Binding arbitration


Arbitration, like mediation, is a form of alternative dispute resolution which has grown in popularity as parties increasingly seek to avoid the time and cost of going to court to settle a dispute.

Although not strictly necessary, many parties involved in arbitration will engage a solicitor to represent them, as like a court case, the decision of an independent arbitrator is binding.

What is binding arbitration?

Binding arbitration is the process by which two parties resolve a dispute without litigation.

The process, which may also be referred to simply as ‘arbitration’, consists of a tribunal which hears the arguments of both sides and then decides on the award. The tribunal is made up of arbitrators who are appointed by the parties themselves.

Both parties to a dispute must agree to the use of arbitration in advance, and as a result an arbitration clause is often included in industrial and commercial contractual agreements.

Prior to signing an agreement however, it is important to know and be familiar with the rules that the arbitrating body is likely to follow.
Compared to litigation, binding arbitration:

  • Offers the parties much more privacy
  • They are not required to disclose information if they are not planning to rely on it

These two qualities make it popular amongst large companies which prefer to avoid both publicity and disclosing information about the way in which they operate. Faster decisions mean less cost, and crucially, the chance to return to business as usual that little bit quicker.

Awards from the court

The Arbitration Act (1996) allows an arbitrator to withhold a decision until after their fees are paid. This is to avoid a situation in which the losing party refuses to pay the fees because the decision went against them.

Binding arbitration is different from non-binding arbitration in that, as the name suggests, the award given by the tribunal is binding on the parties.

If you are entering into binding arbitration, you may want to consider hiring counsel even though this is by no means mandatory.

Although the procedure itself does not take place in the courts, a tribunal’s decision is based on the laws of the jurisdiction indicated in the arbitration contract. Arbitration arguments therefore tend to be law-based, which means that legal knowledge is a great advantage.

The decision can only be queried in situations where either the arbitration procedure was not correctly followed, or where there appears to be a material defect in the decision. In such circumstances, your solicitor may be able to appeal to a court to have the decision reviewed.

Click here for more information specifically on commercial mediation.

Are you a company or corporation thinking about using binding arbitration to avoid public litigation? Contact Law can put you in touch with a specialist arbitrator to give your case the best chance of success. Please call us on 0800 1777 162 or complete the web-form above.

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