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Arbitration

Arbitration is a private, out-of-court dispute resolution process—usually between parties to a contract—in which the dispute is resolved by one or more arbitrators rather than by judges and juries in the court system.

In Texas, arbitration is governed by both federal and state laws. The Federal Arbitration Act (FAA) applies to arbitration agreements that involve interstate commerce, which can cover a wide range of contracts. Additionally, Texas has its own arbitration statute, the Texas Arbitration Act (TAA), which is found in Chapter 171 of the Texas Civil Practice and Remedies Code. The TAA applies to arbitration agreements that are entirely within the state of Texas and not covered by the FAA. Both the FAA and TAA favor the enforcement of arbitration agreements and require courts to compel arbitration when a valid agreement exists and the dispute falls within its scope. Arbitration in Texas is a binding process, and the arbitrator's decision, known as an award, is final and enforceable in court, with very limited grounds for appeal or review. Parties can agree to arbitration through a clause in a contract or a separate agreement, and they can also decide on procedural rules, the choice of arbitrator(s), and other specifics of the arbitration process.



Texas Statutes & Rules

Texas Civil Practice and Remedies Code - Section 171.001 et seq.: General Provisions of Arbitration
This section outlines the general provisions of arbitration in Texas, including the validity and enforceability of arbitration agreements.

Under Texas law, a written agreement to arbitrate is valid, enforceable, and irrevocable, except on grounds that exist at law or in equity for the revocation of any contract. This includes agreements to arbitrate present or future disputes. The statute reflects the state's policy favoring arbitration as a means of resolving disputes and limits the courts' involvement in arbitration proceedings. It also provides for the appointment of arbitrators if the parties cannot agree on one.

Texas Civil Practice and Remedies Code - Section 171.041 et seq.: Arbitration Proceedings
This section provides the procedures for conducting arbitration proceedings in Texas.

The Texas Civil Practice and Remedies Code sets forth the procedural aspects of arbitration, including the initiation of proceedings, the selection and powers of arbitrators, and the conduct of the arbitration hearing. It allows parties to agree on the procedures to be followed by the arbitrator in conducting the proceedings. In the absence of an agreement, the arbitrator has the power to conduct the arbitration in a manner they consider appropriate for a fair and expeditious resolution of the dispute.

Texas Civil Practice and Remedies Code - Section 171.081 et seq.: Provisional Remedies
This section addresses the availability of provisional remedies in the context of arbitration in Texas.

Texas law permits a court to grant provisional or interim remedies before an arbitration award is made. This includes the appointment of receivers or the issuance of injunctions. The purpose of these remedies is to preserve the status quo and the subject matter of the arbitration, ensuring that the arbitration process is not rendered ineffectual by changes in circumstances or actions by one of the parties.

Texas Civil Practice and Remedies Code - Section 171.087: Confirmation of Award
This section deals with the confirmation of arbitration awards by Texas courts.

After an arbitrator has made an award, any party to the arbitration may request the court to confirm the award. Unless the award is vacated, modified, or corrected on a party's application within the time limits set by the statute, the court must confirm the award. Once confirmed, the award has the same effect as a judgment of the court and is enforceable in the same manner.

Texas Civil Practice and Remedies Code - Section 171.091 et seq.: Vacating Award
This section provides the grounds upon which an arbitration award may be vacated by a Texas court.

An arbitration award may be vacated if the award was obtained through corruption, fraud, or other undue means; if there was evident partiality by an arbitrator; if the arbitrator was guilty of misconduct; or if the arbitrator exceeded their powers. The application to vacate an award must be made within 90 days after the award is delivered to the applicant, except in cases where the award was obtained through corrupt means, in which case the application must be made within 90 days after the grounds are known or should have been known.

Texas Civil Practice and Remedies Code - Section 171.098: Appeal
This section outlines the appeal process for orders related to arbitration.

An appeal may be taken from an order denying an application to compel arbitration, an order granting an application to stay arbitration, an order confirming or denying confirmation of an award, an order modifying or correcting an award, or from a judgment or decree entered pursuant to the provisions of the Texas arbitration statutes. The appeal must be taken in the manner and to the same extent as from orders or judgments in a civil action.

Federal Statutes & Rules

Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16
The FAA provides the legal foundation for the enforcement of arbitration agreements and the conduct of arbitration proceedings in the United States.

The Federal Arbitration Act (FAA) was enacted in 1925 to ensure the validity and enforceability of arbitration agreements. It applies to any arbitration agreement within the scope of interstate commerce or maritime transactions, which covers a broad range of commercial relationships. The FAA establishes that agreements to arbitrate disputes are valid, irrevocable, and enforceable, just as other contracts are. It also provides procedures for the United States courts to facilitate arbitration, including the appointment of arbitrators if necessary, and to confirm, vacate, modify, or correct arbitration awards. The Act limits the grounds on which courts can refuse to enforce an arbitration award, thereby favoring the finality of arbitration. It also includes provisions that allow parties to seek interim relief from courts to preserve the status quo pending arbitration. The FAA preempts conflicting state laws that would undermine the enforceability of arbitration agreements, reflecting a strong federal policy favoring arbitration.

Arbitration Fairness Act (Proposed Legislation)
While not a current federal statute, the Arbitration Fairness Act has been proposed multiple times to amend the FAA and address concerns about mandatory arbitration clauses.

The Arbitration Fairness Act has been introduced in various sessions of Congress but has not been enacted. If passed, it would amend the Federal Arbitration Act to invalidate pre-dispute arbitration agreements for employment, consumer, antitrust, or civil rights disputes. The Act aims to ensure that arbitration is truly voluntary by prohibiting the enforcement of arbitration agreements made before a dispute arises in these specific contexts. The proposed legislation reflects concerns that mandatory arbitration may limit the rights of individuals and consumers by requiring them to resolve disputes through arbitration rather than in court. It seeks to protect the right to a jury trial and prevent the enforcement of arbitration clauses that are often buried in the fine print of contracts. The status of this proposed legislation should be monitored for updates as it could significantly alter the legal landscape of arbitration if enacted.