DIsclosure form on typewriter

There is no doubt that the issue of arbitrator disclosures is a very important issue in reinsurance arbitrations and especially in arbitrations conducted under the traditional US party-appointed system. Disclosures are even more important in the selection of the umpire. A recent decision in a long-running reinsurance battle addresses the issue of the timeliness of disclosures and whether there is a pre-selection disclosure obligation. Nat’l Indem. Co. v. IRB Brasil Resseguros S.A., No. 15 Civ. 3975 (NRB), 2016 U.S. Dist. LEXIS 30871 (S.D.N.Y. Mar. 10, 2016).

This case has lots in it and it comes from a judge who (my guess only) first cut her teeth on reinsurance in the 1980s as a Magistrate Judge in a case that I was involved in for a few years. My comments focus on the disclosure issue.

The case was before the court on the retrocedent’s application to confirm the awards and the retrocessionaire’s application to vacate. One of the main grounds for vacatur was that the umpire failed to timely disclose that he was appointed as a party-appointed arbitrator during the period of time between his nomination as umpire (after having filled out an umpire questionnaire) and his eventual appointment (some 2 years later) and that he was evidently partial to the retrocedent because that appointment as a party-appointed arbitrator was for an entity that the retrocessionaire argued was an affiliate of the retrocedent.

As most cases, this case turns on the facts and much as the law, which the court pointed out was a steep uphill climb to obtain an order vacating an arbitration award. You can read the decision for all of the facts.

The court said a few things (among others) worth mention. First, the court rejected the retrocessionaire’s argument that there existed an obligation on the umpire candidate to disclose all potential conflicts within a certain period of time and on a continuous basis. Essentially what the retrocessionaire was advocating was that the umpire candidate while waiting to find out whether the umpire appointment would come, must disclose every possible conflict that might arise in all cases to all parties. The court found that there was no pre-selection disclosure obligation (obviously other than the obligation to disclose on the questionnaire).

Here’s where the facts come in. The candidate who eventually was appointed umpire filled out the umpire questionnaire and waited 2 years to be appointed. In the interim, the candidate took on 15 new assignments, already had a roster of active and dormant cases, and was under consideration for more. The court noted that a continuous pre-selection disclosure obligation could “easily add up to hundreds of supplemental disclosures, and failure to make any of them would be grounds to vacate any award ultimately issued.” The court held that this default rule would result in unreasonable burden.

Moreover, the court found no case holding that an arbitrator’s voluntary disclosure after selection instead of a pre-selection supplemental disclosure is a ground to vacate an arbitration award.

Notably, the court cites to the ARIAS-U.S. Code of Conduct, mentions that it is not binding on the parties (no incorporation), but indicates that the umpire did exactly what the Code required by considering all the relevant issues and making a reasoned determination whether to withdraw or continue. In fact, here the umpire asked for briefing on the issue before deciding how to address the alleged conflict.

The decision also addresses evident partiality and what that means as well (not merely the appearance of bias, but also not proof of actual bias).