The Federal Arbitration Act (FAA) §10(a) sets forth four statutory grounds for vacating an arbitration award: (1) the award was procured by corruption, fraud or undue means; (2) evident partiality or corruption of the arbitrators; (3) the arbitrators were guilty of prejudicial misconduct during the course of the hearing; and (4) the arbitrators exceeded their powers or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made. For a wholly intrastate arbitration in New York to which the FAA does not apply, similar grounds are stated in CPLR §7511(b). Such arbitrations will be few in number when sizable commercial transactions are involved because the Supreme Court has interpreted the FAA broadly to mean “that if the subject matter of an arbitration merely affected interstate commerce, the FAA would apply,” the transaction need not actually be “in commerce.” Citizens Bank v. Alafabco, 539 U.S. 52, 56 (2003); Wien & Malkin v. Helmsley-Spear, 6 N.Y.3d 471, 486 n. 8 (2006).

Neither the FAA nor the CPLR contains a provision allowing an arbitration award to be challenged for an error of law, such as the English Arbitration Act 1996, §69(1) permits unless otherwise agreed by the parties. However, a fifth ground for challenging an arbitration award, was created by the federal judiciary—“manifest disregard of the law.” This ground “originated in dicta in Wilko v. Swan, 346 U.S. 427, 436-37 (1953), where Justice Reed wrote, ‘the interpretations of the law by arbitrators in contrast to manifest disregard are not subject, in the federal courts, to judicial review for error in interpretation.’” Wien & Malkin v. Helmsley-Spear, 6 N.Y.3d 471, 486 n. 10 (2006). This has been described as “a doctrine of last resort” because “its use is limited only to those exceedingly rare instances where some egregious impropriety on the part of the arbitrators is apparent, but where none of the provisions of the FAA apply.” Duferco Int’l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 389 (2d Cir.2003). The doctrine “gives extreme deference to arbitrators” (Wallace v. Buttar, 378 F.3d 182, 189 (2d Cir. 2004)), and it “imposes a heavy burden on the party seeking to vacate an arbitral award.” Sotheby’s International Realty v. Relocation Group, 588 Fed. Appx. 64, 65 (2d Cir. 2015) (unpublished). “Manifest disregard of the law may be found … if the arbitrator ‘understood and correctly stated the law but proceeded to ignore it.’” Willemijn Houdstermaatschappij, BV v. Standard Microsystems, 103 F.3d 9, 12 (2d Cir. 1997).