Endurance Specialty Insurance Limited v. Horseshoe Re Limited

Background

Endurance brought a petition in New York State Supreme Court seeking to remove and replace Sir Bernard Eder, the presiding arbitrator in an ongoing arbitration with Horseshoe in Bermuda. Endurance alleged that Sir Bernard was biased. The arbitration arose from two materially identical reinsurance contracts. The contracts required arbitration in Hamilton, Bermuda, under Bermuda procedural law and New York substantive law. They also required the arbitrators to be completely impartial and disinterested in the parties and the result.

After the party-appointed arbitrators could not agree on an umpire, the International Chamber of Commerce Court appointed Sir Bernard on October 6, 2022. Endurance challenged that appointment before the International Chamber of Commerce Court, which rejected the challenge on February 9, 2023. Endurance then filed its state-court petition. Horseshoe removed the case to federal court under provisions of the Federal Arbitration Act implementing the New York Convention.

The court considered two motions: Endurance’s motion to remand the case to New York State Supreme Court and Horseshoe’s motion to dismiss the petition for failure to state a claim.

Remand and Federal Jurisdiction

The court held that the arbitration fell under the New York Convention because it arose from a commercial legal relationship that was not entirely domestic. Both entities were based in Bermuda, and the arbitration was located there. Under Section 203 of the Federal Arbitration Act, federal district courts have original jurisdiction over actions or proceedings falling under the Convention.

The court rejected Endurance’s argument that Section 203 covers only requests to compel arbitration, enforce or vacate an arbitration award, obtain an injunction supporting arbitration, or stop an incompatible arbitration. The court explained that later decisions had interpreted Section 203 more broadly to include relief closely connected to an international arbitration. A petition seeking to disqualify and replace the presiding arbitrator was, in the court’s view, especially closely connected to the arbitration. The court therefore held that it had federal subject-matter jurisdiction and denied Endurance’s motion to remand.

Motion to Dismiss

The court held that the parties’ choice of Bermuda procedural law was enforceable and that Bermuda law governed the request to remove Sir Bernard. The parties agreed that Section 34(1) of the Bermuda Arbitration Act applied. That provision states that “the Court” may remove an arbitrator who has misconducted himself or the proceedings, and the Act defines “Court” as the Supreme Court of Bermuda. The court therefore concluded that only the Supreme Court of Bermuda could remove an arbitrator in this proceeding and that this federal court lacked authority to grant Endurance’s requested relief.

The court also concluded that Endurance’s allegations would not establish bias even if the federal court had authority to remove Sir Bernard. Under the Bermuda standard, an arbitrator should be removed only when there is a “real danger of bias.” Endurance relied on the disclosure of the parties’ preferences for an arbitrator with Sir Bernard’s background and on Sir Bernard’s treatment of Endurance’s counsel in an unrelated arbitration. The court agreed with the International Chamber of Commerce Court that these facts did not establish the required danger of bias. The court further stated that the allegations did not show a clearly apparent appearance of bias under New York law.

Disposition

Judge John G. Koeltl denied Endurance’s motion to remand and granted Horseshoe’s motion to dismiss the petition. The Clerk was directed to dismiss the petition, close all pending motions, and close the case. The opinion does not state that the dismissal was with or without prejudice.