The Finality of Arbitration

Many disputes are resolved through arbitration rather than a court of law. While there are several important differences between the two forums, perhaps none is more significant than the very limited right of appeal in arbitration.

The Federal Arbitration Act provides limited grounds for vacating an arbitrator's decision:

• where the award was procured by corruption, fraud or undue means
• where there was evident partiality or corruption in the arbitrator(s)
• where the arbitrator(s) were guilty of misconduct in refusing to hear pertinent and material evidence or other misbehavior prejudicing the rights of any party
• where the arbitrator(s) exceed their powers

Most states, including Virginia, have adopted the Uniform Arbitration Act which contains grounds for vacating arbitral awards very similar to the federal law. Courts that are asked to review decisions reached in arbitration describe their scope of review as one of the narrowest standards of judicial review in all of American jurisprudence, the purpose of which is to avoid the expense of appeals.

But what if the arbitrator misconstrues the law applicable to the matter and reaches a decision based upon a legal error? Consistent with the narrow grounds for vacating an award, such a mistake would not be the basis for a court to overturn the decision. As the Supreme Court of Virginia has written, the issue before a reviewing court is "not whether the award is legally correct," but "only whether the arbitrators had the power to decide the parties' contract claims." BBF, Inc. v. Alstom Power, Inc., 274 Va. 326, 574 S.E.2d 467 (2007).

Parties weighing whether to agree to arbitration should recognize that while arbitration can be faster and cheaper than litigation in court, it also is likely to be final, as a successful appeal is unlikely barring exceptional circumstances.