On April 8, Virginia Governor Abigail Spanberger signed SB 227, the Arbitration Fairness Act, into law. The Act not only regulates how high-volume arbitration providers select and oversee arbitrators, but also reshapes the rules for challenging an arbitration award after it has been issued. Designed to make consumer and employment arbitrations more transparent and balanced when administered by high‑volume arbitration service providers, SB 227 will take effect on July 1, 2026, and will apply to all arbitration agreements entered into on or after that date.

Scope

The Act is formally directed at “high‑volume arbitration service providers” — providers that administer more than 100 arbitrations per calendar year arising from pre‑dispute arbitration agreements involving a Virginia‑connected transaction. “Pre‑dispute arbitration clause” is broadly defined as an agreement to arbitrate future disputes between a consumer and a business, or between an individual employed in Virginia and that individual’s employer, where the dispute has not yet arisen at the time the agreement is made.

The Act’s reach is further expanded by its definition of a “Virginia‑connected transaction,” which broadly encompasses any transaction, agreement, or dispute tied to activities, relationships, or events in Virginia, as well as arbitrations ordered by a Virginia state or federal court. As a result, many employment and consumer arbitrations involving Virginia parties, performance in Virginia, or Virginia‑based conduct will fall within its scope.

While many of the Act’s new duties are imposed directly on high‑volume arbitration service providers, the downstream consequences of noncompliance land on the businesses and employers that drafted and invoked the arbitration agreement. Those consequences include increased risk that awards will be vacated, loss of the right to compel arbitration in specific disputes, exposure to sanctions, additional fee‑shifting and cost obligations, and an obligation for businesses, including businesses with potentially weak ties to the state, to litigate all these issues in a Virginia state court forum.

Arbitrator Selection

A central focus of the Act is how arbitrators are selected. High-volume providers may not require any party to accept or use a particular arbitrator in an arbitration arising under a pre‑dispute agreement. In practical terms, businesses can no longer rely on provider rules or contract language that allow one side to control, directly or indirectly, who decides the case.

Instead, providers must maintain procedures that: (1) give the parties a genuine opportunity to agree on an arbitrator, and, (2) if they cannot agree, employ an impartial selection method in which each party has an equal voice, neither party can unilaterally impose an arbitrator, and the process is transparent and fair.

The Act identifies several compliant approaches, including an alternating strike process from a neutral list, a ranking system under which the highest mutually ranked arbitrator is appointed, or random selection from a pool of arbitrators that both parties have pre‑approved.

Expanded Arbitrator Disclosure Requirements

The Act also imposes significant disclosure obligations on proposed arbitrators. Before accepting an appointment, a proposed arbitrator must disclose any matter that could cause a reasonably informed person to doubt the arbitrator’s impartiality. The statute then specifies several categories of required disclosures, including: (1) any ground for disqualification that would apply to a judge under the Canons of Judicial Conduct; (2) whether the arbitrator has a current arrangement for prospective neutral work, or within the past two years has engaged in discussions about such work, with a party to the proceeding; and (3) a five‑year history of all arbitrations in which the arbitrator has served, or is serving, as a party‑appointed arbitrator for a party to the current proceeding or that party’s counsel.

In practice, businesses and their counsel should expect substantially greater visibility into an arbitrator’s track record with repeat players — including themselves, their affiliates, and their law firms — and should assume that the same level of transparency will be available to claimants evaluating potential bias or repeat‑player dynamics.

Fee Payments, Defaults, and Loss of the Right to Arbitrate

One of the Act’s most consequential features is its treatment of who must pay arbitration fees — and what happens when they are not paid on time. If the business or employer that drafted the pre‑dispute arbitration agreement (the Drafting Party) is responsible for arbitration fees and costs, failing to pay those amounts within 30 days after the due date has three statutory consequences: a material breach of the arbitration agreement, a default in the arbitration, and a waiver of the Drafting Party’s right to compel arbitration of that dispute. Thus, if a Drafting Party does not timely submit payment for the arbitration it demanded, its arbitration clause may become effectively unenforceable for that case.

The Act also standardizes the invoicing process to clarify when the Drafting Party’s 30-day payment deadline is triggered. Once the claimant initiates arbitration with a provider and satisfies all applicable filing requirements, the provider must promptly issue an itemized invoice identifying all fees and costs that must be paid before the arbitration can proceed. The provider must deliver this invoice to all parties simultaneously. If the arbitration agreement does not specify a payment deadline, payment of the invoice is deemed due upon receipt.

If the Drafting Party defaults on its payment obligations, the claimant has a powerful choice of remedies. The claimant may either withdraw from arbitration and pursue the claims in court or seek to compel arbitration and recover reasonable attorneys’ fees and costs associated with the arbitration. If the claimant chooses to proceed in court, the statute requires the court to impose sanctions on the Drafting Party. As a result, nonpayment is no longer a low‑risk tactic for businesses, as it now carries direct financial and procedural consequences.

Tolling of Limitations Periods

The Act includes robust tolling protections designed to prevent claims from expiring while parties navigate arbitration and court.

  • Demanding arbitration: Statutes of limitations are tolled from the date a party sends a written demand to the arbitration provider until 90 days after the arbitration ends.
  • Switching from arbitration to court: If the employee or consumer withdraws from arbitration after a default and files in court, limitations periods for all claims brought — or that relate back to claims brought — are tolled from the date of the first filing in any forum.
  • Contractual deadlines to initiate arbitration: Filing a civil action can toll contractual deadlines to demand arbitration while a court determines whether arbitration is required.

For businesses, this means arguments that claims are time‑barred may be more difficult where the claimant has actively pursued either arbitration or litigation.

Enforcement, Remedies, and the Risk of Vacated Awards

The Act provides both private and public enforcement mechanisms. If a high‑volume arbitration service provider fails to comply with the Act, a party can seek injunctive relief or other civil remedies in Virginia circuit court, which may include vacatur of any arbitration award affected by the noncompliance. In addition, the State Corporation Commission may impose civil penalties of up to $10,000 per violation on noncompliant high‑volume providers. These remedies, combined with the new ground to vacate arbitration awards for violation of the Arbitration Fairness Act, substantially increase the risk that awards will not withstand judicial scrutiny if the Act’s requirements are not followed.

The Foreseeable Impact of SB 227

Taken together, these changes will likely have significant and immediate consequences for businesses and employers that rely on arbitration as a primary dispute resolution mechanism. Stricter invoicing, payment, and timeline requirements will increase administrative and compliance burdens, and failures to adhere to these rules may result in waiver arguments, adverse fee consequences, or court intervention that undermines the predictability businesses and employers seek from arbitration programs.

At the same time, clearer procedures and stronger enforcement mechanisms may embolden claimants to challenge noncompliant practices, potentially increasing motions practice and efforts to escape arbitration altogether in favor of court proceedings. Over time, these dynamics could not only drive up defense costs and exposure in individual cases, but also affect the enforceability of arbitration awards — ultimately prompting some businesses and employers to reevaluate the structure, scope, or even continued use of pre-dispute arbitration agreements.

More broadly, employers and businesses should review and update their arbitration agreements, revisit their choice of providers, and implement internal controls to ensure timely fee payments and compliance with the Act’s expanded selection, disclosure, and reporting regime. The cost of treating these requirements as an afterthought is no longer limited to administrative inconvenience — it now includes the very real risk of losing the benefit of arbitration altogether.