The U.S. Supreme Court's 1989 affirmation of a California court's stay of arbitration sent shockwaves through the arbitration community. The ruling in Volt-which upheld the finding that a choice-of-law clause in the parties' contract precluded the Federal Arbitration Act in favor of state law-led many to question whether parties can feel reasonably secure that their arbitration agreements will continue to receive broad federal protection.
This article attempts to put this concern into perspective. Noting that the California court failed to discern a number of questions underlying the choice-of-law issue, and that the U.S. Supreme Court chose to limit its review of the case to whether there was a conflict between state law and the FAA, the author argues that the Court's finding does not significantly threaten the FAA. The author does advise parties, however, to use care in drafting the choice-of-law clause to ensure that their intent to arbitrate under federal law will be carried out.