Opinion
In this appeal, we consider the appropriate level of deference that the courts, in performing their de novo review of whether an arbitration award violates public policy, should give to the arbitrator’s factual findings. The defendant, Handy and Harman, Inc., appeals1 from the judgment of the trial court granting the application of the plaintiff, HH East Parcel, LLC, to confirm, and denying the defendant’s application to vacate, an arbitration award rendered in favor of the plaintiff. On appeal, the defendant claims that the trial court, in confirming the award, improperly deferred to the arbitrator’s factual findings when the court concluded that a per diem provision in a contract for the sale and remediation of real estate was a valid liquidated damages clause, rather than a penalty clause, the enforcement of which would violate the public policy of Connecticut. We conclude that the trial court properly deferred to the arbitrator’s factual findings in determining that the award did not violate public policy. Accordingly, we affirm the judgment of the trial court.
The record reveals the following undisputed background facts and procedural history. On or about December 31, 2003, the defendant sold real property located in Fairfield to the plaintiff for $8 million. The purchase and sale agreement (purchase agreement) required the defendant to demolish all existing buildings and structures on the property, and to remediate all environmental contamination on the property by December 31, 2004. The purchase agreement also pro*192vided that time was of the essence with regard to the remediation. Sections 14 and 15 of the purchase agreement contained a per diem clause that required the defendant to pay to the plaintiff $5000 for each day after December 31, 2004, that the defendant had failed to complete the demolition and remediation as specified therein.
Although the plaintiff paid the defendant $8 million and received title to the property, the defendant failed to complete the remediation by December 31, 2004, as agreed to by the parties. The defendant also failed to pay the necessary contractors and subcontractors for remediation services rendered by December 31, 2004, and they placed various mechanic’s liens on the property. Thus, the parties then entered into an environmental indemnification agreement (indemnification agreement) that required the defendant to indemnify and hold harmless the plaintiff for the losses caused by the defendant’s failure to complete the remediation.
Thereafter, on April 5, 2005, the plaintiff filed a demand for arbitration with the American Arbitration Association (association) pursuant to § 6 of the indemnification agreement,2 and served a copy of that demand *193on the defendant.3 Attorney Edward V. Lahey, Jr., was selected as the arbitrator, and he conducted a two day arbitration in Stamford. At the arbitration, the defendant did not dispute its liability for breach of the purchase agreement, but did dispute the validity of the $5000 per diem clause, which the defendant claimed was an unenforceable penalty. The plaintiff contended, however, that the per diem clause was a valid liquidated damage provision. The arbitrator issued an award in December, 2005, upon concluding that the $5000 per diem clause was a reasonable and valid liquidated damages provision that had been properly negotiated by the parties. The arbitrator ordered the defendant to pay the plaintiff $5000 per day for all unpaid per diem charges occurring since January 1, 2005, through November 30, 2005, for a total of $1,670,000, and directed the defendant to begin making monthly payments on that sum starting January 1, 2006. The arbitrator also ordered the defendant to pay the plaintiff 6 percent interest on all unpaid per diem charges, and to fund and complete the demolition and remediation of the property without delay.4
Shortly thereafter, the plaintiff brought this application to confirm the arbitration award pursuant to General Statutes § 52-417,5 and the defendant filed its *194application and cross motion to vacate the award pursuant to General Statutes § 52-418 (a),6 claiming, inter alia, that “the award violate[d] public policy by awarding a draconian, limitless penalty . . . .”7 The trial court relied on our decision in Schoonmaker v. Cummings & Lockwood of Connecticut, P.C., 252 Conn. 416, 747 A.2d 1017 (2000), and noted that, although it was required to review the award de novo because the defendant claimed that it violated the well established public policy against the enforcement of penalty clauses in contracts, it nevertheless was obligated to defer to the arbitrator’s factual findings and interpretation of the *195underlying contract. The trial court determined that the arbitrator properly applied Connecticut law to conclude that the purchase agreement contained a valid liquidated damages clause based on his findings that the damages resulting from the breach of the contract would be difficult to estimate or provide, that the parties had intended to liquidate any resulting damages, and that the amount agreed upon in the contract was not unreasonable. The trial court also conducted, however, an additional review of the record in detail to determine whether the arbitrator’s findings were in fact supported by substantial evidence, and concluded that the findings were supported by: (1) the negotiated nature of the per diem charge and the date that it would begin; and (2) the difficulties of ascertaining economic loss because of the fluctuating liens on the property and determining how long the remediation would take. Accordingly, the trial court rejected the defendant’s claim that the arbitration award violated public policy, and rendered judgment confirming the award. This appeal followed.8
On appeal, the defendant claims that the trial court improperly deferred to the arbitrator’s factual findings, *196because the issue of whether the per diem clause was a penalty is a mixed question of fact and law subject to de novo review. The defendant also claims that the trial court improperly confined its review to the issue of whether the arbitrator’s findings were supported by substantial evidence, and claims that, even under that more restrictive standard of review, the evidence in the record does not support the arbitrator’s conclusion that the per diem clause was not an illegal penalty. In response, the plaintiff relies on our recent decision in C. R. Klewin Northeast, LLC v. Bridgeport, 282 Conn. 54, 919 A.2d 1002 (2007), and contends that, in conducting its public policy analysis, the trial court properly relied upon and deferred to the arbitrator’s factual findings. The plaintiff further argues that, although the trial court did not need to conduct that level of review, that court nevertheless properly determined that the arbitrator’s factual finding that the parties intended to liquidate their damages, rather than impose an illegal penalty, is supported by substantial evidence in the record.
At the outset, we note that whether the trial court engaged in the correct level of review of the arbitrator’s decision presents a question of law over which our review is plenary. See id., 93; see also LaSalla v. Doctor’s Associates, Inc., 278 Conn. 578, 586, 898 A.2d 803 (2006) (“the proper scope of review, in both the trial court and this court, for a colorable claim that an award violated public policy is plenary”).
Most of the general principles at issue herein are undisputed, namely, that “arbitration is a creature of contract, whereby the parties themselves, by agreement, define the powers of the arbitrators. . . . Moreover, we have stated that when the parties have established the authority of the arbitrator, the extent of our judicial review of the award is delineated by the scope of the parties’ agreement. . . . When the parties *197have not restricted the scope of the arbitrator’s authority, the resulting award is not subject to de novo review even for errors of law so long as the award conforms to the submission. . . .
“The long-standing principles governing consensual arbitration are, however, subject to certain exceptions. Although we have traditionally afforded considerable deference to the decisions of arbitrators, we have also conducted a more searching review of arbitral awards in certain circumstances. In Garrity v. McCaskey, [223 Conn. 1, 6, 612 A.2d 742 (1992)], this court listed three recognized grounds for vacating an award: (1) the award rules on the constitutionality of a statute . . . (2) the award violates clear public policy ... or (3) the award contravenes one or more of the statutory proscriptions of § 52-418 (a). . . . The judicial recognition of these grounds for vacatur evinces a willingness, in limited circumstances, to employ a heightened standard of judicial review of arbitral conclusions, despite the traditional high level of deference afforded to arbitrators’ decisions when made in accordance with their authority pursuant to an unrestricted submission.” (Citations omitted; internal quotation marks omitted.) Schoonmaker v. Cummings & Lockwood of Connecticut, P.C., supra, 252 Conn. 426-28.
“A court’s refusal to enforce an arbitrator’s award . . . because it is contrary to public policy is a specific application of the more general doctrine, rooted in the common law, that a court may refuse to enforce contracts that violate law or public policy. . . . This rule is an exception to the general rule restricting judicial review of arbitral awards. . . . The exception, however, is narrowly construed and ... is limited to situations where the contract as interpreted would violate some explicit public policy that is well defined and dominant, and is to be ascertained by reference to the laws and legal precedents and not from general consid*198erations of supposed public interests. ... To be vacated under the narrow public policy exception, the award must be clearly illegal or clearly violative of a strong public policy. . . . Furthermore, [t]he party challenging the award bears the burden of proving that illegality or conflict with public policy is clearly demonstrated.” (Citations omitted; internal quotation marks omitted.) C. R. Klewin Northeast, LLC v. Bridgeport, supra, 282 Conn. 93-94.
The seminal case with respect to the nature of the judicial review given to a claim that an arbitration award violates public policy is Schoonmaker v. Cummings & Lockwood of Connecticut, P.C., supra, 252 Conn. 416. In that case, which involved a public policy challenge under rule 5.6 of the Rules of Professional Conduct to a partnership agreement provision that had conditioned the receipt of retirement benefits on compliance with a noncompete clause, we concluded that, “where a party challenges a consensual arbitral award on the ground that it violates public policy, and where that challenge has a legitimate, colorable basis, de novo review of the award is appropriate in order to determine whether the award does in fact violate public policy.”9 Id., 429; see *199also id., 428-29 (discussing expressions of public policy in statutes, case law or administrative regulations and stating “whether . . . there exists a public policy mandate with which an arbitral award must conform . . . indisputably involves an issue of law properly resolved by an exercise of this court’s plenary authority” [citations omitted; internal quotation marks omitted]). We emphasized, however, our “adhere[nce] to the longstanding principle that findings of fact are ordinarily left undisturbed upon judicial review,” and “deferred] to the arbitrator’s interpretation of the agreements regarding the scope of the forfeiture upon competition provision, as well as the terms upon which postemployment benefits are offered to former employees. We conclude only that as a reviewing court, we must determine, pursuant to our plenary authority and giving appropriate deference to the arbitrator’s factual conclusions, whether the forfeiture provision in question violates those policies. ” Id., 432. Indeed, we noted that “in undertaking de novo review of the plaintiffs public policy claim, we defer to the arbitrator’s interpretation of the agreements .... We therefore do not substitute our own reading of the contract terms for that of the arbitrator, but intervene only to the extent that those terms, as interpreted, violate a clearly established public policy.”10 (Emphasis added; internal quotation marks omitted.) Id., 432 n.8.
*200Our case law following Schoonmaker has emphasized that a reviewing court is bound by the arbitrator’s factual findings in reviewing a claim that an award rendered in a consensual arbitration violates this state’s public policy. See State v. AFSCME, AFL-CIO, Council 4, Local 2663, 257 Conn. 80, 95, 777 A.2d 169 (2001) (“To the extent that the plaintiff claims that the award violated public policy because the arbitrator misapplied the [contract’s] definition of salaried employee, we decline to undertake judicial review of the arbitrator’s factual determinations in interpreting the terms of the contract. The arbitrator made a factual determination that commission staff attorneys are hourly, rather than salaried employees.”); Groton v. United Steelworkers of America, 254 Conn. 35, 52, 757 A.2d 501 (2000) (noting that “legal system . . . ordinarily give[s] great deference ... to both the factual and legal determinations of the arbitrators,” and that even in a de novo public policy challenge, “we give deference to the arbitrator’s factual determinations” [citation omitted]).
The arbitrator’s factual findings are equally binding when the public policy claim has been raised before the arbitrator in the form of a defense that the underlying contract is illegal. In C. R. Klewin Northeast, LLC v. Bridgeport, supra, 282 Conn. 95, we relied on Schoonmaker, and further explained the significance of the arbitrator’s findings of fact. In that case, a city had claimed that the arbitration award was made pursuant to a construction contract that had been procured illegally, and that confirming it would violate the state’s public policy against corruption in municipal contracting. Id., 92. We agreed with the contractor’s argument that “the city’s arguments conflate two issues: (1) whether enforcement of an arbitration award, which deals with the lawfulness of the award itself, violates public policy; and (2) whether the contract underlying *201the award violates public policy because of its terms or the manner in which it was procured.” Id. We noted that, “[¡Judicial review of whether an arbitration award violates public policy is de novo, but not completely unfettered. The legal determination of whether a particular award violates public policy necessarily depends on the facts found by the arbitrator during those proceedings.” (Emphasis added.) Id., 94. Thus, we concluded that “the city’s public policy claim [was] functionally indistinguishable from its contract illegality defense, and because the city waived its opportunity to present that claim before the panel, the trial court properly determined that the city had waived its public policy claim because there was no factual predicate under which it could be reviewed.” Id., 93; see also Bridgeport v. Kasper Group, Inc., 278 Conn. 466, 499, 899 A.2d 523 (2006) (Vertefeuille, J., dissenting) (deferring to arbitrator’s factual findings in concluding that contract did not violate public policy against illegal procurement and stating that “I would not review the correctness of the finding, implicit in the arbitrator’s award, that the contract was not illegally procured”). Thus, we defer to the arbitrator’s factual findings, even when the public policy determination for the courts turns on a “subsidiary factual determination” that is “fundamentally indistinguishable” from, or inextricably linked to, a substantive contract defense argued before the arbitrator. C. R. Klewin Northeast, LLC v. Bridgeport, supra, 96.11
We acknowledge that several Appellate Court decisions cited by the parties conclude that, in reviewing a claim that an arbitration award violates public policy, *202the trial court should review the arbitrator’s findings of fact to determine that they are supported by substantial evidence.12 See Enfield v. AFSCME, Council 4, Local 1029, 100 Conn. App. 470, 477, 918 A.2d 934, cert. denied, 282 Conn. 924, 925 A.2d 1105 (2007); Board of Police Commissioners v. Stanley, 92 Conn. App. 723, 734-36, 887 A.2d 394 (2005); Metropolitan District Commission v. AFSCME, Council 4, Local 184, 89 Conn. App. 680, 686, 874 A.2d 839, cert. denied, 275 Conn. 912, 882 A.2d 673 (2005). These cases present, however, an incorrect statement of the law in the context of consensual arbitrations, like that in the present case, because they are founded on the Appellate Court’s reliance on Burns v. General Motors Corp., 80 Conn. App. 146, 151-52, 833 A.2d 934, cert. denied, 267 Conn. 909, 840 A.2d 1170 (2003), which is a lemon law arbitration case. See Metropolitan District Commission v. AFSCME, Council 4, Local 184, supra, 686. The substantial evidence standard is inapposite in the context of consensual arbitration awards because the use of that standard is statutorily prescribed for lemon law cases by General Statutes (Sup. 2008) § 42-181 (c) (4).13 See *203General Motors Corp. v. Dohmann, 247 Conn. 274, 281-82, 722 A.2d 1205 (1998). Indeed, the use of the substantial evidence standard, which “permit[s] judicial review that is broader than that traditionally available for § 52-418 review of voluntary arbitration awards”; Motor Vehicle Manufacturers Assn, of the United States, Inc. v. O'Neill, 212 Conn. 83, 96, 561 A.2d 917 (1989); for the judicial review of awards that result from arbitration that is statutorily compelled, saves those statutes from constitutional jeopardy under clauses protecting rights to due process and access to the courts. Id., 94; accord Chmielewski v. Aetna Casualty & Surety Co., 218 Conn. 646, 660-63, 591 A.2d 101 (1991) (factual determinations in compulsory arbitration in uninsured motorist cases pursuant to General Statutes § 38-175c to be reviewed *204under substantial evidence standard applicable to factual determinations by administrative agencies); see also O & G/O’Connell Joint Venture v. Chase Family Ltd. Partnership No. 3, 203 Conn. 133, 154-55, 523 A.2d 1271 (1987) (trial court lacked authority to determine that there was insufficient evidence to support arbitrator’s award of lost opportunity damages because “judicial review of arbitration awards is even more restrictive than judicial review of a decision of an administrative agency under the Uniform Administrative Procedure Act, which has been interpreted as allowing a court to ‘do no more, on the factual questions presented, than to examine the record to determine whether the ultimate findings were supported ... by substantial evidence’ ”).14 Accordingly, we conclude that courts are bound by the arbitrator’s factual findings when reviewing a claim that an award violates public policy,15 even if that claim has been addressed by the arbitrator in the context of a substantive attack on the validity of the contract.16
*205In the present case, it is undisputed that the defendant’s claims implicate the clearly established public policy against the enforcement of penalty clauses in contracts. See, e.g., American Car Rental, Inc. v. Commissioner of Consumer Protection, 273 Conn. 296, 306-307, 869 A.2d 1198 (2005); Berger v. Shanahan, 142 Conn. 726, 731-32, 118 A.2d 311 (1955). A clause fixing damages for a contractual breach, however, may be a permissible liquidated damages clause, rather than an illegal penalty clause, “if three conditions are satisfied: (1) The damage which was to be expected as a result of a breach of the contract was uncertain in amount or difficult to prove; (2) there was an intent on the part of the parties to liquidate damages in advance; and (3) the amount stipulated was reasonable in the sense that it was not greatly disproportionate to the amount of the damage which, as the parties looked forward, seemed to be the presumable loss which would be sustained by the contractee in the event of a breach of the contract.” (Internal quotation marks omitted.) American Car Rental, Inc. v. Commissioner of Consumer Protection, supra, 307, quoting Berger v. Shanahan, supra, 731-32. Thus, in fashioning the award, the arbitrator considered the legality of the clause at issue, and ruled directly on the public policy concerns implicated by this case.
Accordingly, we engage in a de novo review of the arbitrator’s application of these legal principles to his factual findings. The arbitrator credited the testimony of Paul Dixon, the defendant’s negotiator, who, during negotiations, had proposed an initial liquidated damages figure of $1500, then $2500, and then finally increased that number to $5000, but commencing 180 days later than the parties originally had intended. The arbitrator then relied on the testimony of Michael Bradley, the plaintiffs negotiator, who testified that the plaintiff expected to earn $5000 per day from the property, which “is a valid proxy for damage caused by *206inability to use the asset acquired . . . .” Finally, the arbitrator concluded that liquidation of damages was appropriate because the party in breach retained the power to stop the damages by remediating the property. The arbitrator emphasized that the $5000 per diem figure was agreed upon by “representatives of two sophisticated businesses . . . .”
Thus, we conclude, on the basis of the facts as found by the arbitrator, that the per diem clause was a valid liquidated damages provision. In particular, we note that it was actively negotiated by the parties in an attempt to reach an agreement on the sale of the property. See Hendricks Property Management Corp. v. Birchwood Properties Ltd. Partnership, 741 N.W.2d 461, 470 (N.D. 2007) (“where experienced parties and their attorneys had multiple opportunities to examine the contracts and discuss their terms, including the liquidated damages clauses, we conclude the evidence supports the district court’s finding that the liquidated damages clauses were the result of reasonable endeavor by the parties to fix compensation”). We also emphasize that the arbitrator found it to be reasonable in light of the anticipated damages to the plaintiff from its inability to use the property, as well as the anticipated rate of return.17 Cf. American Car Rental, Inc. v. Commissioner of Consumer Protection, supra, 273 Conn. 309 (concluding that $150 per occurrence “speeding” fee *207was unreasonable when it “was more than 400 times the potential damage incurred” by rental vehicle, as “the hearing officer calculated the damage incurred by the plaintiff as a result of the operation of a rental vehicle at eighty miles per hour for two minutes at thirty-seven cents”); Schoonmaker v. Cummings & Lockwood of Connecticut, P.C., supra, 252 Conn. 435 n.12 (reasonableness of attorney’s fees, although implicating public policy set by rule 1.5 of the Rules of Professional Conduct, remains question of fact requiring deference to arbitrator’s findings). Thus, we conclude that the trial court properly determined that the arbitrator’s enforcement of the per diem clause, which was actively negotiated by two sophisticated commercial parties that had the ample assistance of counsel,18 does not offend the public policy of our state.
The judgment is affirmed.
In this opinion the other justices concurred.