'Stolt-Nielsen': So What Is the Standard of Review of Arbitration Awards?

Commentary on the Supreme Court’s recent decision in Stolt-Nielsen S.A. v. Animalfeeds International Corp., 130 S.Ct. 1758 (April 27, 2010), has focused on the Court’s holding that if an arbitration agreement is silent on the subject of class arbitrations, then generally such arbitrations are not permitted. This holding is certainly important, but it could well pale in comparison to the implications of the reasoning the Court used to arrive at that holding. The Court showed little deference to the arbitrators’ award, which arguably portends a shift to more rigorous judicial review. However, lower courts are unlikely to abandon their traditional deference to arbitration awards because of the Court’s opinion in Stolt-Nielsen, and the Court may not have intended that they do so, but those seeking to vacate arbitration awards can find good fodder in the Court’s decision.

The Facts of ‘Stolt-Nielsen’

Stolt-Nielsen involved a “standard contract” routinely entered into between shipping companies, such as Stolt-Nielsen, and shippers who need their goods transported, such as Animalfeeds. Shippers generally choose from among a number of standard contracts, called a “charter party.” Animalfeeds chose a charter party that contained a broad arbitration clause.