Judicial Enforcement of Arbitration Agreements: the Stay-Dismissal Dichotomy of FAA Section 3

The meaning of section 3 of the Federal Arbitration Act (“FAA”) has been the subject of substantial litigation and uncertainty. Section 3 applies to a suit or proceeding brought in court where the issues are referable to arbitration under an agreement in writing. The statute states: [T]he court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceedings is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.

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