Two-party contract, three-party dispute, federal court selects arbitrators

BP and Exxon disputed the condition of an offshore rig operated by Noble off the coast of Libya; Noble sought payment from either of them.  BP Exploration Libya Ltd. v. ExxonMobil Libya Ltd., No. 11-20547 (July 30, 2012).  The resulting three-party dispute ran into practical problems because the arbitration clause had a procedure for selecting three arbitrators that was only workable in a two-party dispute.  The Fifth Circuit found that a “mechanical breakdown” had occurred that justified federal court intervention under the FAA, 9 U.S.C. § 5, but that the district court exceeded its authority by ordering that arbitration proceed with five arbitrators rather than the three specified by the agreement.  The Court remanded with instructions as to the process for the district court to follow in forming a three-arbitrator panel.