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What Does Arbitration Mean?

Binding/Non-Binding Arbitration

No one ever plans on getting into a car wreck, and a serious collision can have a negative lasting effect on a person or family. When a Plaintiff is injured, often times the costly and timely process of litigation can be avoided or seriously reduced with the use of Alternative Dispute Resolution (ADR) tactics.

ADR advocates are part of a movement amongst lawyers that attempts to cut down on the cost, time, and stress associated with the litigation process. Often times, litigation can take years and thousands, if not hundreds of thousands, of dollars to complete.

Arbitration is defined by the statutes in Texas:

(a) Nonbinding arbitration is a forum in which each party and counsel for the party present the position of the party before an impartial third party, who renders a specific award.

(b) If the parties stipulate in advance, the award is binding and is enforceable in the same manner as any contract obligation. If the parties do not stipulate in advance that the award is binding, the award is not binding and serves only as a basis for the parties’ further settlement negotiations.

Arbitration is part of the ADR movement and can really cut down on the cost and time associated with a claim. In an arbitration hearing under the ADR Act, an impartial third party or panel meets with the parties, listens to presentations of both fact and law, and renders a confidential, advisory award. The parties may, if they desire, specify in advance that the award will be binding. If such an agreement is made, then the award is enforceable in the same manner as any court judgment.

If such a stipulation is not made, the advisory award serves only to provide additional information for use in further settlement negotiations. Binding arbitration procedures agreed to by the parties to resolve many construction, labor and industrial disputes are usually ruled by the Texas General Arbitration Act and/or the Federal Arbitration Act. Therefore, when organizing, the type of hearing and relevant statutes should be specified.

If the arbitration is agreed upon beforehand to be binding, then the process is much like a trial in the sense that the decision handed down will be as binding as a Judge’s decision. Many critics of the process say that there are still a lot of costs associated with the process.