Court Vacates Arbitration Award Where Arbitration Held Under Incorrect Arbitration Rules

A federal judge in Houston recently vacated an arbitration award where the reinsurance agreement specified that the arbitration of any disputes would proceed “under the auspices of the ICC,” but the arbitration actually proceeded under the American Arbitration Association’s Commercial Arbitration Rules. The Court found that the parties to the reinsurance agreements selected the International Chamber of Commerce, and application of its rules, as a mandatory and essential condition of their agreement to arbitrate. Because this did not occur, the selected arbitrator lacked jurisdiction to hear the claims presented. The court noted that generally, after the conclusion of an arbitration, a court cannot second guess the arbitrator’s jurisdiction and decision so long as the arbitrator (1) is arguably construing or applying the contract, and (2) is acting within the scope of his authority. The court found, however, that the case presented a rare example of the second exception, in which an arbitrator assumed authority over a dispute that the parties’ agreements mandated be referred to a different forum, namely the ICC. This error fundamentally prejudiced the proceedings. PoolRe Insurance Corp. v. Organizational Strategies, Inc., Case No. H-13-1857 (USDC S.D. Tex. Mar. 31, 2014).


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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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