Justice HECHT delivered the opinion of the Court, in which Chief Justice JEFFERSON, Justice WAINWRIGHT, Justice MEDINA, Justice GREEN, Justice JOHNSON, Justice WILLETT, Justice GUZMAN, and Justice LEHRMANN joined.

"The answer to most questions regarding arbitration `flow inexorably from the fact that arbitration is simply a matter of contract between the parties.'"1 Nevertheless, the United States Supreme Court has held in Hall Street Associates, L.L.C. v. Mattel, Inc., that the grounds for vacating or modifying an arbitration award under the Federal Arbitration Act (FAA)2 "are exclusive" and cannot be "supplemented by contract".3 The principal questions in this case are whether the Texas General Arbitration Act (TAA)4 likewise precludes an agreement for judicial review of an arbitration award for reversible error, and if not, whether the FAA preempts enforcement of such an agreement. We answer both questions in the negative and consequently reverse the judgment of the court of appeals5 and remand the case to that court for further proceedings.

I

Petitioner, Nafta Traders, Inc., an international re-distributor of athletic apparel and footwear, terminated its employment of respondent, Margaret A. Quinn, its Vice President of Operations, citing as the basis for its decision a reduction in force due to worsening business conditions. Quinn sued Nafta for sex discrimination in violation of the Texas Commission on Human Rights Act.6 Nafta's employee handbook included a section captioned "Arbitration", which called for "a dispute arising out of [the] employment relationship . . . or its termination" to be submitted to binding arbitration. The arbitration section did not indicate whether state or federal law would apply, providing only that "[a]ll proceedings shall be conducted in the City of Dallas, State of Texas."7 Nafta moved to compel arbitration under the FAA, which applies to "contract[s] evidencing a transaction involving commerce"8 Quinn did not object, and the district court signed an agreed order.

The parties then selected an AAA arbitrator, who heard evidence and awarded Quinn $30,000 in back pay, $30,000 in mental anguish damages, $29,031 in "special damages",9 $104,828 in attorney fees, and costs. A verbatim record was made of the proceedings. Quinn moved the court to confirm the award under the TAA. Nafta moved for vacatur under the FAA, the TAA, the common law, and a provision in the arbitration section of the employee handbook that stated: "The arbitrator does not have authority (i) to render a decision which contains a reversible error of state or federal law, or (ii) to apply a cause of action or remedy not expressly provided for under existing state or federal law." Nafta argued in part that by agreeing to these limits on the arbitrator's authority the parties had in effect agreed to expand the narrow scope of judicial review otherwise provided by the TAA and the FAA.

As grounds for vacating the award, Nafta asserted that the arbitrator had applied federal law to Quinn's sex discrimination claim even though she had alleged only a violation of Texas law, and that the evidence did not support a finding of sex discrimination. Regarding damages, Nafta asserted that the attorney fee award was improper, that the "special damages" award was really a double recovery of lost wages, and that the evidence did not support an award of mental anguish damages. Quinn responded that none of the grounds asserted by Nafta is recognized by the TAA or the FAA as a basis for vacating an arbitration award, and that neither the TAA nor the FAA permits the grounds for vacating an arbitration award to be enlarged by agreement. Even if such an agreement were permissible, Quinn argued, the statement in the handbook was too vague and one-sided to be enforced. And finally, she contended, even if the grounds asserted by Nafta could be considered, they should all be rejected as meritless.

The district court issued a brief order simply confirming the arbitrator's award without giving any indication whether it had considered the substance of Nafta's complaints and rejected them or instead had concluded that the TAA or FAA did not permit consideration of such grounds for vacatur. Nafta appealed.10 After oral argument in the court of appeals but before an opinion had issued, the United States Supreme Court decided Hall Street Associates, L.L.C. v. Mattel, Inc., holding that the FAA's grounds for vacatur and modification "are exclusive" and cannot be "supplemented by contract".11 Although the court of appeals applied the TAA in this case rather than the FAA, noting that neither Nafta nor Quinn had disputed on appeal that the TAA governed their arbitration,12 it concluded that similarities between the two statutes weighed heavily in favor of construing the TAA as Hall Street had construed the FAA.13 Accordingly, the court held that "parties seeking judicial review of an arbitration award covered under the TAA cannot contractually agree to expand the scope of that review and are instead limited to judicial review based on the statutory grounds enumerated in the statute."14

One such statutory ground is section 171.088(a)(3)(A), that an arbitrator has exceeded his power,15 and Nafta argued that the arbitrator had exceeded his power by issuing an erroneous award when the arbitration agreement denied him the authority to commit reversible error or apply an action or remedy contrary to law.16 The court of appeals rejected Nafta's argument because, it explained, while an arbitrator exceeds his power by deciding an issue the parties did not agree to submit to him, he does not exceed his power by deciding matters incorrectly.17 Moreover, the court said, Nafta could not use section 171.088(a)(3)(A) "to accomplish indirectly what we have already concluded it cannot do directly, that is, contractually expand judicial review of the arbitration decision."18 Having decided that none of Nafta's complaints fell within any of the statutory grounds for vacatur, the court affirmed the district court's judgment.19

We granted Nafta's petition for review.20

II

The TAA, which is based on the Uniform Arbitration Act,21 lists specific grounds for vacating,22 modifying, or correcting23 an arbitration award and provides that unless such grounds are offered, "the court, on application of a party, shall confirm the award."24 One such ground for vacating an arbitration award is that "the arbitrators . . . exceeded their powers".25 In arbitration conducted by agreement of the parties, the rule is well established that "[a]n arbitrator derives his power from the parties' agreement to submit to arbitration".26 As the United States Supreme Court has stated:

Quinn argues that her agreement to limit the arbitrator's authority is in effect an agreement for broader judicial review of the arbitration award than permitted by the TAA for the same reasons it is not permitted under similar provisions of the FAA, as the United States Supreme Court held in Hall Street. Sections 10 and 11 of the FAA specify grounds for vacating,28 modifying, or correcting29 an arbitration award that are similar to the TAA's, and like the TAA, section 9 of the FAA mandates confirmation absent such grounds.30 In Hall Street, the parties had tried part of their dispute to the federal district court and then agreed to submit another part to arbitration.31 They agreed that the court could "enter judgment upon any award" unless "the arbitrator's findings of facts are not supported by substantial evidence, or . . . the arbitrator's conclusions of law are erroneous."32 The Supreme Court held that this agreement impermissibly enlarged the grounds for vacating or modifying an arbitration award under the FAA.33

We must, of course, follow Hall Street in applying the FAA, but in construing the TAA, we are obliged to examine Hall Street's reasoning and reach our own judgment. The Supreme Court based its decision on the framework of the FAA and on policy. It found that "textual features" of sections 9, 10, and 11 were "at odds with enforcing a contract to expand judicial review following the arbitration."34 Because the grounds listed in sections 10 and 11 all "address egregious departures from the parties' agreed-upon arbitration" and "extreme arbitral conduct", the FAA did not, the Court reasoned, "authorize contracting parties to supplement review for specific instances of outrageous conduct with review for just any legal error."35 Further, the Court observed, section 9 "carries no hint of flexibility"; it "unequivocally tells courts to grant confirmation in all cases, except when one of the `prescribed' exceptions applies", and does not merely "tell a court what to do just in case the parties say nothing else."36 This construction, the Court added, was consistent with policy favoring limited judicial review:

We agree with Quinn that while the Supreme Court and the parties in Hall Street framed the issue as "expandable judicial review authority",38 the flip-side is limited arbitral decision-making authority, the aim of Quinn and Nafta's agreement. Though the parties in Hall Street did not couch their agreement in terms of limiting the arbitrator's authority to issue a decision unsupported by the law and the evidence, that was certainly the practical effect of what they expressly agreed to— that the court could not "enter judgment" on such a decision. The parties in Hall Street attempted to accomplish indirectly the same end that Quinn and Nafta sought directly—a limit on the arbitrator's authority.

Yet the Supreme Court, in holding that under the FAA the grounds for vacating, modifying, or correcting an arbitration award cannot be expanded beyond those listed in sections 10 and 11, did not discuss section 10(a)(4), which like section 171.088(a)(3)(A) of the TAA, provides for vacatur "where the arbitrators exceeded their powers".39 The omission appears to us to undercut the Supreme Court's textual analysis. When parties have agreed that an arbitrator should not have authority to reach a decision based on reversible error—in other words, that an arbitrator should have no more power than a judge— a motion to vacate for such error as exceeding the arbitrator's authority is firmly grounded in the text of section 10. The Supreme Court's reasoning that an arbitrator's merely legal errors are not the kind of "egregious departures from the parties' agreed-upon arbitration" section 10 addresses loses force when such errors directly contradict the parties' express agreement and deprive them of the benefit of their reasonable expectations.

When parties have agreed to limit an arbitrator's power to that of a judge, whose decisions are reviewable on appeal, and the complaint is that the arbitrator's decision exceeds his powers, a statutory ground for vacatur, the only way to maintain a textual argument for limited judicial review is to hold that such an agreement is not encompassed by the statutory provision and unenforceable. In other words, the textual argument entails that arbitrators can never, by committing reversible error, "exceed their powers" within the meaning of section 10(a)(4), regardless of the parties' agreement. But the FAA itself imposes no such limitation on parties' right of contract.40 On the contrary, as the Supreme Court noted, "the FAA lets parties tailor some, even many features of arbitration by contract, including the way arbitrators are chosen, what their qualifications should be, which issues are arbitrable, along with procedure and choice of substantive law."41 Furthermore, the Court recognized a "general policy of treating arbitration agreements as enforceable".42 The Court regarded this general policy as "beg[ging] the question. . . whether the FAA has textual features at odds with enforcing a contract to expand judicial review following the arbitration",43 but one such "textual feature[]" is section 10(a)(4), which requires vacatur when arbitrators exceed their authority. Whether that feature is at odds with expanded judicial review depends on whether the right to contract to circumscribe arbitral authority includes limiting the authority to err in decision-making.

The Supreme Court's textual analysis, when taking account of the complete statutory text, circles back to the question whether parties can agree to limit an arbitrator's power to err. If not, then section 10(a)(4) is consistent with the Court's analysis, but if so, the analysis would appear to be flawed. It is the statutory text that begs the policy question, not policy that begs the statutory construction issue.

The Supreme Court stated that it "makes . . . sense" for there to be "a national policy favoring arbitration with just the limited review needed to maintain arbitration's essential virtue of resolving disputes straightaway."44 One difficulty with this statement of national policy is that the Court had previously identified the enforcement of private agreements as the FAA's "overriding goal", writing:

Hall Street dismissed these words as taken out of context, explaining that all the Court had said was that arbitration should be expedited, in accordance with the parties' agreement, despite pending litigation, even if proceeding in different forums is not the most efficient course for resolving the disputes.46 But the Court has since reaffirmed that "[t]he `principal purpose' of the FAA is to `ensur[e] that private arbitration agreements are enforced according to their terms'",47 so Hall Street cannot fairly be read to replace the FAA's "principal purpose" of enforcing arbitration agreements with arbitration's "essential virtue" of expedition in determining what policy should guide its textual interpretation.48 Parties agree to arbitration for reasons other than speed and cost, such as flexibility, privacy, and in some instances, expertise.49 In some cases, at least, whether arbitration reduces cost and delay at all is fiercely debated. In any event, it would hardly make sense to force more expedition on parties than they want. If we were to identify an essential virtue of arbitration, it would be that it is a creature of agreement.

But assuming that the ultimate goal of arbitration is haste, the abiding difficulty with a policy against expanded judicial review, and correspondingly, limited arbitral authority, is that the Court could not itself say whether the policy was a good one:

A national policy favoring limited judicial review that turns out to be inimical to arbitration could hardly reside comfortably alongside the "national policy favoring arbitration" that the Supreme Court has held Congress declared in the FAA.51 But without denying that possibility, the Court concluded that the statutory text leaves no alternative.

Thus, the search for a policy to justify limited judicial review winds back around to the statutory text, which, as we have already seen, is what commissioned the expedition in the first place. The problem comes down to this. Under the TAA (and the FAA), an arbitration award must be vacated if the arbitrator exceeds his powers. Generally, an arbitrator's powers are determined by agreement of the parties. Can the parties agree that an arbitrator has no more power than a judge, so that his decision is subject to review, the same as a judicial decision? Hall Street answers no, based on an analysis of the FAA's text that ignores the provision that raises the problem, and a policy that may be at odds with the national policy favoring arbitration. With great respect, we are unable to conclude that Hall Street's analysis of the FAA provides a persuasive basis for construing the TAA the same way.

The Supreme Court expressed concern that "a more cumbersome and time-consuming judicial review process [would] bring arbitration theory to grief in post-arbitration process",52 and we agree that delay and resulting expense are concerns that arbitration is intended, at least, to alleviate.53 But equally grievous is a post-arbitration process that refuses to correct errors as the parties intended, and of equal concern is a civil justice system that allows parties an alternative to litigation only if they are willing to risk an unreviewable decision. The California Supreme Court, declining to follow Hall Street in construing its own state's statute, offered this assessment:

As a fundamental matter, Texas law recognizes and protects a broad freedom of contract. We have repeatedly said that

We find nothing in the TAA at odds with this policy.56 On the contrary, the purpose of the TAA is to facilitate arbitration agreements, which have been enforceable in Texas by Constitution or statute since at least 1845.57 Specifically, the TAA contains no policy against parties' agreeing to limit the authority of an arbitrator to that of a judge, but rather, an express provision requiring vacatur when "arbitrators [have] exceeded their powers".58

Quinn argues that an agreement like the one in this case is one-sided, but we fail to see how. Had the arbitration award gone against her and against the law and evidence, the agreement would have been to her benefit. We have said that an arbitration agreement may be so one-sided as to be unconscionable,59 but the benefits or burdens of judicial review for reversible error fall to each side alike.

The Supreme Court in Hall Street squarely rejected the argument that an agreement to expand the statutory grounds for judicial review of an arbitration award is an invalid attempt to confer jurisdiction on a court by contract:

The TAA, also, is not jurisdictional, and the argument has no more merit with respect to Texas courts' jurisdiction. Nothing more need be said on the subject.

We are mindful of the TAA's mandate that it "be construed to . . . make uniform the construction of other states' law applicable to an arbitration."61 But the states are already divided over whether their own statutes permit agreements for expanded judicial review of arbitration awards: three say yes,62 five say no.63 In construing the TAA, we are obliged to be faithful to its text.

Accordingly, we hold that the TAA presents no impediment to an agreement that limits the authority of an arbitrator in deciding a matter and thus allows for judicial review of an arbitration award for reversible error.

III

When, as in this case, an arbitration agreement is covered by both state and federal law,64 state law is preempted "to the extent that it actually conflicts with federal law—that is, to the extent that it `stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.'"65 Having concluded that the TAA permits parties to agree to expanded judicial review of arbitration awards, we must determine whether the FAA, which under Hall Street precludes such agreements, preempts Texas law. That is, do such agreements thwart Congress's purposes and objectives in the FAA?

In Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University, the Supreme Court explained the FAA's preemptive effect as follows:

FAA-preemption is thus aimed at state-law hindrances to enforcement of arbitration agreements not applicable to contracts generally. We have explained it this way:

In Volt, the parties chose California law to govern their arbitration agreement.68 When a dispute arose between them, one demanded arbitration while the other filed suit, joining two strangers to the agreement as defendants. The state trial court stayed the arbitration pursuant to a provision of the California Arbitration Act that authorized a court "to stay arbitration pending resolution of related litigation between a party to the arbitration agreement and third parties not bound by it, where `there is a possibility of conflicting rulings on a common issue of law or fact.'"69 Though the FAA contains no similar provision, the Supreme Court held that the FAA did not preempt state law:

State law was not preempted, even though it operated to stay arbitration that would have gone forward under federal law. The parties' agreement was enforced, not thwarted, by application of the California law they had chosen. The Supreme Court concluded that the FAA's purposes and objectives are not defeated by conducting arbitration under state-law procedures different from those provided by the federal statute. Indeed, as Volt acknowledged, it is not clear to what extent the FAA's procedures, prescribed expressly for federal courts, ever apply in state courts.71 Section 10 of the FAA, the basis of the decision in Hall Street, is itself addressed only to "the United States court in and for the district wherein the award was made".72 The lesson of Volt is that the FAA does not preempt all state-law impediments to arbitration; it preempts state-law impediments to arbitration agreements.

The opinion in Hall Street, as we have discussed, seems at one point to promote expedition as the primary goal of the FAA. But if expedition is the touchstone for FAA-preemption, then Volt was incorrectly decided, since it upheld the use of state law to delay arbitration. Though Hall Street's majority did not cite Volt, the Court has since relied on it.73 With Volt intact, we cannot read Hall Street's discussion of the importance of expedition to displace as the principal basis for preemption the protection of parties' agreements.74 More importantly, Hall Street expressly contemplates that the FAA will not preempt state law that allows agreements to enlarge judicial review of arbitration awards:

Dissenting from the Court's construction of the FAA, Justice Breyer emphasized that the Court was in agreement that its decision would not have preclusive effect. Citing the passage of the Court's opinion we have just quoted, and a part of Justice Stevens' dissenting opinion, he stressed:

These passages, we think, refute any argument that Volt's reasoning applies only to the procedure by which arbitration is conducted, not the procedure by which awards are reviewed. The only reasonable reading of the opinions in Hall Street, in our view, is that the FAA does not preempt state law that allows parties to agree to a greater review of arbitration awards.77

It was not necessary for Quinn and Nafta to choose the TAA to govern their agreement, nor would that choice alone have provided them expanded judicial review of an arbitration award. The TAA, as we have construed it, permits parties to agree to expanded review, or to a corresponding limit on the arbitrator's authority, as in this case, but it does not impose such review on every arbitration agreement. Nor was it necessary for Quinn and Nafta to choose not to be governed by the FAA, since even if it applies, as it does in this case, it does not preempt the parties' agreement for expanded judicial review. The matter is left to the agreement of the parties. But absent clear agreement, the default under the TAA, and the only course permitted by the FAA, is restricted judicial review.78

For these reasons, we hold that the FAA does not preempt enforcement of an agreement for expanded judicial review of an arbitration award enforceable under the TAA.

IV

An arbitration award is not susceptible to full judicial review merely because the parties have agreed. A court79 must have a sufficient record of the arbitral proceedings, and complaints must have been preserved, all as if the award were a court judgment on appeal.80 For efficiency's sake, arbitration proceedings are often informal; procedural rules are relaxed, rules of evidence are not followed, and no record is made. These aspects of arbitration, which are key to reducing costs and delay in resolving disputes, must fall casualty to the requirements for full judicial review. The parties can decide for themselves whether the benefits are worth the additional cost and delay, but the only review to which they can agree is the kind of review courts conduct. If error cannot be demonstrated, an award must be presumed correct.81

By the same token, arbitration parties cannot agree to a different standard of judicial review than the court would employ in a judicial proceeding involving the same subject matter. "[A]n arbitration agreement providing that a `judge would review the award by flipping a coin or studying the entrails of a dead fowl' would be unenforceable."82

Here, the parties have submitted a record of the arbitration proceeding, including a transcript of the evidence offered. Nafta has attacked the award on several legal grounds and challenged the sufficiency of the evidence. On remand, the court must determine whether the record is sufficient to review Nafta's complaints.

V

In the trial court, Nafta invoked the provision of its agreement with Quinn limiting the arbitrator's authority "to render a decision which contains a reversible error of state or federal law, or . . . to apply a cause of action or remedy not expressly provided for under existing state or federal law", and raised its arguments under this provision for vacating the award. Since the trial court's order confirming the award gives no basis for its decision, we must presume that the court rejected Nafta's arguments in substance. Nafta raised the same arguments in the court of appeals, but the court did not reach them, concluding instead that even if meritorious, they were not grounds for vacatur. Because we disagree, the judgment of the court of appeals must be reversed and the case remanded to that court for consideration of the merits of Nafta's challenges to the arbitration award.

It is so ordered.

Chief Justice JEFFERSON filed a concurring opinion, in which Justice WAINWRIGHT and Justice LEHRMANN joined.

Chief Justice JEFFERSON, joined by Justice WAINWRIGHT and Justice LEHRMANN, concurring.

Increasingly, our civil disputes are submitted to the private sector rather than a judge or jury. The trend is neither intrinsically good nor bad, but there are consequences. When a case is tried in open court, rules of evidence inherited from Britain and modified by American courts dictate what facts a jury may properly consider. The proceeding is recorded, and dispositive rulings are subject to principles of error preservation. When the facts are established and the law applied, the State of Texas enforces the trial court's judgment. Journalists report the facts, editorial writers critique the judgment, citizens reflect on the state of our laws, and legislators file bills to alter future outcomes. When the parties appeal, the resulting precedent gives predictability to the activities and transactions in which people and corporations engage.

An arbitration is different.1 It is said to be speedier, often less costly, and overseen by experts in the relevant subject matter. But it is conducted in private.2 The rules of evidence do not apply. There may be no official transcript of the proceedings. The award is usually final, even when an identical judgment appealed to a state court would be reversed on procedural or substantive grounds. Courts are generally required to confirm an arbitral award because trial judges have little power to reverse it for factual insufficiency or, with certain exceptions, to prevent a miscarriage of justice.3

This case asks whether parties can agree to "try" a case privately, but then enlist state courts to review the decision for reversible errors of state or federal law. I agree with the Court that the agreement is enforceable under the TAA, Hall Street notwithstanding. 339 S.W.3d at 101. I write only to observe that our system is failing if parties are compelled to arbitrate because they believe our courts do not adequately serve their needs. If litigation is leaving because lawsuits are too expensive, the bench and the bar must rethink the crippling burdens oppressive discovery imposes. If courts have yet to embrace modern case-management practices, the Legislature should ensure that the justice system has resources to improve technology and to hire qualified personnel—two sure ways to improve efficiency.

And it is unlikely, given a choice, that parties to an arbitration would choose, as their arbitrator, a person whose only qualification is the possession of a law license, and who need not have significant experience as an advocate or as a judge.4 They seek instead a pool of qualified professionals rather than individuals who are swept in and out of office based not on considerations of merit, but on the vagaries of partisan election. See TEX. CONST. art. V (outlining the requirements for judicial election). The solution to that quandary is beyond the scope of this case, but the parties' contractual agreement for reviewing the arbitrator's decision demonstrates that people know how to avoid this perceived deficiency. They will, increasingly, select their own specialized tribunal and seek to retain a contractual right to meaningful appellate review in our state courts. As the Court does, I would affirm that right. Nevertheless, we must, in the future, address those aspects of our justice system that compel litigants to circumvent the courts and opt for private adjudication.