International Arbitration: Confirmation of Awards and Functus Officio

Courts in the United States continue to affirm the strong presumption in favor of confirming arbitration awards while clarifying the narrow grounds for judicial intervention. This jurisprudence underscores the importance of well-drafted arbitration clauses, complete case presentation, and targeted post-award strategies for both law firms and their clients.

The common-law doctrine of functus officio holds that once arbitrators issue a final award, their authority ends—unless the parties agree otherwise or narrow exceptions apply. This rule protects the finality and integrity of arbitration by preventing post-award reconsideration by arbitrators who lack the institutional safeguards of judicial officers. Recent decisions illustrate its practical application, reinforcing the strong presumption in favor of confirmation in the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1–16, the “heavy” burden for vacatur under § 10(a), and that even a “barely colorable” justification suffices to uphold an award.

In this Legal Update, we examine these developments and provide our key takeaways.

Recent federal decisions shaping post-award arbitration review

• Smarter Tools¹ is a leading recent Second Circuit case on functus officio. The Second Circuit recognized that, although arbitrators ordinarily lose authority once they issue a final award, courts may remand for clarification or to conform the award to the parties’ agreement without violating the doctrine. The court endorsed exceptions where an award is ambiguous, fails to address a contingency, allows multiple interpretations, or lacks the contractually required form (in Smarter Tools, a “reasoned award”). Remanding to obtain a properly reasoned award was deemed a permissible § 11 “form” correction—not a merits redo—consistent with arbitration’s goals of efficiency and finality. The panel rejected the argument that the absence of a reasoned award mandates vacatur under § 10(a)(4), and confirmed the amended award once the arbitrator provided basic reasoning on the central issues.
• Eletson,² while not a functus officio case, complements Smarter Tools by illustrating how courts review arbitral awards and confirm those portions not subject to vacatur. The court upheld the merits and fee determinations as within the tribunal’s scope, but set aside portions of the award imposing liability on non‑parties and enjoining non‑arbitral actions. The opinion emphasizes that (1) awards are divisible for confirmation; (2) § 11 permits modification where arbitrators decide matters “not submitted” if the core merits remain intact; (3) binding non‑signatories is a judicial question absent clear delegation; and (4) manifest disregard requires proof the arbitrator knowingly ignored controlling law. Eletson affirms that targeted modification, not wholesale vacatur, is consistent with the FAA and New York Convention.
• Key Investment Services³ reaffirms deference to arbitral tribunals in domestic cases. The Second Circuit declined to vacate a FINRA award where the panel addressed issues “inextricably tied” to the submitted claims, acted within the submission agreement and applicable rules, and provided a plausible legal basis for its award. The court emphasized that excess-of-powers challenges turn on whether arbitrators had contractual authority to reach an issue, not whether they decided it “correctly,” and reaffirmed the narrow scope of “manifest disregard.” It also upheld the award’s structure, including attorneys’ fees treated as punitive damages under state law, so long as a plausible legal interpretation supported the result.
• Flintlock⁴ continues this pattern, sustaining an award where the tribunal interpreted prior awards and settlements to allocate recoveries under the parties’ agreement. The Second Circuit rejected claims that the panel “rewrote” earlier instruments, finding instead that the arbitrators acted within their interpretative mandate. The court also rejected challenges based on “irrationality” and public policy, applying a presumption of validity under both the FAA and the New York Civil Practice Law and Rules (CPLR), and emphasizing that mere disagreement with the arbitrators’ reading does not amount to an excess of power or manifest disregard.
• Acorda⁵ adds two important points relevant to award-confirmation challenges. First, on appellate jurisdiction, a petition to confirm or modify an award under the FAA does not “arise under” patent law merely because the underlying dispute involved patent issues; rather jurisdiction follows the FAA framework, and the Federal Circuit transferred the appeal to the Second Circuit. Second, on the merits, the tribunal’s reliance on state doctrines—such as the New York’s voluntary-payment rule—to limit restitution after finding Brulotte⁶ (which bars patent royalties after a patent expires) inapplicable did not constitute manifest disregard. Brulotte did not clearly compel the payment of retroactive refunds, and the arbitrators reasonably relied on contract provisions and state law to limit recoupment to protested payments. The court also reaffirmed that “manifest disregard” supports vacatur, not modification—reinforcing remedial discipline under §§ 10 and 11.

Key takeaways:

• Finality of arbitration awards remains paramount: Courts may remand to correct procedural or formal defects, modify portions of awards beyond the arbitrator’s authority, or—rarely—vacate for clear excesses of power. However, the strong presumption favoring confirmation of arbitration awards remains firmly in place.
• Well-drafted arbitration clauses are essential: Arbitration clauses should specify the award’s form (e.g., “reasoned award”) and define the scope of the arbitrator’s authority. Broader grants of authority strengthen the award’s finality and limit opportunities for challenge.
• Clarification is preferred over vacatur: Where an award is unclear or incomplete, courts favor remand for clarification or modification rather than outright invalidation.
• Awards may be partially confirmed: Courts can preserve valid portions while modifying or removing only those parts that exceed arbitral authority.

Please contact any of the authors, or your usual Mayer Brown contact, should you wish to discuss anything in this Legal Update.