Woman taking batch of hundred dollar bills. Hands close up

The Federal Arbitration Act provides that “[i]f the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, and shall specify the court, then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title.” 9 U.S.C. § 9. When you break this sentence down to its components, it first requires that the agreement to arbitrate expressly state that a judgment of the court shall be entered upon the arbitration award. Most reinsurance contracts have that phraseology in their arbitration clauses ( e.g., “Judgment upon the award rendered may be entered in any court having jurisdiction thereof.” BRMA 6 A). It then states that any of the parties may apply to the court to confirm the award. Any party does not necessarily mean the prevailing party. Finally, if these two criteria are met, then the court must confirm the award unless it is otherwise vacated, modified or corrected.

So let’s say the ceding insurer wins the arbitration and the final award requires the reinsurer to pay the ceding insurer $1 million within 30 days. And let’s say the reinsurer complies with the final award and pays the ceding insurer promptly. The case is over and we can call it a day, right? Not so fast. What happens if, in spite of the reinsurer’s full compliance with the final award, the ceding insurer goes into court under § 9 and asks the court to confirm the award anyway?

A New York federal court recently addressed this issue and ruled that confirmation was appropriate under § 9 even though the reinsurer had paid the award in full. Nat’l Cas. Co. v. Resolute Reins. Co., No. 15 Civ. 9440 (DLC) (S.D.N.Y. Mar. 24, 2016). The court noted that while the Second Circuit has not set forth a rule governing how to calculate the amount in controversy for jurisdictional purposes in an arbitration confirmation proceeding where the award has already been paid, it has held that prior compliance is not a ground to refuse to confirm an arbitration award. Why you say? Because § 9 is mandatory. If the arbitration provision provides for the parties’ consent that the court confirm the award and a party requests confirmation, the court has no choice but to confirm if there is no basis to vacate, modify or correct the award. In other words, once the statutory prerequisites are satisfied, the court must grant the petition.

What was interesting is that the arbitration provision in this case only implied consent because it only said that the “written decision of the [arbitration panel] shall be final and binding upon the parties under this certificate.” The words “final and binding,” according to the court, “powerfully indicates that they consented to federal court confirmation of an arbitration award.” There was other conduct that also led to the court’s conclusion, but here there was no “judgment upon the award rendered may be entered in any court having jurisdiction” language. There is no Second Circuit case directly holding that this is enough, but this judge thought it was sufficiently implied (as the “final and binding” language weighs heavily in favor of finding that the parties consented to confirmation).

The other practical question is why bother confirming if you got paid? That mystery is not disclosed, but we have seen a lot of cases where prevailing parties have sought confirmation for reasons other than obtaining collection or compliance.