The Second Circuit reversed a lower court’s decision granting attorneys’ fees for the cost of confirming an arbitration award. The dispute arose out of a shipping contract for overseas shipping of acrylonitrile, and the defendant in arbitration prevailed. Following arbitration, the district court awarded the prevailing party its fees in seeking to confirm the arbitration award under a provision in the charter agreement awarding fees for a breach of contract. The Second Circuit reversed, finding first that there was no breach of the agreement by the party losing in arbitration. Further, there could be no breach of the agreement by resisting the arbitral award’s confirmation—and even if there was—such a provision would be unenforceable. By agreeing to arbitrate, the parties “also consented to confirmation of the arbitral award in any court of competent jurisdiction,” which the court found to be an effective incorporation of the Federal Arbitration Act into the contract. The Second Circuit went further, however, in holding that any agreement purporting to limit the ability to challenge an arbitration award would be unenforceable because it would “divest the courts of their statutory and common-law authority to review both the substance of the awards and the arbitral process for compliance with § 10(a) and the manifest disregard standard.” Zurich American Insurance Co. v. Team Tankers A.S., No. 14-4036-cv (2d Cir. Jan. 28, 2016).
This post written by Zach Ludens.
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