The pro-arbitration policy in the United States is based on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), the Federal Arbitration Act (FAA), and the jurisprudence of the U.S. Supreme Court interpreting and applying both the New York Convention and FAA. These legal documents ensure the enforceability of arbitration agreements and the resulting arbitral awards.
1. New York Convention
(Reference www.newyorkconvention.org/english)
On June 10, 1958, the United Nations Economic and Social Council (ECOSOC) adopted the New York Convention at their New York Conference on International Commercial Arbitration. On September 30, 1970, Congress implemented the New York Convention by enacting Chapter 2 of the FAA, thereby making the New York Convention binding domestic law in the United States.
Soon thereafter, the U.S. Supreme Court recognized in the context generally of forum selection clauses generally that “[t]here are compelling reasons why a freely negotiated private international agreement, unaffected by fraud, undue influence, or overweening bargaining power, … should be given full effect.” M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12-13 (1972).
The Supreme Court recognized specifically in the arbitration context that “[t]he goal of the Convention, and the principal purpose underlying American adoption and implementation of it, was to encourage the recognition and enforcement of commercial arbitration agreements in international contracts and to unify the standards by which agreements to arbitrate are observed and arbitral awards are enforced in the signatory countries.” Scherk v. Alberto-Culver Co., 417 U.S. 506, 520 n.15 (1974).
For additional information:
The New York Convention Guide
Guide to the New York Convention (2nd ed, 2024)
2. Federal Arbitration Act
(Reference uscode.house.gov/view.xhtml?path=/prelim@title9/chapter1&edition=prelim)
The Federal Arbitration Act (FAA) reflects the strong federal policy favoring arbitration of domestic and international commercial disputes and enforcement of domestic and international arbitration clauses and awards, with limited grounds for vacating such awards.
The Supreme Court has summarized the history and purpose of the FAA as follows:
“Congress enacted the FAA to replace judicial indisposition to arbitration with a ‘national policy favoring [it] and plac[ing] arbitration agreements on equal footing with all other contracts.’” Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576, 581 (2008), quoting Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006).
“The FAA’s overarching purpose is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate informal, streamlined proceedings.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 344 (2011)
Key provisions include:
Chapter 1. Declares domestic arbitration agreements “valid, irrevocable, and enforceable” (Section 2) and provides for the confirmation, vacatur, and modification of domestic arbitral awards (Sections 9-11).
Chapter 2. Implements the New York Convention and makes it broadly applicable to arbitration agreements and awards that have a significant foreign component.
Chapter 3. Implements the 1975 Inter-American Convention on International Commercial Arbitration (Panama Convention), applicable where the majority of parties to the arbitration agreement are nationals of member states of the Organization of American States (OAS) and those member states have ratified or acceded to the Panama Convention.
3. Supreme Court Jurisprudence
Decisions of the U.S. Supreme Court, the highest court in the United States, support the federal policy favoring arbitration in cases where the New York Convention or the FAA applies. The Supreme Court has stated that the FAA’s “centerpiece provision makes a written agreement to arbitrate ‘in any maritime transaction or a contract evidencing a transaction involving commerce … valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The “liberal federal policy favoring arbitration agreements,” Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983), manifested by this provision and the Act as a whole, is at bottom a policy guaranteeing the enforcement of private contractual arrangements: the Act simply ‘creates a body of federal substantive law establishing and regulating the duty to honor an agreement to arbitrate.” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625 (1985).
Decisions of the U.S. Supreme Court also support the federal policy favoring recognition and enforcement of domestic and international arbitral awards, with limited grounds for courts to refuse to enforce a tribunal’s award. The Supreme Court noted regarding FAA § 9, that on application for a judicial order confirming an arbitral award, “the court must grant” the order “unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title.” There is nothing discretionary about “must grant,” which unequivocally tells courts to confirm an award in all cases, except when one of the “prescribed” exceptions applies. Hall St. Assocs., L.L.C. v. Mattel, Inc., 128 S. Ct. 1396, 1405 (2008).