Arbitration News

SUMMARYOF U.S. ARBITRATION LAW

The United States is a common law country. As a result, opinions of its courts also constitute law. Each year, the FAA is supplemented through the myriad court decisions interpreting it. This case law comes from three levels of federal courts: the United States Supreme Court, the appellate courts and the trial courts. The U.S. judiciary has established an unambiguous presumption in favor of arbitration, and it has encouraged the use of arbitration, particularly for disputes arising out of international commercial transactions.

The respect of U.S. courts for party autonomy in the arbitral process has been reinforced by a trilogy of U.S. Supreme Court decisions in 1995. As noted above, in the Terminix case, the Court held that the FAA applied to all contracts that in fact involved interstate commerce.In Mastrobuono v. Shearson Lehman Hutton, the Court held that one must look to the intent of parties and the language of the arbitration clause in determining whether or not the parties intended to exclude any type of claims (in that case, a claim for punitive damages) from the scope of the arbitration clause.

SUMMARY OF U.S. ARBITRATION LAWThe Court noted that any such interpretation must be made in light of the federal policy requiring that disputes regarding the scope of arbitrable issues be resolved in favor of arbitration, which the Court held weighed against finding a restriction on the scope of the arbitrators' authority.In First Options of Chicago v. Kaplan, the Court held that one must also look to the arbitration clause to determine whether the parties have agreed to arbitrate any issue regarding the arbitrability of the dispute itself. The Court held that courts should not assume that the parties agreed to arbitrate arbitrability unless there is "clear and unmistakable" evidence that they did so. Otherwise, the issue should be determined by a court.

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	Did You Know?
	There is one drawback to arbitration. There are no guarantees that arbitration will be a fair process. Once a decision is rendered in a binding arbitration, the parties are generally stuck with that decision. Without the right to appeal, there is always the risk of being subject to the whims and prejudices of the arbitrator. Overall, this is probably the biggest drawback to the arbitration process.