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Don’t Expect Your Arbitration Award to be Vacated

Authored by Partner, Jean-Claude Mazzola

In 245 Park Member LLC v. HNA Grp. (Int’l) Co. 22-cv-5136 (JGK) United States District Court Judge John G. Koeltl granted the petitioner’s petition to confirm an arbitration award (the “Award”) in the amount of $185,412,763.60. This action falls under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly known as the New York Convention (the “Convention”). One of the main foci of the Convention is enforcing arbitral awards that arise from disputes between parties of different States who have signed and ratified the Convention, therefore being considered “nondomestic” awards. A vast majority of awards are enforced due to the pro-enforcement bias that the Convention is considered to have.

While the petitioner commenced the arbitration action on December 21, 2022, JAMS, formally known as Judicial Arbitration and Mediation Services, Inc., set up the parties Scheduling Decision, which marks the beginning of their arbitration timeframe, for March 22, 2022. Following the issuance of the Scheduling Decision, the parties had seven business days to make their merit submissions regarding each matter in dispute and any applicable materials and have a final non-appealable award within thirty calendar days. The parties agreed to an expedited process within their arbitration provision.

Arbitration clauses are often bargained for in contracts to allow disputes to be resolved in a timely and cost-efficient manner with limited discovery. Although the respondent argued that it was entitled to discovery and an evidentiary hearing under the JAMS Rules, during the Scheduling Decision Justice Hall concluded that that the parties agreed to waive discovery and an evidentiary hearing due to their expedited arbitration process. This decision was previously enforced by the arbitrator during proceedings stating that they “clearly did not contemplate time for discovery.”

One of the criticisms of arbitration is that it can give power and coercion to large corporations when in opposition to small companies or individuals, however in this instance, both parties are sophisticated entities who bargained for this expedited process. Arbitrators are afforded broad discretion and unless the process was “fundamentally unfair and contrary to the terms of the parties’ arbitration agreement,” then the Award is likely to be upheld.

Parties should consider the ramifications of entering into an arbitration agreement, especially the terms they are bound by. The Institution you decide to work with, the rules that you bargain for, and the arbitrator(s) you decide on can all impact the final, binding arbitration award. Arbitration can save money and time, but it can also lead to an Award of $185,412,763.60.