Arbitral Injustice Rethinking the Manifest Disregard Standard for Judicial Review of Awards

Abstract:     
The manifest disregard test for judicial review of commercial arbitral awards is employed by the federal courts and those state courts operating under the so-called federal law of arbitration. The test is typically said to have two elements:

- A basic mistake of law even though the correct rule was brought directly to the arbitrator's attention; and
- Deliberate disregard of that rule of law by the arbitrator.

Under this test, commercial awards are rarely overturned. Nonetheless, the courts are burdened with applications to vacate such awards with great frequency, almost as a knee jerk step in the process.

The test, which somewhat surprisingly is applied to awards on statutory as well as common law claims, has proven largely unworkable. Given that most domestic awards are unreasoned, it is often impossible to determine whether a basic legal rule was, in fact, disregarded. The standard is often said to be inapplicable to awards which are even utterly inconsistent with the evidence. Moreover, a requirement that the basic mistake of law be deliberate fails to distinguish between purposeful attempts to do the wrong thing and those designed to do basic arbitral equity, which is thought to be integral to the commercial arbitral process.

This piece canvasses use of manifest disregard in different types of cases, and offers partial attempts at improvement on the unworkable.

Number of Pages in PDF File: 47

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