Arbitration is an alternative dispute resolution method which is adopted by the parties in dispute to settle it out as an alternative to legal course of action. In arbitration, the parties in dispute submit their cases to an independent or neutral party called the arbitrator for resolution. Arbitration is recognized by the United States federal law as a substitute for formal law.
In United States of America, the Federal Arbitration Act provides for judicial laws which govern the private settlement of dispute through arbitration. The Federal Arbitration Law was enacted in the year 1925. The legal framework laid down by Federal arbitration act is applicable to both State and Federal court.
In case the parties in dispute agrees to approach an independent arbitrator, then the resolution awarded by the arbitrator is legally binding provided the resolution proceeding is equivalent in fairness as compared to court proceedings. However, before the resolution becomes legally binding it should be confirmed in the court of law.
The United States law stipulates that the award granted should be confirmed in a court of law within one year of the grant whereas the objection can be raised by the losing party within three months of the award of the contract. However, the grounds of review for the arbitration award remain the same and cannot be expanded even if all the parties in dispute agree to do so.
In 2007, Arbitration Fairness Act was introduced in the US Congress but the bill was not passed.