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PhloxADR | Arbitation Agreement
By: Dr. Justin Wood, Th.d, CJME

Whether an arbitration decision is binding on the parties depends on the terms of their arbitration agreement.

Generally, arbitration results are binding arbitration awards unless the parties agree to advisory, or nonbinding, arbitration. If the agreement says “arbitration” without any modifier, then the arbitration decision is likely binding.

In binding arbitration, the arbitrator’s decision is final. It may not be appealed or overturned by a court except in very limited circumstances, such as when fraud has been involved.

In nonbinding arbitration, either party may reject the arbitration award and demand a trial instead. Parties often use nonbinding decisions as an independent assessment of the strengths and weaknesses of a potential lawsuit, with the aim of fostering a settlement.  Even in nonbinding arbitration, the agreement will often provide that the award may become binding if the parties consent or wait longer than a stated time to request that the case be returned to court.

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