What is the difference between binding and non-binding arbitration?

Binding arbitration and non-binding arbitration are two distinct forms of dispute resolution mechanisms in legal proceedings. The key differences between the two types of arbitration lie in the finality and enforceability of the arbitral decision.

Binding Arbitration

In binding arbitration, the parties agree to be bound by the arbitrator's decision. This means that once the arbitrator makes a ruling, it is final and legally enforceable. The decision cannot be appealed to a court, providing a swift resolution to the dispute. The parties are obligated to comply with the arbitration decision, and it can be enforced by a court if necessary.

Benefits of binding arbitration include a quicker resolution, lower costs compared to litigation, and finality in the decision-making process. However, drawbacks include limited avenues for appeal and the potential for an unfavorable outcome.

Non-Binding Arbitration

In non-binding arbitration, the arbitrator's decision is advisory in nature and does not have the force of law. The parties may choose to accept or reject the decision, and if they reject it, they can proceed to litigation. Non-binding arbitration is often used as a form of alternative dispute resolution to facilitate settlement negotiations.

Advantages of non-binding arbitration include flexibility in the decision-making process and the opportunity for parties to seek further legal remedies if dissatisfied with the outcome. However, drawbacks include the potential for prolonged disputes if parties cannot reach a settlement following the arbitration.