New York Appellate Court Ruling Affirms State's Policy Of Non-Interference With International Arbitration Awards

The New York Appellate Division, First Judicial Department, recently reaffirmed the state's strong public policy favoring the enforcement of international arbitration awards. Specifically, the Appellate Division addressed, and soundly reversed, a lower court ruling partially vacating an international arbitration award on grounds that the tribunal had "manifestly disregarded the law." The Appellate Division decision—uncommon in its length and detailed reasoning—was clearly aimed at preventing the wrongful vacatur of international arbitration awards in the future. In so doing, the Appellate Division reinforced New York's status as an international arbitration-friendly jurisdiction.

In Matter of Daesang Corp. v. Nutrasweet Co., Daesang Corp. ("Daesang") moved in New York Supreme Court to confirm partial and final arbitration awards that awarded it over $100 million in a dispute arising out of the sale of its assets to NutraSweet Co. ("NutraSweet"). (Index No. 655019/2016, 2018 WL 4623562 (N.Y. App. Div., 1st Dep't Sept. 27, 2018).) NutraSweet cross-moved to vacate the awards on multiple grounds, including that the arbitrators had "manifestly disregarded" applicable law and violated public policy. The Supreme Court partially granted NutraSweet's cross-motion and remanded NutraSweet's counterclaims to the tribunal for its "redetermination" of the claims. Daesang appealed. Evidencing the public import of the decision, the Association of the Bar of the City of New York submitted an amicus curiae brief on appeal to explain that the vacatur risked New York City's status as a leading international arbitral seat, arguing that the ruling would subject arbitration awards issued in New York-seated arbitrations to an unlawfully low standard for vacatur. (See id. at *2 n.1.)

Citing the amicus brief in support of its decision, the Appellate Division held that the Supreme Court had "plainly erred" in partially vacating the arbitration awards. (Id. at *8, 13.) In doing so, it explained that, according to the New York Court of Appeals, "[a]n arbitration award must be upheld when the arbitrator offers even a barely colorable justification for the outcome reached." (Id. at *7 (quoting Wien & Malkin LLP v. Helmsely-Spear, Inc., 846 N.E.2d 1201, 1206 (NY 2006)).) Mere error is insufficient to establish manifest disregardof the law. The manifest-disregardstandard "is a doctrine of last resort limited to the rare occurrences of apparent egregious impropriety by the...