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Justice Ian Binnie at the Supreme Court in Ottawa on Sept. 15, 2011.Dave Chan/The Globe and Mail

Senators will be able to fight the Auditor-General's findings that they mishandled their expenses in front of a new arbitration system, which will be overseen by former Supreme Court justice Ian Binnie.

The process will not affect the referral of alleged cases of financial wrongdoing to the RCMP, but will apply to current and recently retired senators who want to challenge the Senate's attempts to get its money back.

Allowing for arbitration is a departure for the Senate: When four senators, including Mike Duffy, were suspended without pay in 2013 for their controversial expenses claims, they did not have access to an independent review process.

The Auditor-General's office is putting the finishing touches on its report into the expenses of hundreds of sitting and recently retired senators, which is expected to be released in early June. While the office said it would not comment on the audit ahead of its release, Auditor-General Michael Ferguson told CBC News that the report uncovered problems with 30 senators' expenses and that up to 10 cases could be referred to the Mounties.

Senate officials decided to create the new arbitration system to settle the legal questions that will come from the line-by-line audit, including whether the senators were fulfilling parliamentary duties when they incurred controversial expenses.

Conservative Senator Leo Housakos, who was appointed Speaker of the Senate earlier this month, said it is important to ensure that all senators named in the audit benefit from due process.

"Every single case that the Auditor-General will identify where there are disagreements will have the arbitration process at their disposal, including those that will be – I assume – referred to the RCMP or any other authorities," Mr. Housakos said.

Should the Auditor-General recommend that the Senate refer specific files to the RCMP, Mr. Housakos said the Senate will comply. He said final word on whether or not senators must pay back money will rest with the Senate internal economy committee. Still, he added that senators have agreed to give Mr. Binnie the authority to rule on disputes.

Retired senators who participate in the process will have to agree in advance to adhere to the findings of the "binding arbitration." If they refuse to participate, they will face a lawsuit, a Senate official said.

Mr. Housakos said all of the arbitrator's decisions will be made public.

In a statement, Mr. Binnie said he will work at arm's length from the Senate and evaluate each claim individually after hearing from both the senator and the Senate administration.

"I am satisfied that this procedure is independent, fair and impartial," Mr. Binnie said. "Every citizen has the right to due process. The Senate arbitration process ensures this."

Aaron Wudrick, federal director of the Canadian Taxpayers Federation, said the arbitration process is a positive step, as long as it does not replace further police investigations. "It's a welcome development, assuming it expedites reimbursement and ensures taxpayers are made whole," he said. "It shouldn't replace the criminal law process, of course."

But NDP MP Charlie Angus said he fears the process is designed to "protect the Senate."

"If these senators have been named for ripping off the public, then they should be paying up," he said.

But Mr. Housakos rejected the suggestion that the Auditor-General's report should simply be the final word and that all senators should have to repay disputed amounts.

"If you would get audited by Revenue Canada, you would have the opportunity to appeal. So why would senators be any different?" he said. "We have to get to the bottom of things in a fair and just fashion."

The Office of the Auditor-General said the report is in the final stages of production, but it won't "discuss the contents of our audit until it is made public."

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