In Beacon Towers Condominium Trust v. Alex, 473 Mass. 472 (2016) ("Beacon Towers"), the Massachusetts Supreme Judicial Court decided that an arbitral tribunal had overstepped the bounds of its authority when it awarded attorney's fees pursuant to the Commonwealth's frivolous claims statute. The SJC ultimately vacated the arbitral tribunal's fee award, despite noting that arbitration awards enjoy an exceptionally narrow scope of judicial review.
Alternative dispute resolution is rightly gaining steam as an efficient, fair mechanism for the resolution of complex business disputes. Many companies are redrafting their standard-form contracts to include mandatory arbitration clauses. This is particularly true for companies doing business across state or national borders, so that they might avoid being hauled into court in a foreign jurisdiction. But what if you agree to arbitrate a business dispute and end up losing? Do you have any recourse?
One of the advantages of arbitration is the certainty that comes with it. While arbitration awards can be challenged in court, it is extremely difficult to overturn an award. In fact, courts will vacate, or refuse to confirm an arbitration award only if there was a serious conflict of interest or corruption on the part of a neutral arbitrator, or the arbitrators exceeded their powers. This latter ground, the arbitrators exceeding their authority, is most frequently used as a basis for setting aside an arbitral award. A recent decision by the Swedish Court of Appeals setting aside a US $173 million arbitration award provides some guidance on how this standard may be applied.