Generally, choice-of-law provisions allow corporations that do business in several states or countries to draft their agreements and conduct their business in accordance with the law they choose. When the choice-of-law provision is contained in a contract that does not have an agreement to arbitrate, courts generally have no qualms about enforcing them. However, when the contract does contain an agreement to arbitrate, courts are reluctant to enforce the choice-of-law provision as to the arbitration agreement because the Federal Arbitration Act (FAA) governs arbitration agreements. This issue has been the source of much confusion and litigation in the field of arbitration law. The issue is further confused when the underlying issue being litigated is the standard of review that the chosen state's laws would provide if it were applied to the agreement to arbitration. This complex problem provokes issues concerning how good the FAA standard of review is, how stringent courts should be in applying choice-of-law provisions to arbitration agreements, and how parties can preempt the FAA.
FAA Preemption by Choice-of-Law Provisions: Enforceable or Unenforceable,
2006 J. Disp. Resol.
Available at: https://scholarship.law.missouri.edu/jdr/vol2006/iss2/11