Is a binding arbitration decision really binding?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Written by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: Jul 15, 2021

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All arbitration results are binding arbitration awards unless the parties agree to advisory arbitration. If the agreement says “arbitration” without any modifier, the arbitration decision is binding. The parties to an arbitration agreement can, however, mutually agree to withdraw the case from arbitration at any time before an award is issued by the arbitrator. If they withdraw the case, the arbitrator loses her authority to decide it. 

Unlike the regular court system, binding arbitration does not provide for an appeal. Rather, the arbitrator simply hears the evidence and grants an award with an explanation, the arbitration decision. If the result of a binding arbitration is inaccurate and both parties are willing to acknowledge the inaccuracy, then the arbitration will no longer be binding. If only one party feels the decision is inaccurate, the arbitration decision will most likely still stand unless the opposing party takes further legal action. 

If you personally disagreed with the arbitration decision, but your attorney is advising you that it was in all likelihood correct, then you should simply honor the award. If your attorney is advising you that the award was granted inaccurately, then you may wish to consider taking your case to the regular court system. Contrary to popular belief, cases that are decided in binding arbitration can still be filed in the court system. However, you will be sued by the opposing party for breach of contract since you will have previously signed a contract waiving your rights to a trial. 

Arbitration is less expensive than a trial and is completely private. Unless you actually decide to then file a lawsuit, the public will never be made aware that you were disputing with the opposing party. In addition, arbitrations are typically heard by retired judges, so you will be getting an equivalent result to a trial, simply without all the extra time and expenses.


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