When considering the fairness and integrity of arbitration proceedings, the concept of evident partiality comes to the forefront. In scenarios where one of the decision-makers—a party-appointed arbitrator—may harbor bias, questions arise about the validity of the arbitral award. The U.S. Federal Arbitration Act (FAA), particularly under 9 U.S.C. § 10, gives parties the right to challenge an award on grounds that include an arbitrator’s evident partiality.
The threshold for what constitutes evident partiality has been interpreted variably across different circuits, with some demanding proof of actual bias and others focusing on the potential for bias through undisclosed relationships. Courts themselves, when tasked to review such cases, must balance the need for impartial arbiters against the practicalities of arbitration, where arbitrators often are selected for their subject-specific expertise, which may naturally involve professional relationships.
Key Principles and Legal Precedent:
- Disclosure Requirements: Arbitrators are obliged to disclose any potential conflicts of interest. The breadth and depth of these disclosures can influence the perception of their impartiality.
- Legal Precedents: Cases like Commonwealth Coatings Corp. v. Continental Casualty Co. and Monster Energy Co. v. City Beverages LLC provide benchmarks for what may constitute evident partiality.
- Circuit Views: The Second Circuit emphasizes a reasonable person standard, whereby an undisclosed fact would have to be something that a reasonable person would consider likely to affect an arbitrator’s impartiality.
Considerations for Parties:
- Selection of Arbitrators: Both personal and financial interests should be scrutinized during arbitrator selection.
- Review and Vacatur: Parties should be attentive to the arbitrator’s disclosures and have a mechanism to challenge an arbitrator if sufficient grounds arise post-award.
- Institutional Guidelines: Bodies like the American Arbitration Association offer guidelines to help steer the parties through the necessary disclosures and arbitrator selection process.
Implications for Arbitration Practice:
- Ongoing discussions about the scope of evident partiality and the role arbitrators must play in disclosure signal an evolving landscape.
- The emergence of international arbitration adds layers of complexity given the cross-jurisdictional variance in standards for evident partiality.
This focus on evident partiality underscores the importance of stringent disclosure standards and the safeguards needed to ensure arbitration remains a trusted and viable method for dispute resolution. Arbitrators’ integrity and neutrality are essential, as is the recognition that the perception of impartiality is as crucial as impartiality in fact.
