Southern District of New York reiterates high standard for arbitrator removal on bias grounds

• Published date: 30 August 2023
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Law Firm: Kennedys
• Author: Mr John LaBarbera and Thomas Kaufman

Applications to disqualify arbitrators or vacate arbitration awards due to the alleged bias of a panel member made in United States courts are often met with significant resistance. Courts have long recognized that arbitrators, who are generally "knowledgeable individuals in a given field," often have "interests and relationships that overlap with the matter they are considering as arbitrators." Florasynth, Inc. v. Pickholz, 750 F.2d 171, 173 (2d Cir. 1984). As a result, "[t]he mere appearance of bias that might disqualify a judge will not disqualify an arbitrator." Id.; accord Health Servs. Mgmt. Corp. v. Hughes, 975 F.2d 1253, 1264 (7th Cir. 1992) ("[T]the mere fact that there was some prior business relationship between [a party and two arbitrators] is not in and of itself sufficient to disqualify [the] arbitrators.").

On July 5, 2023, the United States District Court of the Southern District of New York decided Endurance Specialty Insurance Limited v. Horseshoe Re Limited (Case No. 23-cv-1831) ( "Horseshoe"), where the Court dismissed a petition by a party to an arbitration to remove the umpire on bias grounds, based on issues that arose between the umpire and the party's counsel in the current arbitration, and in a prior unrelated arbitration. In doing so, the Court reaffirmed the high burden that must be met in order to seek disqualification on the grounds of arbitrator bias.

The Dispute Between The Parties

The parties involved in Horseshoe were Endurance Specialty Insurance Limited ("Endurance") and its reinsurer, Horseshoe Re Limited ("Horseshoe Re"). Endurance and Horseshoe Re had engaged in an arbitration in Bermuda to resolve a dispute that had arisen under two reinsurance contracts. The party-appointed arbitrators selected by Endurance and Horseshoe Re could not reach an agreement on the appointment of an umpire, and the matter was therefore referred to the Secretary General of the Court of Arbitration of the International Chamber of Commerce (the "ICC Court"). The ICC Court ultimately selected Sir Bernard Eder, a London-based Queen's Counsel ("QC") to act as the umpire.

Sir Eder's appointment was contested by Endurance on at least two grounds. First, during the appointment process, Horseshoe Re specifically requested the appointment of a QC to serve as an umpire. Endurance objected to such an appointment, requesting instead the appointment of an active or retired officer of an insurance or reinsurance company. Endurance argued in its...