Inspection Arbitration Services (IAS)
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Definition and Benefits of Non-Binding Arbitration
“Benefits of Non-Binding Arbitration: On its face, non-binding arbitration may appear to be quite inefficient. The parties go through the motions of traditional arbitration only to end up with an award that has no binding effect. If the parties do not settle, they may be forced to repeat the entire process at a trial, administrative hearing, or in binding arbitration. Yet, when properly implemented, non-binding arbitration can serve several useful purposes. First, it can be a “springboard for discussion” because it provides the parties with important information about how a knowledgeable fact finder might decide the case. Second, because the award is advisory, there is no need to argue that the arbitrator failed to follow proper procedure or ignored the essential facts and law of the case. Thus, non-binding arbitration eliminates the possible need to appeal an adverse decision, thereby making it less costly in time, money and frustration. A party who is unhappy with a non-binding award and chooses not to settle may litigate the dispute in court (or binding arbitration, if the parties agree). But because this is a costly decision, the disappointed party is likely to think hard about it and try to find a more businesslike solution. In addition, non-binding arbitration shares some of the benefits of traditional arbitration: it is more flexible and more private than litigation because the parties can agree to keep arbitration proceedings and information exchanges confidential. The parties can also agree to appoint an experienced arbitrator with expertise in the field of the dispute. These advantages, combined with the “fail safe” element—the ability to reject the award and seek a de novo trial or arbitration hearing—make non-binding arbitration a highly practical process, especially for less complex commercial disputes that companies do not wish to mediate (either because the parties are too far apart in their settlement positions or because they need a detailed evaluation of the merits of their position). In some instances, courts and administrative agencies seek the case-screening benefits of nonbinding arbitration. The process gives the parties a chance to hear a decision maker’s view of the case. A party to judicial or government-annexed non-binding arbitration always has theright to reject the award and literally have a day in court at a trial on the merits, but this right need not be exercised. The disappointed party can agree to accept the non-binding award as a settlement, or seek to negotiate a different settlement with the adversary.” (http://www.jonesday.com/files/Publication/266ff349-03e1-4610-a7c1-d0f951e8bb/Presentation/PublicationAttachment/1d047cae-3d31-4b6b-b280-71ed96efa8e5/Bennett,%20Steven%5B2%5D.pdf)
“With non-binding arbitration, the arbitrator makes a determination of the rights of the parties to the dispute but this determination is not binding on them. The award given is just an advisory opinion. Thus here the role of an arbitrator is similar to that of a mediator in a mediation. However unlike in mediation the arbitrator remains totally away from the actual settlement process though he might give suggestions. What happens after a non binding arbitration? Well subsequent to a non-binding arbitration, it is up to the parties involved; they are free to pursue their claims either via the courts, or by a binding arbitration.” (http://ezinearticles.com/?Binding-and-Non-Binding-Arbitration&id=1115884)
"Non-Binding Arbitration: Get Your Day in Court WIthout One Day in Court. Non-binding arbitration is simply a way to get an advisory opinion.A procedure sometimes called “non-binding arbitration” is conducted much like a (binding) arbitration, except that when the arbitrator issues the award after the hearing, it is not binding on the parties and they do not give up their right to a jury trial. In that case, the arbitrator’s award is merely an advisory opinion. Many cases go to settlement or (binding) arbitration after this phase, or they can choose to go to a trial.” (http://www.settlementperspectives.com/2008/10/non-binding-arbitration-get-your-day-in-court-without-one-day-in-court/)
Binding v. Non-Binding Arbitration
Dispute Resolution Journal, May - July 2007
“In Massa Construction v. Ruskin, the California Court of Appeal, No. A110704 (2006 WL 2474885, 1st Dist. Div. 3, Aug. 29, 2006), held that once parties agree to arbitrate, unless they simultaneously and unambiguously agree otherwise, the award will be binding on them.
This case involved the alleged breach of a residential construction contract and a mechanic's lien foreclosure claim. The parties agreed to arbitrate, but when the owner countersued for breach of contract, the court consolidated the cases and compelled arbitration. The arbitrator issued an award in the contractor's favor. The trial court confirmed the award and on appeal the California Court of Appeal affirmed.
The appeals court rejected the owner's non-disclosure claim. It said the arbitrator's ties to the construction industry "were not such as would 'cause a person aware of the facts to reasonably entertain a doubt that the proposed neutral arbitrator would be able to be impartial' or lead the proposed arbitrator to believe there is a substantial doubt as to his or her capacity to be impartial." The court also said the fact that an arbitrator and a party are members of the same professional organization "is in itself hardly a credible basis for inferring even an impression of bias."
The court also held that the award was binding absent a clear indication that the parties intend arbitration not to be binding. The very essence of the term "arbitration" connotes a binding award, the court said.” (http://findarticles.com/p/articles/mi_qa3923/is_200705/ai_n19435129/)
“In a non-binding arbitration, the arbitrator determines the rights of the parties to the dispute. However, neither party is bound by an arbitrator’s decision nor an arbitration award is issued. Subsequent to a non-binding arbitration, the parties to dispute can either pursue their claims through courts or by a binding arbitration” (http://definitions.uslegal.com/n/non-binding-arbitration)
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