The U.S. Court of Appeals for the Ninth Circuit has ruled that courts may review an arbitrator's decision.

The San Francisco-based court said the Federal Arbitration Act does not preclude court review if the parties have agreed to such appeals in advance.

Banking industry lawyers hailed the decision, saying it frees companies to customize arbitration agreements. "The court confirmed the right of private parties to contract as they see fit and to have those contracts enforced," said Michael F. Crotty, deputy general counsel for litigation at the American Bankers Association. "That is good for everybody."

"This recognizes the right of counterparties to an arbitration agreement to dictate the terms of the agreement," said Richard M. Whiting, general counsel at the Bankers Roundtable.

Banks, especially those on the West Coast, increasingly include arbitration requirements in loan and deposit contracts to reduce litigation costs.

- Jaret Seiberg and Bill McConnell

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