Although the US has traditionally maintained a pro-arbitration policy toward domestic and international arbitration agreements and awards, recent trends suggest increasing scepticism of mandatory arbitration clauses. Arbitration observers and consumer advocates have criticised the use of mandatory arbitration clauses to resolve disputes where parties have unequal bargaining power. Against that background, on 29 April 2009, Senator Russ Feingold (D-WI) introduced the Arbitration Fairness Act, a bill that would make pre-dispute agreements requiring arbitration for employment, consumer, franchise, or civil rights disputes unenforceable. Moreover, on 6 October 2009, the Senate passed an amendment to the 2010 Defense Appropriations Bill, introduced by Senator Al Franken (D-MN). The amendment, which passed by a vote of 68-30, would cut funding to defense contractors who commit employees to mandatory arbitration in cases involving sexual assault. Some courts in the United States have also issued decisions that have reined in mandatory arbitration clauses. For instance, in Parada v. Superior Court, No. G041339 (Cal.App.4th 2009), the California Fourth District Court of Appeal held that an arbitration clause in contracts between an investment company and its customers requiring mandatory arbitration by a three-arbitrator panel was unconscionable, and therefore unenforceable, where the company failed to justify it (see Legal update, California Appeals Court rules three-arbitrator panel unconscionable).

Although it is uncertain whether the Arbitration Fairness Act will become law and whether more courts will follow the lead of courts such as the California Fourth District Court of Appeal, these recent legislative and judicial developments reveal an increasing scepticism of mandatory arbitration clauses in the US.

After the Supreme Court's decision in Hall Street Associates, LLC v. Mattel, Inc., 552 U.S. 576 (2008), in which the Supreme Court questioned whether federal judges should be able to vacate arbitration awards based on the non-statutory ground that the awards are in "manifest disregard of the law," the vast majority of circuit courts have limited this doctrine to situations in which one of the statutory grounds for vacatur is also present. For instance, the Ninth Circuit held in Comedy Club Inc. v. Improv West Ass'n, 553 F 3d. 1277 (9th Cir. 2009) that "manifest disregard of the law" is merely a situation where arbitrators have "exceeded their powers"- a ground for vacatur explicitly set forth in the Federal Arbitration Act. Moreover, in Citigroup Global Markets Inc. v. Bacon, 562 F. 3d. 349 (5th Cir. 2009), the Fifth Circuit went further and expressly abandoned "manifest disregard of the law" as a ground for vacatur based on the Supreme Court's dictum in Hall Street. Still, the Sixth Circuit remains a holdout, having determined in Coffee Beanery, Ltd v. WW, LLC, 300 Fed Appx. 415 (6th Cir. 2008), that Hall Street did not diminish its ability to vacate arbitral awards that are, in its determination, "in manifest disregard of the law." Although these decisions reflect a circuit split after Hall Street, on 5 October 2009, the Supreme Court denied three "manifest disregard of the law" petitions that sought to clarify the status of this doctrine after Hall Street. Two of these petitions had arisen from the decisions in Comedy Club Inc. and Coffee Beanery, Ltd.

In Arthur Andersen LLP v. Carlisle, 129 S.Ct. 1896 (2009), the Supreme Court held (6-3) that circuit courts have jurisdiction to consider an appeal from a district court's denial of a motion to stay litigation in favour of arbitration, even when a third party requests the stay (see Legal update, Federal Courts of Appeal have jurisdiction to hear appeals from motions denying stay in favour of arbitration). In this case, the Supreme Court held that a party that had not signed the agreement with the arbitration clause, but which had relied on it, had the right to appeal a denial of a motion to stay litigation and compel arbitration. In such situations, the underlying merits of the motions are irrelevant, although the arbitration agreement must be enforceable under the relevant state's contract laws.

The Supreme Court's decision reflects the federal policy in favour of arbitration that underlies the Federal Arbitration Act because it enables parties to quickly assert their rights to arbitration without first litigating the merits of the case. In the short term, however, this decision is significant because it will extend the process of litigating stay motions in circuit courts that have previously disallowed such appeals.