Forging American Arbitration Policy: Judicial Interpretation of the Federal Arbitration Act

Abstract:     
Although American courts initially were hostile to agreements to arbitration, the Federal Arbitration Act (FAA) instructed the courts - at least, on the face of things, the federal courts - to enforce arbitration clauses. It has become clear in the past generation that the FAA has accomplished much more. The currrent state of affairs is not the result of the legislation alone. The central thrust of the FAA was clear, but courts could surely have thwarted its impact by parsimonious interpretation. This is true in part because Congress failed to deal definitively with fundamental issues - including whether the FAA was to apply in state court proceedings and whether the Act provided federal subject matter jurisdiction. It fell to the courts to pick up the pieces left by the statutory language. The purpose of this brief piece is to review selected topics on which the courts have been required to fashion rules affecting the impact of the FAA. First are matters addressed by the legislation, but unclearly. As to these, courts have had to engage in basic statutory interpretation. Second - and perhaps more interesting - are matters not addressed at all by the FAA. As to these, the courts have had to decide whether (and, if so, how) to fill in the gaps in the legislation. In both sets of examples, Congress probably should have been clearer. And in both sets, the courts have forged courses that generally promote a broad application of the FAA. In the end, the broad, well-established American arbitration policy embodied in the FAA has been realized only because courts have been willing to step in to interpret and fill gaps as needed.

Number of Pages in PDF File: 18

Keywords: Arbitration, Alternative Dispute Resolution

JEL Classification: K40, K41

Accepted Paper Series