Parties may not contractually waive judicial review of arbitral awards

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Introduction -

In a recent award enforcement decision, the US Court of Appeals for the Ninth Circuit ruled that parties cannot contractually eliminate judicial review of arbitral awards under the US Federal Arbitration Act. The enforcement decision is significant for international arbitration practitioners because it demonstrates an ongoing judicial trend to apply and interpret the act strictly. It also highlights the need to draft arbitration clauses carefully and to consider legal developments in likely enforcement jurisdictions when doing so.

Facts -

The underlying dispute in the enforcement decision concerned lawyers' fees granted in connection with the settlement of a class action lawsuit. The lawyers had previously entered into an agreement which provided that any disputes about the allocation of fees among them would be arbitrated. The arbitration clause stated that:

"Class Counsel agree on behalf of themselves, their clients, and all Class Counsel to submit any disputes concerning fees (including, but not limited to, disputes concerning the fee allocation to any Class Counsel as recommended by Co-Lead Counsel, and disputes between Co-Lead Counsel regarding the determination of appropriate fee allocations) to binding, non-appealable arbitration."

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