Requires disclosure of possible conflicts; provides for the vacating of an arbitration award on the ground that the arbitrator was affiliated in any way with any party, or has a financial interest directly or indirectly in any party or in the outcome of the arbitration.
STATE OF NEW YORK
________________________________________________________________________
8710
IN SENATE
May 10, 2018
___________
Introduced by Sen. SEPULVEDA -- read twice and ordered printed, and when
printed to be committed to the Committee on Judiciary
AN ACT to amend the civil practice law and rules, in relation to grounds
for vacating an arbitration award on the basis of partiality of the
arbitrator
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Article 75 of the civil practice law and rules is amended
2 by adding a new section 7500 to read as follows:
3 § 7500. Definitions. As used in this article:
4 (a) "Arbitration" means a form of dispute resolution that is an alter-
5 native to litigation, in which the parties agree to be bound by the
6 determination of a neutral third party arbitrator.
7 (b) "Neutral third party arbitrator" means an arbitrator or panel of
8 arbitrators each of whom does not have an undisclosed known, direct, and
9 material interest in the outcome of the arbitration proceeding or a
10 known, existing, and substantial relationship with a party, counsel, or
11 representative of a party.
12 § 2. Section 7501 of the civil practice law and rules, as amended by
13 chapter 532 of the laws of 1963, is amended to read as follows:
14 § 7501. Effect of arbitration agreement. A written agreement to
15 submit any controversy thereafter arising or any existing controversy to
16 arbitration is enforceable without regard to the justiciable character
17 of the controversy and confers jurisdiction on the courts of the state
18 to enforce it and to enter judgment on an award; provided, however, that
19 any language requiring the controversy be submitted to an arbitrator or
20 arbitration organization that is not a neutral third party arbitrator,
21 as that term is defined in subdivision (b) of section seventy-five
22 hundred of this article, shall be deemed void; provided that it shall be
23 valid with respect to the requirement that the controversy be arbi-
24 trated. The requirement that the controversy be heard by a neutral third
25 party arbitrator may not be waived by party prior to the service on such
26 party of a demand for arbitration. Upon disclosure pursuant to section
27 seventy-five hundred five-a of this article of a known, direct, and
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD09174-01-7
S. 8710 2
1 material interest in the outcome of the arbitration proceeding or a
2 known existing and substantial relationship with a party, counsel, or
3 representative of a party, a party shall be deemed to have waived any
4 objection to the arbitrator or composition of any arbitration panel, by
5 failing to raise same prior to the commencement of the arbitration hear-
6 ing. In determining any matter arising under this article, the court
7 shall not consider whether the claim with respect to which arbitration
8 is sought is tenable, or otherwise pass upon the merits of the dispute.
9 § 3. The civil practice law and rules is amended by adding a new
10 section 7505-a to read as follows:
11 § 7505-a. Disclosure by arbitrator. (a) Before accepting appointment,
12 an individual who is requested to serve as an arbitrator, after making a
13 reasonable inquiry, shall disclose to all parties to the agreement to
14 arbitrate and the arbitration proceeding and to any other arbitrators
15 any known facts that a reasonable person would consider likely to affect
16 the impartiality of the arbitrator in the arbitration proceeding,
17 including:
18 (1) a financial or personal interest in the outcome of the arbitration
19 proceeding; and
20 (2) an existing or past relationship with any of the parties to the
21 agreement to arbitrate or the arbitration proceeding, their counsel or
22 representatives, a witness, or another arbitrator.
23 (b) An arbitrator has a continuing obligation to disclose to all
24 parties to the agreement to arbitrate and the arbitration proceeding and
25 to any other arbitrators any facts that the arbitrator learns after
26 accepting appointment which a reasonable person would consider likely to
27 affect the impartiality of the arbitrator.
28 (c) If an arbitrator discloses a fact required by subdivision (a) or
29 (b) of this section to be disclosed and a party timely objects to the
30 appointment or continued service of the arbitrator based upon the fact
31 disclosed, the objection may be a ground for vacating an award made by
32 the arbitrator.
33 (d) If the arbitrator did not disclose a fact as required by subdivi-
34 sion (a) or (b) of this section, upon timely objection by a party, the
35 court may vacate an award.
36 (e) An arbitrator appointed as a neutral arbitrator who does not
37 disclose a known, direct, and material interest in the outcome of the
38 arbitration proceeding or a known, existing, and substantial relation-
39 ship with a party is presumed to act with evident partiality.
40 § 4. This act shall take effect immediately.
