key term - Manifest disregard standard

Definition

The manifest disregard standard is a legal principle used in the context of arbitration that allows a court to overturn an arbitration award if the arbitrators have ignored the governing law or demonstrated a clear disregard for it. This standard is rooted in the belief that arbitrators must adhere to applicable legal principles while making their decisions, and when they fail to do so, it raises concerns about the fairness and integrity of the arbitration process.

5 Must Know Facts For Your Next Test

1. The manifest disregard standard is not a universally accepted standard; its application can vary depending on the jurisdiction.
2. Courts are generally reluctant to overturn arbitration awards, applying the manifest disregard standard only in exceptional circumstances.
3. To meet the manifest disregard standard, a party must demonstrate that the arbitrators recognized the relevant law but chose to ignore it in their decision-making process.
4. This standard serves as a check on arbitrators’ authority, ensuring they do not operate completely outside the bounds of established legal norms.
5. The U.S. Supreme Court has clarified that manifest disregard is not an independent ground for vacating an award but rather an indication of a failure to comply with applicable legal standards.

Review Questions

• How does the manifest disregard standard relate to the overall integrity of the arbitration process?
  • The manifest disregard standard is crucial for maintaining the integrity of the arbitration process because it holds arbitrators accountable for their adherence to applicable legal standards. When arbitrators disregard relevant laws, it can undermine trust in arbitration as a fair dispute resolution mechanism. This standard allows courts to intervene only in exceptional cases, ensuring that arbitration remains an efficient and reliable alternative to litigation while still safeguarding parties' rights.
• Evaluate how different jurisdictions interpret and apply the manifest disregard standard in relation to arbitration awards.
  • Different jurisdictions interpret and apply the manifest disregard standard in varied ways, leading to inconsistencies in how arbitration awards are treated. Some jurisdictions may apply a more lenient approach, allowing courts to review awards more closely for potential legal misapplications, while others may take a stricter stance, limiting judicial intervention. This variation affects how parties approach arbitration and their strategies for potential challenges to awards, highlighting the need for parties to understand the specific legal landscape in their jurisdiction before entering into arbitration agreements.
• Critically assess the implications of relying on the manifest disregard standard for parties engaged in arbitration and potential appeals.
  • Relying on the manifest disregard standard has significant implications for parties involved in arbitration and any subsequent appeals. While it provides a safeguard against erroneous decisions by arbitrators, it also creates uncertainty regarding when and how courts will intervene. Parties may feel pressured to carefully present their legal arguments during arbitration, knowing that failing to convince arbitrators could result in limited recourse if they later seek to challenge an award. Additionally, this reliance can influence how arbitrators approach their decision-making process, knowing that their rulings may be scrutinized under this standard.

Related terms

Arbitration:

A method of resolving disputes outside of court, where a neutral third party makes a binding decision based on the evidence and arguments presented.

Arbitration Award: The final decision made by an arbitrator or arbitration panel, which resolves the dispute between the parties involved.

Vacatur: A legal term referring to the annulment or cancellation of a court order or arbitration award, often sought when there are grounds for challenging the decision.