Can an arbitration award be overturned by a court?

Arbitration awards can be challenged in court, but these awards will only be overturned by the court in rare and limited cases. Courts will vacate, or refuse to confirm an arbitration award if the award is the product of fraud, corruption, or serious misconduct by the arbitrator.

Grounds for Vacating an Arbitration Award

In order to have an arbitration award vacated, it is usually necessary to demonstrate at least one of the following in court: There was a serious conflict of interest on the part of a neutral arbitrator; the award was not final and thus failed to constitute a definitive end to the issue; or, the award covered an issue that was outside the scope of the arbitration agreement.

Arbitrator fraud or misconduct claims are rare because actual evidence of arbitrator misconduct is hard to come by. Further, when courts are faced with motions to vacate an arbitration award, they will generally only look at the procedural details of the arbitration, not the substantive details. This means that courts won’t look at the merits of the case unless the claim involves the award itself being unreasonable or unethical. Ultimately, fraud is very unlikely to be a winning argument in court unless there is definitive evidence. An arbitrator’s binding decision isn’t fraudulent just because it’s unfavorable.

Arbitration as Alternative Dispute Resolution

On a similar note, you are unlikely to get a court to overturn an arbitration award simply because the arbitrator interpreted the law differently from how a court might have. Even clear mistakes of law or fact sometimes will not justify an arbitration award being overturned. This is the significance of the term binding in binding arbitration.

In addition, courts are often reluctant to overturn arbitrator awards since doing so can reduce the usefulness of arbitration as an alternative dispute resolution (ADR) mechanism. Arbitration is less expensive, less time-consuming, and less formal than court-based dispute resolution. Even if a court would have decided the case differently under existing law, it will still usually enforce an award. One possible exception occurs when an arbitration award or decision is vacated because it violates public policy. However, these grounds for overturning an award have not been advanced very often, and they have succeeded in few cases.

If you believe your arbitration proceeding suffered serious procedural flaws, seek the assistance of a lawyer trained in ADR. If you have yet to enter into an arbitration, consider other forms of alternative dispute resolution such as mediation, a non-binding process where a neutral third party known as a mediator helps the participants arrive at a solution on their own. A mediator may suit your situation better than a binding decision made by an arbitrator.

Case Studies: Overturning Arbitration Awards in Court

Case Study 1: Serious Conflict of Interest

In a construction dispute between a homeowner and a contractor, an arbitration award was rendered in favor of the contractor. However, the homeowner discovered that the arbitrator had a financial interest in the contractor’s business, creating a serious conflict of interest. The homeowner filed a motion to vacate the arbitration award, arguing that the arbitrator’s bias compromised the fairness of the proceedings.

Case Study 2: Award Not Final and Outside Scope

In a commercial contract dispute, the arbitration award addressed some issues but left certain matters unresolved. The party dissatisfied with the award filed a motion to vacate, contending that the award was not final and failed to provide a definitive resolution. Additionally, the party argued that the arbitrator exceeded the scope of the arbitration agreement by addressing matters outside its boundaries.

Case Study 3: Allegations of Arbitrator Misconduct

In a labor dispute between a union and an employer, an arbitration award was issued in favor of the employer. However, the union discovered evidence suggesting that the arbitrator engaged in serious misconduct during the proceedings. They alleged that the arbitrator had accepted bribes from the employer, compromising the integrity of the award.