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FMG Law Blog Line

Arbitration Agreements Cannot Change the Rules for Judicial Review of a Final Award

Posted on: November 18th, 2015

By: Bart Gary

Agreements to arbitrate are now uniformly enforceable throughout the country. While some states have shown reluctance to enforce arbitration agreements because they are seen as ousting the courts of jurisdictions, an agreement that evidences commerce among the states is controlled by the federal arbitration act. Almost any contract has some effect on interstate commerce. The federal law favors arbitration agreements and trumps any state or local law that conflict with the general enforceability of the agreement. The parties may freely agree upon the details about the conduct of the arbitration, including such terms as the location of the hearing, the arbitrator or how the arbitrator will be selected, the number of arbitrators, and whether and to what extent prehearing discovery will be allowed. Most agreements incorporate a set of rules that describe the process of the arbitration, and such agreements are also enforceable.

            Arbitration awards are usually final and binding and may be enforced in the courts by a procedure called confirmation, which is intended to be a quick and inexpensive way to convert the award to a judgment. Most statutes, including the federal act, allow limited grounds to challenge or vacate an award in court, usually for some egregious misconduct by a party or an arbitrator, such as fraud. Challenging the award is the one area where the courts restrict the parties’ freedom to contract. Efforts to expand the grounds to challenge the award have been uniformly unsuccessful, because those efforts would frustrate the policy of finality to the arbitration process. Parties have also attempted to avoid any judicial review of the award, for example with language in the arbitration agreement that the parties “hereby expressly agree not to challenge the validity of the arbitration or the award.” Recently the Georgia Court of Appeals held that such a term was against public policy and not enforceable. The court reasoned that just as parties may not by agreement expand the grounds to challenge an award, they may not by agreement “waive or eliminate a party’s right to apply to a court to vacate or modify an award on the statutory grounds.”

Atlanta Flooring Design Centers, Inc. v. R.G.Williams Constr. Inc., 333 Ga. App. 528 (2015).

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