Scandinavian Reinsurance Company Limited (“Scandinavian Re”) and St. Paul Fire & Marine Insurance Company, St. Paul Reinsurance Company, Ltd. and St. Paul Re (Bermuda) Ltd. (collectively “St. Paul”) entered into a retrocessional agreement under which St. Paul ceded a portion of its casualty reinsurance portfolio to Scandinavian Re. After a dispute arose concerning that agreement, St. Paul demanded arbitration. Pursuant to arbitration clause in the retrocessional agreement, each party appointed an arbitrator, who then selected a neutral umpire.
The arbitration panel ultimately rendered an award in St. Paul’s favor. Scandinavian Re moved to vacate the award on the grounds that two of the arbitrators exhibited “evident partiality” under Section 10 of the Federal Arbitration Act (“FAA”), because they had failed to disclose their simultaneous involvement in another arbitration that involved a common witness, similar disputed issues and contract terms, and a reinsurer that was St. Paul’s successor.
The court began its analysis by noting that an arbitrator has a continuing obligation to disclose to the parties any relationship that a reasonable person would deem to be material. Because the two arbitrators were simultaneously presiding over another arbitration that involved similar issues, related parties, and a common fact witness who testified on overlapping subjects, the court found that the arbitrators’ failure to disclose amounted to evident partiality under the FAA. Thus, the court granted Scandinavian Re’s motion to vacate.
Click here to review the District Court’s decision, captioned Scandinavian Reinsurance Co. v. St. Paul Fire & Marine Ins. Co., et al., 09-cv-9531 (S.D.N.Y. 2010).