Banco raises four challenges to the August 6 Order: (1) the Court
should have employed a de novo standard in reviewing the arbitral orders
for manifest error of law; (2) contrary to the Court's August 6 Opinion,
Banco did assert that the arbitration Panel's award was against public
policy; (3) the Court erred in finding that the Panel did not act in
manifest disregard of law; and (4) the Panel erroneously relied on. the
terms of the reinsurance agreement in finding that Banco was required to
post prejudgment security. I will briefly address each of these
A. The Standard of Review
"Arbitration awards are subject to very limited review in order to
avoid undermining the twin goals of arbitration, namely, settling
disputes efficiently and avoiding long and expensive litigation."
Willemijn Houdstermaatschappij, BV v. Standard Microsystems Corp.,
103 F.3d 9, 12 (2d Cir. 1997) (quotation marks omitted). "Review for
manifest error is `severely limited'." Greenberg v. Bear, Stearns &
Co., 220 F.3d 22, 28 (2d Cir. 2000) (quoting DiRussa v. Dean Witter
Reynolds Inc., 121 F.3d 818, 821 (2d Cir. 1997)). The Second Circuit has
cautioned that "manifest disregard clearly means more than error or
misunderstanding with respect to the law." Halligan v. Piper Jaffray,
Inc., 148 F.3d 197, 202 (2d Cir. 1998) (quotation marks omitted).
Specifically, a court may not vacate an arbitration award unless it finds
that: "(1) the arbitrators knew of a governing legal principle yet
refused to apply it or ignored it altogether, and (2) the law ignored by
the arbitrators was well defined, explicit, and clearly applicable to the
case." Greenberg, 220 F.3d at 28 (citing DiRussa, 121 F.3d at 821).
The party seeking vacatur of an arbitration award bears the burden of
proving manifest disregard of law. See Greenberg, 220 F.3d at 2-8 (citing
Willemijn Houdstermaatschappij, 103 F.3d at 12). But, even if that party
proves that the arbitrators' decision is based on a manifest error of
law, a court must nevertheless confirm the award if grounds for the
decision can be inferred from the facts of the case. See Willemijn
Houdstermaatschappij, 103 F.3d at 13; Green v. Progressive Mgmt., Inc.,
No. 00 Civ. 2539, 2000 WL 1229755, at *2 (S.D.N.Y. Aug. 29, 2000).
In response to this authority, which was summarized in a condensed
format in the August 6 Opinion, Banco notes that in Greenberg, the Second
Circuit held that "a district court's application of the manifest
disregard standard is a legal determination that we review de novo." See
Banco's Memorandum of Law in Support of Petitioner's Motion for
Reconsideration ("Banco Mem.") at 5 (quoting Greenberg, 20 F.3d at 28).
This argument is frivolous. While the Second Circuit must review the
district court's determination de novo, this in no way abrogates the
extensive authority cited above regarding this Court's "severely limited"
review of the arbitral award. This ground for reconsideration is rejected
as the Court applied the appropriate standard of review.
B. The Public Policy Argument
In the August 6 opinion, the Court listed the seven grounds set forth
in the Inter-American Convention that would permit a court to refuse to
recognize or enforce an arbitral award. The Court then noted that "Banco
does not claim that any of these provisions apply." Banco I, 1998 WL
1808201, at *6. Banco correctly points out that it did, in fact, claim
one of those grounds — namely that "the recognition or execution of
the decision would be contrary to the public policy ("order public") of
th[e] State [of the tribunal]."
9 U.S.C. § 207. At page 3 of its
Memorandum of Law in Reply on Plaintiff's Motion and in Opposition to
Defendant's' Cross-Motion ("Reply Brief"), Banco did, in fact, make the
following argument: "[T]he interim award may be refused enforcement
pursuant to Article 5 of the Inter-American Convention because they are
contrary to the public policy of the United States, specifically the
foreign policy interests embodied and reflected in the FSIA [Foreign
Sovereign Immunities Act]".*fn1 Because the Court overlooked an argument
raised on the initial motion, it must now consider the argument it failed
to consider earlier. It is for this reason that the motion for
reconsideration is granted.
A district court can only vacate an arbitration award on the basis of
public policy if there is (1) a violation of "`some explicit public
policy'," and (2) "the award explicitly conflicts with `law and legal
precedents', as opposed to `general considerations of supposed public
interests'." Alberti v. Morgan Stanley Dean Witter Reynolds Inc., No. 97
Civ. 9385, 1998 WL 438667, at *6 (S.D.N.Y. July 31, 1998), aff'd,
205 F.3d 1321 (2d Cir. 2000) (quoting United Paper Workers Int'l Union
v. Misco, Inc., 484 U.S. 29, 43 (1987)). Banco has correctly identified
an "explicit public policy". Section 1609 of the FSIA explicitly states
that "a foreign state shall be immune from attachment arrest and
execution . . ." 28 U.s.c. § 1609. The Second Circuit has held that
this section requires that a foreign state or its instrumentality is
generally immune from prejudgment attachment of its assets in the United
States, unless that state explicitly waives its immunity. See S & S
Machinery Co. v. Masinexportimport, 706 F.2d 411, 413 (2d Cir. 1983).
Relying on Stephens, Banco argues that the Panel's interim awards are
contrary to this public policy.
Banco's public policy argument fails for the same reason that this
Court found that the Panel had not acted in "manifest disregard" of the
law. See Banco I, 2002 WL 1808201, at *7-*9. While the Second Circuit has
not addressed the issue, several courts have held that the holding in
Stephens does not apply to arbitrations. See International Ins. Co v.
Caja Nacional de Ahorro Y Seguro, No. 00 Civ. 6703, 2001 WL 322005, at *3
(N.D. Ill. Apr. 2, 2001), aff'd, 293 F.3d 392, No. 01-3054, 2002 WL
1274129 (7th Cir. Jun. 7, 2002); Skandia Am. Reinsurance Corp. v.
Caja Nacional De Ahorro Y Seguro, No. 96 Civ. 2310, 1997 WL 278054, at
*1-*2 (S.D.N.Y. May 23, 1997. Moreover, in Home Ins. Co. v. Banco de
Seguros del Estado ("Home"), No. 98 Civ. 6022, 1999 U.S. Dist. LEXIS 22478
(S.D.N.Y. Feb. 28, 1999), a court in this district held that the party
claiming the benefit of the FSIA, there, as here, Banco de Seguros del
Estado, waived its immunity by agreeing to arbitration. This is the short
answer to the public policy
argument. Accordingly, Banco has failed to
show how enforcing the arbitral awards here "explicitly conflicts" with
this public policy. Thus, reconsideration on this ground must be denied.
C. Manifest Disregard of the Law
In this section of its motion, Banco cites no controlling authority
overlooked by the Court, nor does it cite to any factual matters that
were before the Court but that the Court failed to consider. Instead, it
reargues the points it made during the initial briefing and now explains
to the Court how its analysis is "erroneous". This is the type of
argument that must be made to an appellate court and is not appropriate
argument in a motion for reconsideration.
Nonetheless, I will briefly address the argument. Banco claims that
this Court "erred in attempting to create a `basis' for the Panel to rule
in favor of the posting of security by asserting that the Panel relied
upon these unpublished decisions [Home, Caja, 2001 WL 322005, at *3; and
Skandia, 1997 WL 278054, at *1-*2] and therefore, since there was
opposing case law, there could be no manifest disregard of the law." Banco
Mem. at 9-10.
This Court did no such thing. As noted in Banco I, "[b]ecause the
question before the Court; is whether the arbitrators acted in `manifest
disregard of the law', . . . `the Court need not pronounce
authoritatively upon" the merits of Banco's claim, and is therefore not
required to decide whether Home, Caja or Skandia were correctly decided.
Rather, the question is "whether the Panel ignored or refused to apply
`well defined, explicit, and clearly applicable' law of which it was
aware." Banco I, 2002 WL 1808291, at *8. The existence of these three
opinions, all of which approved the award of prejudgment security against
a foreign state or instrumentality in the context of an arbitration,
merely show that the law in this are is not "well defined" and
"explicit." Accordingly, reconsideration on this ground is denied.
D. The Panel Relied on the Reinsurance Contracts
In its final argument, Banco argues that the Panel relied on the
reinsurance contracts in dispute as permitting an award of prejudgment
security. Banco notes that this Court, in contrast, has justified the
award by relying on the trilogy of Home, Caja and Skandia to support an
award of prejudgment security. Banco argues that the Court cannot
substitute a ground for the award that was not specifically cited by the
Panel, particularly if the Panel relied on a ground that did not and
could not support its award. In effect, Banco is making the argument on
reconsideration that it should be making on appeal, namely explaining to
the district court how it erred. Nonetheless, I will briefly address this
As noted in Banco I, even if a party proves that the arbitrator's
decision was based on an improper interpretation of the law, a court must
nevertheless confirm the award if grounds for the decision can be
inferred from the facts of the case. Banco I, 2002 WL 1809202, at *7.
Here, the Panel was provided with a number of cases from which it could
have reasonably concluded that it was authorized to award prejudgment
security. Thus, even if the reinsurance contracts do not authorize such
an award, and even if this Court disagrees with the case law presented to
the Panel, that case law provides a basis for confirming the interim
Orders. Accordingly, reconsideration on this ground is denied.
For the reasons stated above, Banco's motion for reconsideration is
denied in its
entirety. The Clerk of the Court is ordered to close this