- Federal Arbitration Act
In
United States law , the Federal Arbitration Act is astatute that provides for judicial facilitation of private dispute resolution through arbitration. It applies in both state courts and federal courts, as was held in Southland v. Keating. It applies where the transaction contemplated by the parties "involves" interstate commerce and is predicated on an exercise of the "Commerce Clause" powers given to Congress in the U.S. Constitution.The Federal Arbitration Act (found at [http://www.law.cornell.edu/uscode/html/uscode09/usc_sup_01_9_10_1.html 9 U.S.C. Section 1 et seq.] ), first enacted in 1925, provides for contractually-based compulsory and binding arbitration, resulting in an "arbitration award" entered by an arbitrator or arbitration panel as opposed to a "judgment" entered by a court of law. In an arbitration the parties give up the right to an appeal on substantive grounds to a court.
The Federal Arbitration Act requires that where the parties have agreed to arbitrate, they must do so in lieu of going to court, provided that the proceeding is fundamentally fair -- that is, equivalent in fairness to the public courts.
Once an award is entered by an arbitrator or arbitration panel, it must be "confirmed" in a court of law. Once confirmed, the award is then reduced to an enforceable judgment, which may be enforced by the winning party in court, like any other judgment. Under the Federal Arbitration Act awards must be confirmed within one year; while any objection to an award must be challenged by the losing party within three months. An arbitration agreement may be entered "prospectively" --that is, in advance of any actual dispute; or may be entered into by disputing parties once a dispute has arisen.
The Supreme Court, in [http://supct.law.cornell.edu/supct/html/06-989.ZS.html Hall v. Mattel] No. 06–989 (March 25, 2008), has ruled that, even if the parties agree in the arbitration agreement to allow expanded judicial review of the decision, the grounds for review specified in the FAA may not be expanded.
Additional information pertaining to the legislative history can be found at http://www.mac.doc.gov/nafta/usarb.htm
Preemption of state law
Section 2 of the Federal Arbitration Act declares that arbitration provisions will be subject to invalidation only for the same grounds applicable to contractual provisions generally. Consequently, any state law that disfavors the enforcement of arbitration agreements will be preempted by the FAA. State laws that govern the procedures of arbitration, but do not affect its enforcement, are outside the Act's preemptive scope.
A number of Supreme Court cases have dealt with the preemption of state laws by the Federal Arbitration Act:
*"Southland Corp. v. Keating ", 465 U.S. 1 (1984). Established the applicability of the FAA to contracts under state law
*"Perry v. Thomas ", 482 U.S. 483 (1987)
*"Volt Info. Scis. v. Bd. of Trs. ", 489 U.S. 468 (1989)
*"Allied-Bruce Terminix Cos. v. Dobson ", 513 U.S. 265 (1995)
*"Doctor's Assoc., Inc. v. Casarotto ", 517 U.S. 681 (1996)
*"Buckeye Check Cashing Inc. v. Cardegna ", 546 U.S. 440 (2006) Arbitrators must first hear challenge to legality of contract.
*"Preston v. Ferrer ", 552 U.S. ___ (2008) Act requires arbitration first even when state law provides for administrative dispute resolution
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