A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

A word of equivocal meaning; meaning different things in different connections, and the particular sense in which it is used may be explained by the context or surrounding circumstances. Accordingly, the term may be employed as meaning to agree, to approve, to arrange, to ascertain, to liquidate, to come to or reach an agreement, to determine, to establish, to fix, to free from uncertainty, to place, or to regulate.

Case law following the passage of the [Federal Arbitration] Act reflects unequivocal support of agreements to have third parties decide disputes - the essence of arbitration. No magic words such as "arbitrate" or "binding arbitration" or "final dispute resolution" are needed to obtain the benefits of the Act. See City of Omaha v. Omaha Water Co., 218 U.S. 180, 194, 30 S. Ct. 615, 616, 54 L. Ed. 991 (1910) (dictum) ("a plain case of the submission of a dispute or difference which had to be adjusted . . . was in fact an arbitration, though the arbitrators were called appraisers").

. . . .

Arbitration is a creature of contract, a device of the parties rather than the judicial process. If the parties have agreed to submit a dispute for a decision by a third party, they have agreed to arbitration.

Although it defies easy definition, the essence of arbitration, we think, is that, when the parties agree to submit their disputes to it, they have agreed to arbitrate these disputes through to completion, i.e. to an award made by a third-party arbitrator. Arbitration does not occur until the process is completed and the arbitrator makes a decision. Hence, if one party seeks an order compelling arbitration and it is granted, the parties must then arbitrate their dispute to an arbitrators' decision, and cannot seek recourse to the courts before that time.

Except as provided in Section 19.2 hereof [pertaining to injunctions against Wolsey], all controversies, disputes or claims . . . shall be submitted for non-binding arbitration to the San Diego, California office of the American Arbitration Association on demand of either party. Such arbitration proceedings shall be conducted in Honolulu, Hawaii and, except as otherwise provided in this Agreement, shall be heard by three arbitrators in accordance with the then-current commercial arbitration rules of the American Arbitration Association.

The Arbitration Act establishes that, [*12] as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or the allegation of waiver, delay, or a like defense to arbitrability.

[a] party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact[,] . . . the court (1) may refuse to enforce the arbitration agreement and may order intervention or joinder of all parties in a single action or special proceeding; (2) may order intervention or joinder as to all or only certain issues; (3) may order arbitration among the parties who have agreed to arbitration and stay the pending court action or special proceeding pending the outcome of the arbitration proceeding; or (4) may stay arbitration pending the outcome of the court action or special proceeding.

The choice-of-law provision, when viewed in isolation, may reasonably be read as merely a substitute for the conflict-of-laws analysis that otherwise would determine what law to apply to disputes arising out of the contractual relationship. Thus, if a similar contract, without a choice-of-law provision, had been signed in New York and was to be performed in New York, presumably "the laws of the State of New York" would apply, even though the contract did not expressly so state. In such event, there would be nothing in the contract that could possibly constitute evidence of an intent to exclude punitive damages claims. Accordingly, punitive damages would be allowed because, in the absence of contractual intent to the contrary, the FAA would pre-empt the Garrity rule. . . .

Even if the reference to "the laws of the State of New York" is more than a substitute for ordinary conflict-of-laws analysis and, as respondents urge, includes the caveat, "detached from otherwise-applicable federal law," the provision might not preclude the award [*21] of punitive damages because New York allows its courts, though not its arbitrators, to enter such awards. See Garrity, 40 N.Y.2d at 358, 386 N.Y.S.2d at 834, 353 N.E.2d at 796. In other words, the provision might include only New York's substantive rights and obligations, and not the State's allocation of power between alternative tribunals. Respondents' argument is persuasive only if "New York law" means "New York decision law, including the State's allocation of power between courts and arbitrators, notwithstanding otherwise-applicable federal law." But, as we have demonstrated, the provision need not be read so broadly. It is not, in itself, an unequivocal exclusion of punitive damages claims.

We think the best way to harmonize the choice-of-law provision with the arbitration provision is to read "the laws of the State of New York" to encompass substantive principles that New York courts would apply, but not to include special rules limiting the authority of arbitrators. Thus, the arbitration provision covers the rights and duties of the parties, while the choice-of-law clause covers arbitration; neither sentence intrudes upon the other.

The dissent makes much of the similarity between this choice-of-law clause and the one in Volt, which we took to incorporate a California [*25] statute allowing a court to stay arbitration pending resolution of related litigation. In Volt, however, we did not interpret the contract de novo. Instead, we deferred to the California court's construction of its own state law. 489 U.S. at 474, 109 S. Ct. at 1253 ("the interpretation of private contracts is ordinarily a question of state law, which this Court does not sit to review"). In the present case, by contrast, we review a federal court's interpretation of this contract . . . .