One of the most vexing issues facing parties in reinsurance arbitrations is whether the other side’s party-appointed arbitrator qualifies under the arbitrator criteria set forth in the arbitration clause of the reinsurance agreement. The issue is frustrating because sometimes the arbitrator criteria is not as clear as it should be, which leaves room for creative appointments. It is also frustrating because when a counter-party appoints an arbitrator that arguably does not qualify, there is very little that the other party can do about it.
Collateral disputes over the qualifications of the arbitration panel may seem to be a great waste of time and money, but given the existing party-appointed system of advocate-arbitrators that has yet to be replaced by a neutral panel system, the make-up of an arbitration panel is seen as critical to a successful outcome. For this reason, parties are sometimes hesitant to go forward with panel selection when the other side appoints an arbitrator that may not qualify under the criteria established by the arbitration clause.
If a party believes that the opposing party’s arbitrator is not qualified, the party may object to the appointment and request the other party to replace its arbitrator with a qualified candidate. If the other party refuses, the objecting party must decide whether to challenge the appointment or go forward with umpire selection under a reservation of rights.
In a recent case, a Massachusetts federal court had an opportunity to address an objector’s challenge to a party-appointed arbitrator as part of a pre-award petition to remove the arbitrator and enforce the arbitration agreement. That challenge failed.