Federal Arbitration Act - Explained
Rules and Procedures Governing Federal Arbitrations
Written by Jason Gordon
Updated at April 3rd, 2023
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What is the Federal Arbitration Act?
The Federal Arbitration Act (FAA) provides the process and procedure for carrying out the arbitration.
The FAA applies when the dispute is subject to mandatory federal arbitration or when there is a voluntary arbitration agreement and the dispute involves federal law.
Next Article: Judicial Review of Voluntary Arbitration Back to: ALTERNATIVE DISPUTE RESOLUTION
What rules govern the arbitration process?
The rules governing an arbitration vary depending upon whether the arbitration is voluntary or mandatory.
In a voluntary arbitration, the parties may agree upon the rules to govern the proceeding.
It is rare that the parties will specifically state all of the governing provisions; rather, the agreement to arbitrate will agree that statutory provisions or a set of model rules will govern the arbitration proceeding.
- Note: The Revised Uniform Arbitration Act of 2000 is a model law commonly employed in voluntary arbitrations.
In mandatory arbitration, state law or court order dictates the rules governing the arbitration.
Notably, in 1925, Congress passed the Federal Arbitration Act (FAA) to encourage the use of arbitration to resolve conflicts.
The FAA provides the process and procedure for carrying out the arbitration.
The FAA applies when the dispute is subject to mandatory federal arbitration or when there is a voluntary arbitration agreement and the dispute involves federal law.
Of course, the parties to voluntary arbitration may agree to a different set of laws, but applying FAA standards may affect a party's ability to enforce the arbitrator's award through the court system.
Importantly, the FAA requires that where the parties have agreed to arbitrate, they must do so in lieu of going to court.
Discussion Question
Why do you think Congress found it necessary to establish uniform Federal Arbitration Procedures? How do you feel about a federal law attempting to control the state court procedure for recognizing and enforcing arbitration agreements?
Practice Question
Pam and Lisa enter into a contract with an arbitration clause covering any disputes. When a dispute arises, Pam and Lisa decide to submit the matter to arbitration. If the contract does not indicate, what rules apply to the arbitration process?
- Generally, state law would determine what are the default rules for arbitration. These vary from state to state. Most state arbitration procedures are similar to those of The Federal Arbitration Act of 1925. This Act is the governing arbitration legislation. It provides the laws and regulations that should govern the arbitration process. The FAA provides that, for the parties to apply for arbitration the arbitration agreement must be expressly written. This can be written as an express clause in the contract, or a separate arbitration contract between the parties or any other form of writing that the parties expressly indicate that arbitration shall be used. https://iclg.com/practice-areas/international-arbitration-laws-and-regulations/usa. In this situation, Pam and Lisa can enter a separate stand-alone arbitration agreement that will enable them to initiate the arbitration process.
Related Topics
- Alternative Dispute Resolution (Intro)
- What is the Settlement of a Legal Dispute?
- Demand Letter
- What is Mediation?
- What are the advantages and disadvantages of Mediation?
- How Do Parties Initiate Mediation?
- What is the process for carrying out a mediation?
- What is the process for challenging a mediation agreement?
- What is Arbitration?
- What are the Advantages of Arbitration
- Initiating Arbitration Voluntary and Statutorily Mandated Arbitration?
- What is the procedure for carrying out an arbitration?
- Rules governing the arbitration Federal Arbitration Act
- What is the Judicial Review of Voluntary Arbitration?
- What is the Judicial Review of Mandatory Arbitration?
- What is Review under the Federal Arbitration Act?
- How are Arbitration Awards enforced?
