Legal Definitions - United States Arbitration Act

The United States Arbitration Act, also known as the Federal Arbitration Act (USAA), is a federal law that governs the use of arbitration in commercial disputes. It was enacted in 1925 and has been amended several times since then.

Arbitration is a process in which a neutral third party, called an arbitrator, hears both sides of a dispute and makes a decision that is binding on both parties. The USAA provides a framework for the enforcement of arbitration agreements and awards.

For example, if two companies have a contract that includes an arbitration clause, and they have a dispute over the terms of the contract, they can use the USAA to enforce the arbitration clause and have an arbitrator make a decision on the dispute.

The USAA has been the subject of some controversy, with some critics arguing that it favors corporations over consumers and employees. However, supporters of the law argue that it provides a faster and less expensive alternative to traditional litigation.