New York Legislature Considers Adding Bias Ground for Vacation of Arbitral Awards

As reported by the ADR Prof, the New York legislature is considering a bill (S. 5798-2011) that would amend New York’s Civil Practice Law & Rules §7511(b)(1)(ii) on Award vacaturs to state (new language in ALL CAPS):

(ii) partiality of an arbitrator appointed as a neutral, except where the award was by confession; OR WHERE THE ARBITRATOR HAS BEEN AFFILIATED IN ANY WAY WITH ANY PARTY TO THE ARBITRATION, OR ANY OF ITS SUBSIDIARIES OR AFFILIATES; OR WHERE THE ARBITRATOR HAS A FINANCIAL INTEREST, DIRECTLY OR INDIRECTLY, IN ANY PARTY OR IN THE OUTCOME OF THE ARBITRATION; or…

The bill’s justification states,

The public policy in favor of arbitration which is codified in Section 7501 of the Civil Practice Law and Rules, is based upon the fact that arbitration can be a more efficient and cost-effective method for parties to resolve disputes. The presumption that an arbitration clause is enforceable has, however, become a sword to wield against parties oflesser means rather than a shield to protect against unnecessary litigation.

Currently, a party must prove, either during the course of misconduct by the arbitrator or after an award by an arbitrator is perceived to be unfair, that the arbitrator was biased – even if the arbitrator clearly has an economic stake in the outcome of the dispute. This outcome is in direct opposition to the reasons (efficiency and fairness) why arbitration is favored. As arbitration is commonly thought to be a dispute resolution procedure that occurs in front of a neutral third party, codifying it as such will enforce the original intent of the law.

The bill’s companion A7002-A-2011, already passed the assembly and was delivered to the Senate.

Stay tuned.

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