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.
