Second Circuit affirmed the decisions of the district court, stating that the findings of fact supported the conclusion that the corporate parents were alter egos of Storm and concluding that no support existed for a remand of the divestiture question because the award was unambiguous and the district court’s legal analysis was correct. Telenor Mobile Communications AS v. Storm LLC, No. 07-6929 (2d Cir. October 8, 2009).

This post written by Dan Crisp.

COURT OF APPEAL ADDRESSES PRECLUSIVE EFFECT OF COLLUSIVE FOREIGN COURT JUDGMENT AND PROCESS FOR DETERMINING ARBITRABILITY OF DISPUTE

by

It is not unusual for there to be parallel or serial legal proceedings in arbitration disputes, and the preclusive effect of the first matter to go to a final decision has resulted in a number of opinions addressing the application of the doctrines of res judicata and collateral estoppel in arbitration proceedings. In Telnor Mobile Communications AS v. Altimo Holdings & Investments Limited, 07-4974 (2d Cir. Oct. 8, 2009), the Court held that: (1) the district court did not err in not holding a trial to determine whether a dispute before it was arbitrable based upon a dispute as to whether the person who signed the contract containing an arbitration provision had apparent authority to sign the document on behalf of a corporate party, when the factual record clearly demonstrated that the signer had apparent authority to do so; and (2) the district court did not act in manifest disregard of law by confirming an arbitration award that failed to give preclusive effect to a collusive judgment of a Ukrainian court adjudicating an issue before the arbitration panel.

This post written by Rollie Goss.