Patton Boggs Reinsurance Newsletter - December 2012: New York Federal Court Confirms Arbitration Awards for Cedent

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Century Indem. Co. v. AXA Belgium, No. 11 Civ. 7263, 2012 WL 4354816 (S.D.N.Y. Sept. 24, 2012).

A New York federal court granted a cedent’s petition under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards to confirm multiple arbitration awards in its favor, denied cross-petition to vacate the awards, and denied motions to seal. The arbitration concerned multiple contracts through which the parties had overlapping liability to each other for various insurance and reinsurance obligations.  A key dispute before the arbitration panel was the interpretation of a termination provision in one of the underlying contracts, which affected the parties’ liability for losses under those contracts.  

The panel permitted extensive discovery, pre-hearing briefing, multiple position statements and the use of hundreds of evidentiary exhibits.  During a nine-day hearing, the parties presented a total of 11 witnesses, introduced exhibits into evidence, and made opening and closing statements.  The panel deemed the hearing a “final hearing on the merits” and ruled in the cedent’s favor. 

The cedent moved to confirm the award, while the reinsurer moved to vacate.  The court granted the petition to confirm, finding that arbitration awards are subject to extremely limited review and are only rarely to be overturned. The court, in a fairly detailed analysis, rejected the reinsurer’s allegations that the panel refused to hear evidence and found it had a “full and fair” opportunity to present its case before the panel.  The court also found that the panel acted within its authority in interpreting the disputed termination provision, awarding punitive damages where it found the reinsurer had not acted in good faith, and retaining jurisdiction to oversee implementation of its award.  Finally, the court rejected the reinsurer’s argument that the panel manifestly disregarded governing law (here the law of Belgium).  The court noted that the reinsurer had not raised the issue of Belgian law in its briefing or at the arbitration hearing, but raised it for the first time on a petition to modify the award.

Although the parties were at odds as to the propriety of the award, they both moved to file certain documents under seal pursuant to a confidentiality agreement.  The court held that the documents at issue were judicial documents to which a presumption of access attaches, and although the confidentiality agreement was binding on the parties, it did not preclude the court from making those documents available to the public.  In reaching its decision, the court noted that although parties to arbitration are generally able to keep documents confidential, the “circumstance changes when a party seeks to enforce in federal court the fruits of their private agreement to arbitrate, i.e., the arbitration award.” 

In short, the court emphasized that overturning an arbitration award is difficult and unlikely in all but the most extreme circumstances.  In addition, even parties with confidentiality agreements may not be able to seal material from an arbitration hearing if access to the federal courts is taken.

Topics:  Arbitration Agreements, Arbitration Awards, New York Convention, Punitive Damages, Reinsurance

Published In: Alternative Dispute Resolution (ADR) Updates, Civil Remedies Updates, General Business Updates, Insurance Updates, International Trade Updates

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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