By Jacob DeRue (October 16, 2026)

Introduction

Many Virginia businesses include arbitration clauses in their contracts as a matter of course because arbitration is typically faster, less expensive, and more private than litigation. On April 8, 2026, Governor Abigail Spanberger signed Senate Bill 227, the Arbitration Fairness Act, which took effect July 1, 2026. The Act governs pre-dispute arbitration agreements between businesses and consumers or employees.[i] Although much of the Act targets “high-volume arbitration service providers,” its most consequential provisions fall on the businesses that draft those agreements, creating serious new risk for any business that invokes an arbitration clause and then fails to manage the process carefully[ii].

In short: Virginia’s Arbitration Fairness Act, effective July 1, 2026, governs consumer and employee arbitration agreements. A business that drafts one and misses the 30-day deadline to pay arbitration fees waives its right to compel arbitration. Providers must use impartial arbitrator selection, and awards from noncompliant selection must be vacated.

Who Does the Virginia Arbitration Fairness Act Apply To?

The Act applies to pre-dispute arbitration agreements between a business and a consumer, or between an employer and an individual employed in Virginia, covering disputes that had not yet arisen when the agreement was made. A “drafting party” is the business that included the arbitration provision in its contract with the consumer or employee, along with any third party relying on that provision. The Act reaches any “Virginia-connected transaction,” meaning any transaction, agreement, or dispute connected with activities, relationships, or events in the Commonwealth, including any arbitration ordered by a state or federal court located in Virginia. Its arbitrator-selection and disclosure rules apply to “high-volume arbitration service providers,” those conducting more than 100 such arbitrations per calendar year. Purely business-to-business agreements fall outside these definitions.

What Happens If a Business Fails to Pay Arbitration Fees Under the Act?

The provision most likely to catch Virginia businesses off guard is the Act’s treatment of arbitration fees. Where an arbitration in a Virginia-connected transaction requires the drafting party — the business that put the arbitration clause in its contract with a consumer or employee — to pay fees and costs before the arbitration can proceed, and the fees or costs to initiate the proceeding are not paid within 30 days after the due date, the drafting party is (1) in material breach of the arbitration agreement, (2) in default of the arbitration, and (3) deemed to have waived the right to compel arbitration. The consumer or employee may then either withdraw the claim and proceed in court or compel arbitration with the drafting party paying reasonable attorney fees and costs, and a consumer who proceeds in court is entitled to have the court impose sanctions on the drafting party. In plain terms, a business that insisted on an arbitration clause and then missed a fee deadline can lose the forum it bargained for and face sanctions besides[iii].

This is not a theoretical risk. Arbitration fees are often substantial, and the timeline is short. Once a consumer meets the filing requirements with a high-volume provider, the provider must immediately invoice all parties for the fees and costs required before the arbitration can proceed, stating the full amount owed and the due date. Unless the arbitration agreement expressly sets a number of days for payment, those invoices are due upon receipt.[iv] The internal lesson is straightforward: if your business uses arbitration clauses, someone needs to be responsible for monitoring fee invoices and ensuring timely payment. A missed deadline should not be the reason a significant dispute ends up in a courtroom you worked to avoid.

How Does Virginia’s Arbitration Fairness Act Change Arbitrator Selection?

The Act also overhauled arbitrator selection for proceedings administered by high-volume providers. Under prior practice, many arbitration agreements and provider rules allowed the business that drafted the contract to exert meaningful influence over who served as arbitrator. The Act eliminates this. High-volume providers may no longer require any party to accept or use a particular arbitrator in a proceeding arising from a pre-dispute arbitration agreement and involving a Virginia-connected transaction.[v] Instead, providers must maintain procedures that give the parties a meaningful opportunity to agree on an arbitrator and, if they cannot agree, an impartial selection system in which each party has an equal voice, neither party can unilaterally impose an arbitrator, and the process is transparent and fair.[vi] Acceptable approaches under the Act include a striking method in which the parties alternately eliminate arbitrators from a list, a ranking method in which the highest mutually ranked arbitrator is selected, random selection from a pool previously approved by both parties, or any other method that ensures neither party can compel the other to accept an arbitrator without meaningful input.[vii]

In addition, the proposed neutral arbitrator must disclose all matters that may cause a person aware of the facts to have reasonable uncertainty that the arbitrator would be able to be impartial — including any ground that would disqualify a judge under the Canons of Judicial Conduct, any current or recent discussions about prospective employment or compensated service with a party, and prior or pending arbitrations during the preceding five years in which the arbitrator served as a party arbitrator for a party or a party’s lawyer. A high-volume provider also may not administer such an arbitration if any party or its law firm has, or within the preceding five years has had, a financial interest in the provider. For businesses that have historically benefited from favorable arbitrator selection mechanics in their contracts, this represents a real change in the risk profile of arbitration[viii].

Can a Virginia Arbitration Award Be Vacated Because of How the Arbitrator Was Selected?

Perhaps most significantly for businesses that use arbitration as a long-term dispute resolution strategy, the Act adds a new ground on which a Virginia court must vacate an arbitration award: that the award was rendered by an arbitrator selected in violation of the Act. A party subjected to a noncompliant selection procedure may also seek injunctive relief or another civil remedy.[ix] This means that even a favorable arbitration award can now be challenged and overturned after the fact if the opposing party demonstrates that the arbitrator was selected in violation of the Act’s requirements — regardless of whether the prevailing business had any direct role in the noncompliance. Businesses that win arbitrations administered by noncompliant providers now face post-award litigation risk they did not previously face. An application to vacate an award must generally be made within 90 days after delivery of a copy of the award to the applicant, except where the grounds are predicated on corruption, fraud, or other undue means, in which case the 90-day period runs from when such grounds are known or reasonably should have been known.[x]

What Should Virginia Employers and Businesses Do Now?

The Arbitration Fairness Act does not ban arbitration clauses, and for many disputes arbitration remains a sensible and effective alternative to litigation. But the Act changes the risk calculus in ways that warrant careful review now. Businesses that use arbitration clauses in consumer or employment contracts should confirm whether those agreements fall within the Act’s definitions of a pre-dispute arbitration agreement and a Virginia-connected transaction, which reaches any transaction, agreement, or dispute connected with activities in the Commonwealth, including any arbitration ordered by a state or federal court located in Virginia. Because the Act’s requirements are incorporated as material terms of any pre-dispute arbitration agreement governed by Virginia contract law, existing forms should be reviewed now.[xi] And any business that invokes an arbitration clause should have a clear internal process for receiving, tracking, and paying arbitration fee invoices well within the 30-day deadline the Act imposes.[xii]

Conclusion

The Act does not eliminate the advantages of arbitration, but it does require that arbitration clauses be drafted, invoked, and administered more carefully than many businesses have done in the past. That care matters all the more because Virginia still has no formal state-court class action procedure after Governor Spanberger vetoed SB 229 and HB 449 in May 2026, and properly drafted arbitration agreements with class action waivers remain an important tool for managing aggregate litigation exposure. The United States Supreme Court has held that the Federal Arbitration Act, 9 U.S.C. § 1 et seq., preempts state-law rules that condition the enforceability of arbitration agreements on the availability of classwide arbitration, and the Act itself provides that it is to be construed consistently with federal arbitration law. A clause that was an asset in prior disputes can become a liability if the procedural requirements surrounding it are not met[xiii].

If your business uses arbitration clauses, consult an experienced attorney before entering into, renewing, or invoking them. Jacob DeRue represents businesses in commercial disputes throughout Virginia and the District of Columbia. To discuss your situation, contact Jacob DeRue at Willcox & Savage, P.C. at (703) 506-6256, jderue@wilsav.com, or through the Contact Page.

The information in this blog post may not reflect the current law in your jurisdiction. No information in this blog post should be interpreted as legal advice, and this blog post is not intended to be a substitute for legal counsel.

About the Author

Jacob DeRue is an associate attorney in the Business and Commercial Litigation practice group at Willcox & Savage, P.C., in McLean, Virginia. He represents businesses, contractors, subcontractors, business owners, and individuals in commercial disputes across Virginia, the District of Columbia, and the Eastern and Western Districts of Virginia, including breach of contract and fiduciary duty claims, business torts, partnership and ownership disputes, non-compete enforcement, payment claims, and employment matters.

Willcox & Savage, P.C. represents individuals and corporations throughout the Mid-Atlantic region, including Alexandria, Annandale, Arlington County, Ashburn, Burke, Centreville, Chantilly, Clifton, District of Columbia, Dulles, Fairfax County, Falls Church, Great Falls, Herndon, Leesburg, Loudoun County, Manassas, Manassas Park, McLean, Middleburg, Montgomery County, Oakton, Prince George’s County, Prince William County, Reston, South Riding, Springfield, Sterling, Tysons Corner, Vienna, Winchester, and Woodbridge.

Contact the Author

Jacob C. DeRue
Willcox & Savage, P.C.
8201 Greensboro Drive, Suite 1001
McLean, Virginia 22102
Telephone: (703) 506-6256
Email: jderue@wilsav.com

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[i] 2026 Va. Acts ch. 490 (codified at Va. Code Ann. §§ 8.01-581.017 to -581.021).

[ii] Va. Code Ann. § 8.01-581.017.

[iii] Va. Code Ann. § 8.01-581.020(A), (C).

[iv] Va. Code Ann. § 8.01-581.020(B).

[v] Va. Code Ann. § 8.01-581.018(A).

[vi] Va. Code Ann. § 8.01-581.018(B).

[vii] Va. Code Ann. § 8.01-581.018(C).

[viii] Va. Code Ann. § 8.01-581.018(D)–(E).

[ix] Va. Code Ann. §§ 8.01-581.010(6), 8.01-581.021(A).

[x] Va. Code Ann. § 8.01-581.010.

[xi] Va. Code Ann. §§ 8.01-581.017, 8.01-581.021(C).

[xii] Va. Code Ann. § 8.01-581.020(A).

[xiii] AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 344, 352 (2011); Va. Code Ann. § 8.01-581.021(D).