award dated April 15, 1991 (the "Decision and Award"), pursuant
to the United States Arbitration Act, 9 U.S.C. § 10(a)(4), on
the grounds that the arbitrators "exceeded their powers, or so
imperfectly executed them that a mutual, final and definite
award upon the subject matter submitted was not made."
Respondent Merinda Marine Co., Ltd. (the "Owner"), opposes the
petition to vacate and seeks confirmation of the Award.
In March of 1987, the Owner and Charterer entered into a Time
Charter Party contract for the vessel M/V LEONIDAS GLORY, at
$1,950 per day (the "Charter Party"). The Charter Party called
for the vessel to load granite blocks at Mangalore, India,
during April and May, 1987. These granite blocks were to be
discharged at Santander, Spain, St. Malo, France and Antwerp,
Belgium. On route to Santander, the vessel encountered heavy
weather which the Owner claimed caused delays in arriving at
the designated ports of discharge.
Consequently, the Charterer claimed damages for
underperformance in the amount of $39,622.00, based upon a
delay of 11.34 days as compared to a routine voyage. The
Charterer asserted its claim for underperformance in the Court
of Commerce in Antwerp, under Belgian law. At the Charterer's
request, the Court of Commerce issued a Detention Order which
prevented the LEONIDAS GLORY from sailing from the court's
jurisdiction, and appointed a neutral Nautical Surveyor to
investigate the vessel's records in order to determine and
report the causes of the alleged delay.
The Charterer informed the Owner that in lieu of arresting
the vessel it would accept a letter of guarantee in the amount
of $45,000, as security for any liability due to the vessel's
underperformance. Although the Owner had made arrangements to
drydock the vessel for a Class Survey in a Netherlands shipyard
the day after discharge, May 27, 1987, and an arrest would
prevent the Owner from going on drydock as scheduled, the Owner
refused to post the security. As a result, the Charterer
applied to the Belgian Court and obtained an order of arrest
for the LEONIDAS GLORY. Under Belgian law,*fn1 the Owner was
permitted to contest the arrest but failed to do so, even
though it was represented in Antwerp.*fn2
The vessel was subsequently arrested on May 26, 1987, after
completion of discharge at Antwerp. After the arrest, the Owner
posted adequate security, the arrest was lifted and the vessel
was allowed to sail from Antwerp. However, due to the arrest
the vessel was delayed in Antwerp for two days.
During the vessel's detention, the Nautical Surveyor
determined that the LEONIDAS GLORY had indeed underperformed
for a total of 118 hours, or 4 days and 22 hours (as opposed to
the 11.34 days claimed
by the Charterer) on the voyage from Mangalore to Antwerp. The
Surveyor also found that the Charterer should be compensated in
the amount of $17,709.89.
After this determination, the Owner invoked the arbitration
clause of the Charter Party contract,*fn3 and sought
arbitration of the various claims and cross-claims at New York.
The claims and cross-claims were as follows: (1) The Charterer
claimed the $17,708.89 to which the Nautical Surveyor
determined it was entitled as a result of underperformance; (2)
The Owner claimed damages for unpaid freight, repairs
necessitated by stevedores, fees and expenses incurred at
Antwerp due to the arrest, expenses incurred due to the
postponement of scheduled drydocking while the vessel was under
arrest at Antwerp, including the costs of arranging drydocking
in Greece, the cost of the extra drydocking, the costs of the
arbitration proceeding and the cost of the letter of guarantee
posted in Antwerp. Pre-hearing submissions were presented to a
Panel of three arbitrators (the "Panel"), which was formed in
accordance with Clause 17, and a hearing was held on March 29,
On April 15, 1991, the Panel issued a Decision and Award in
which it denied the Charterer's claims. Contrary to the
Nautical Surveyor, the Panel concluded that the weather
conditions during the voyage and the Captain's concern for
safety were serious enough to justify the Captain's decision to
seek shelter at Crete and reduce the speed of the vessel. Thus,
the delay was justified, and the Charterer was not entitled to
recover for underperformance. The Panel further concluded that
the arrest of the vessel was
wrongful and unjustified under the circumstances
because Charterers could have started their
investigation of alleged speed loss at the first
two discharge ports instead of waiting till [sic]
two hours before completion of discharge. Owners
would then have had plenty of time to grant
Charterers Letter of Undertaking without the
vessel being delayed two days.
Decision and Award, Exhibit "A" to DeOrchis Aff., at 15.
Based upon these findings, the Panel awarded the Owner
$75,068.28. According to the Charterer, $49,013 of this award
was intended to reimburse the Owner for expenses relating to
what the arbitrators deemed the "wrongful and unjustified"
arrest.*fn4 The Charterer moves to vacate only this portion of
the award.*fn5 The Charterer
alleges that in awarding the Owner $49,013 for expenses
incurred in connection with the Belgian arrest, the
"arbitrators exceeded their powers, or so imperfectly executed
them that a mutual, final and definite award upon the subject
matter submitted was not made." 9 U.S.C. § 10(a)(4).
The United States Arbitration Act, 9 U.S.C. § 10(a), provides
that either party to an arbitration may move to vacate the
arbitration award. The grounds for vacating an arbitration
award, however, are extremely limited. See Sweeney v.
Morganroth, 451 F. Supp. 367, 369 (S.D.N.Y. 1978) (court's
review of an arbitrator's award is necessarily "severely
limited," being confined to the grounds specified in 9 U.S.C. § 10).
They are as follows:
(1) Where the award was procured by corruption,
fraud, or undue influence.
(2) Where there was evident partiality or
corruption in the arbitrators, or either of them.
(3) Where the arbitrators were guilty of
misconduct in refusing to postpone the hearing,
upon sufficient cause shown, or in refusing to
hear evidence pertinent and material to the
controversy; or of any other misbehavior by which
the rights of any party have been prejudiced.
(4) Where the arbitrators exceeded their powers,
or so imperfectly executed them that a mutual,
final, and definite award upon the subject matter
submitted was not made.
(5) Where an award is vacated and the time within
which the agreement required the award to be made
has not expired the court may, in its discretion,
direct a rehearing by the arbitrators.
9 U.S.C. § 10(a)(1-5).
In addition, an arbitration award may be vacated if the
arbitrators exhibit a "manifest disregard of the law."
Wilko v. Swan, 346 U.S. 427, 436-437, 74 S.Ct. 182, 187-188, 98
L.Ed. 168 (1953). Although no court has clearly defined the
boundaries of this common law doctrine, it is apparent that it
does not significantly expand the statutory bases for vacating
an award. In fact, it is a very limited doctrine. In Merrill
Lynch, Pierce, Fenner & Smith, Inc. v. Bobker, 808 F.2d 930 (2d
Cir. 1986), the Second Circuit concluded that "manifest
disregard of the law." "clearly means more than error or
misunderstanding with respect to the law." Id. at 933; see also
Carte Blance (Singapore) Pte., Ltd. v. Carte Blance (Int'l)
Ltd., 888 F.2d 260, 265 (2d Cir. 1989) (citing Siegel v. Titan
Indus. Corp., 779 F.2d 891, 892-893 (2d Cir. 1985)). It went on
to say that:
The error must have been obvious and capable of
being readily and instantly perceived by the
average person qualified to serve as an
arbitrator. Moreover, the term "disregard" implies
that the arbitrator appreciates the existence of a
clearly governing legal principle but decides to
ignore or pay no attention to it. Bell Aerospace
Company Division of Textron, Inc. v. Local 516,
356 F. Supp. 354, 356 (W.D.N.Y. 1973), rev'd on other
grounds, 500 F.2d 921 (2d Cir. 1974). To adopt a
less strict standard of judicial review would be to
undermine our well established deference to
arbitration as a favored method of settling
disputes when agreed to by the parties. United
Steelworkers v. American Manufacturing Co.,
363 U.S. 564 [80 S.Ct. 1343, 4 L.Ed.2d 1403] (1960).
Merrill Lynch, Pierce, Fenner & Smith, Inc., 808 F.2d at
933-934 (other citations omitted).