ADR as Public Policy: Domestic and International Perspectives
In the United States, arbitrators’ decisions are legally binding. Courts generally confirm and enforce, rather than vacate, arbitration awards. Suppose, however, that the arbitration award is very different from the judgment a court would have rendered had the dispute been litigated, rather than arbitrated. And suppose this is because the arbitrator did not correctly apply the law. If the party that lost in arbitration (the party that would have done better with a correct application of law) asks a court to vacate the award because it is legally erroneous, will the court vacate or confirm the award? And does the answer depend on:
- Whether the parties formed their agreement to arbitrate before or after the dispute arose?
- Whether the agreement’s terms ask courts to vacate or confirm legally erroneous arbitration awards?
- Whether the arbitrator did not try to apply the law or tried to apply it but did so incorrectly?
- Whether the law the arbitrator did not correctly apply is well-established or in doubt? Simple or complex?
- Whether the law the arbitrator did not correctly apply is mandatory law (binding on the parties despite a contract term to the contrary) or default law the parties may contract around?
These questions are the subject of this article. I suggest that arbitration law in the United States has answered these questions differently over time and that these changes in legal doctrine roughly divide into four eras. Unfortunately, recent Supreme Court cases have left much uncertainty on the fundamental question whether arbitration awards must apply the law correctly to avoid vacatur.
Stephen J. Ware, Vacating Legally-Erroneous Arbitration Awards, 6 Y.B. Arb. & Mediation 56 (2014).