What is non-binding or advisory arbitration?
UPDATED: February 20, 2013
It’s all about you. We want to help you make the right legal decisions.
We strive to help you make confident law decisions. Finding trusted and reliable legal advice should be easy. This doesn't influence our content. Our opinions are our own.
Non-binding or advisory arbitration is a step up from mediation in the realm of alternative dispute resolution. It allows parties a forum to debate their case without the fear of a permanent verdict. Non-binding arbitration is a formal process with specific governing rules and procedures that are implemented by most businesses and some courts as an alternative to a full trial.
Advantages of Non-Binding or Advisory Arbitration
Non-binding or advisory arbitration offers numerous benefits over both traditional court and binding arbitration. Non-binding arbitration is private. This means that the decision will not become public record, nor does anyone even have to know that the parties where in dispute. Non-binding arbitration allows for the formal actions of a trial such as discovery without the weight of appeals and pointless motions. In fact, because the decision is merely advisory, many attorneys and clients tend to relax and look at their case more objectively than in a formal courtroom. Finally, non-binding or advisory arbitration can be rejected. If one or both parties do not agree with the arbitrator’s decision, they can choose to litigate instead. Although, the common trend has been that due to the continually rising costs of litigation, most losing parties of an arbitration will seek out a settlement instead of taking the case to court.
The Non-Binding or Advisory Arbitration
During the non-binding or advisory arbitration, the two parties are given time to organize a formal case that will be heard by the arbitrator. Both parties will sign a non-disclosure statement, and conduct limited discovery for the arbitration proceeding. After the preparation time, the attorneys will hold a formal trial in front of either a judge or attorney who will render a decision and amount for the losing party to pay. Typically the arbitration agreement will have a time limit for rejection of the arbitration. If neither party rejected the arbitration decision before the deadline, it is considered the valid settlement agreement. Also, if it was ordered by the court, it will become the final judgement.