Today, the Second Circuit decided ReliaStar Life Ins. Co, of N.Y. v. EMC Nat’l Life Co., No. 07-0828 (2nd Cir. Apr. 9, 2009).
The court held that inclusion in an arbitration agreement of a broad statement that each party will bear the expenses of its own arbitrator and attorney’s fees does not deprive the arbitration panel of authority to award those expenses as a sanction against a party whom the panel determines failed to arbitrate in “good faith.”
The court explained that an arbitrators’ finding of bad faith gives rise to an exception to the general rule that each party bears their own expenses. Thus, the arbitration panel did not exceed its authority in awarding attorney’s and arbitrator’s fees.
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arbitration, ADR, law, Second Circuit, attorney’s fees, arbitrator’s fees
The decision of the Court has to be welcomed. The arbitration clause with a broad statement that parties would meet their respective cost would not necessarily mean that the parties have to incur their own cost for the vexatious litigations that may be raised by the other party. The Tribunal was right in awarding cost. Similarly the Court was right in holding that awarding of cost under these circumstances would not amount to bad faith. The award of cost by arbitration tribunal can not be deemed to be in bad faith. May be an imposition of an exorbitant cost on unwarranted situation could be construed as an award in bad faith.
G.Ashokapathy
partner M/s.PASS Associates, Law firm
Co Founder- CNICA an Arbitration Institution.
Email: ashokapathy@gmail.com
http://www.cnica.org
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