The level of detail
required in an arbitration award is determined in large part by the agreement
of the parties with respect to whether the award is standard, reasoned or
requires even greater specificity in the form of findings of fact and
conclusions of law. The issue of what qualifies as a proper reasoned award has
been the subject of some challenge. Recently, the United States Court of
Appeals for the Second Circuit applied the rationale previously set forth by
the 11th Circuit on this issue.
In assessing the issue with
respect to a challenge to an international arbitration award that was denied
before the District court in the Southern District of New York, the Second
Circuit reasoned:
"[a] reasoned award is
something more than a line or two of unexplained conclusions, but something
less than full findings of fact and conclusions of law on each issue raised
before the panel. A reasoned award sets forth the basic reasoning of the
arbitral panel on the central issue or issues raised before it. It need not
delve into every argument made by the parties. The award here satisfies that
standard: while it does not provide a detailed rationale for each and every
line of damages awarded, it does set forth the relevant facts, as well as the
key factual findings supporting its conclusions. . . . No more is needed."
In reaching its
determination, the Court relied substantially on the rationale set forth in
other circuits including the Eleventh Circuit.
In Cat Charter, LLC v. Schurtenberger, 646 F.3d 836 (11th Cir. 2011), the Court addressed whether the
arbitrators “exceeded their powers” under the Federal Arbitration Act when they
failed to issue a “reasoned award” pursuant to the agreement of the parties.
The arbitration had proceeded according to the Commercial Rules of the American
Arbitration Association and when the Panel issued a unanimous, albeit brief,
award, the losing party moved for vacatur claiming the Panel failing to satisfy
the obligation to provide a “reasoned award.” The district court agreed
that the award was insufficient, vacated the award and declined to remand the
case back to the Panel ruling the doctrine of functus officio precluded
it from doing so.
On appeal, the Eleventh
Circuit reversed and held that the award met the requisite standard:
"Logically, the varying forms of awards may be considered along a
'spectrum of increasingly reasoned awards,' with a 'standard award' requiring
the least explanation and 'findings of fact and conclusions of law' requiring
the most. In this light, therefore, a 'reasoned award is something short of
findings and conclusions but more than a simple result.'" (internal
citations omitted).
The Court determined that
the award met the requisite standard finding “the Panel provided a detailed
explanation for the only conclusion that truly required it” and specificity
where needed, concluding:
"In the present case,
three validly-appointed arbitrators oversaw a five-day hearing and rendered a
thoughtful, reasoned award. We decline to narrowly interpret what constitutes a
reasoned award to overturn an otherwise apparently seamless proceeding. The
parties received precisely what they bargained for — a speedy, fair resolution
of a discrete controversy by an impartial panel of arbitrators skilled in the
relevant areas of the law. To vacate the Award and remand for an entirely new
proceeding would insufficiently respect the value of arbitration and inject the
courts further into the arbitration process than Congress has mandated. As
such, the Award should be confirmed and this controversy should be put to rest
once and for all."
The Eleventh Circuit upheld
the award under the facts before it and its rationale in doing so was recently
adopted by the Second Circuit. The case in Leeward Construction Co. Ltd. v. American
University of Antigua, No. 13-1708-cv (2d Cir.
June 24, 2016) and the opinion is here.
Ava Borrasso is the principal of Ava J Borrasso, P.A., a Miami-based law firm that concentrates on business and international
arbitration and litigation. She also serves as an Arbitrator and is a member of
the commercial panel of the American Arbitration Association.
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