The Federal Arbitration Act is found at 9 U.S.C. Section 1 et seq. It was enacted in 1925, and provides for contractually-based compulsory and binding arbitration. The arbitrator or arbitration panel delivers an “arbitration award” as opposed to a “judgment” entered by a court of law. In arbitration under the Act, 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 instead of going to court, provided that, the arbitration is equivalent in fairness to the public courts.
After an award is entered by an arbitrator or arbitration panel, it must be “confirmed” in a court of law. Once confirmed, the award is reduced to an enforceable judgment, which may be enforced by the winning party in court, like enforcing any other judgment. The Federal Arbitration Act provides that the awards must be confirmed within one year; and any objection to an award must be challenged by the losing party within three months. An arbitration agreement may either be entered “prospectively”, that is, in advance of any actual dispute; or may be entered into by disputing parties after a dispute has arisen.
Section 2 of the Federal Arbitration Act declares that arbitration provisions will be subject to invalidation only for the same grounds generally applicable to contractual provisions. Consequently, any state law that disfavors the enforcement of arbitration agreements will be preempted by the Act. State laws that govern the procedures of arbitration, without affecting its enforcement, are outside the Act’s preemptive scope.