Arbitration, a form of alternative dispute resolution (ADR), is a technique for the resolution of disputes outside the courts, where the parties to a dispute refer it to one or more persons (the "arbitrators", "arbiters" or "arbitral tribunal"), by whose decision (the "award") they agree to be bound. It is a resolution technique in which a third party reviews the evidence in the case and imposes a decision that is legally binding for both sides and enforceable. Other forms of ADR include mediation(a form of settlement negotiation facilitated by a neutral third party) and non-binding resolution by experts.
Arbitration is often used for the resolution of commercial disputes, particularly in the context of international commercial transactions. The use of arbitration is also frequently employed in consumer and employment matters, where arbitration may be mandated by the terms of employment or commercial contracts.
Arbitration is a proceeding in which a dispute is resolved by an impartial adjudicator whose decision the parties to the dispute have agreed, or legislation has decreed, will be final and binding. There are limited rights of review and appeal of arbitration awards.
Arbitration is not the same as:
Judicial proceedings, although in some jurisdictions, court proceedings are sometimes referred as arbitrations
Alternative dispute resolution (or ADR)
Expert determination mediation
Parties often seek to resolve their disputes through arbitration because of a number of perceived potential advantages over judicial proceedings:
When the subject matter of the dispute is highly technical, arbitrators with an appropriate degree of expertise can be appointed (as one cannot "choose the judge" in litigation)
Arbitration is often faster than litigation in court
Arbitration can be cheaper and more flexible for businesses
Arbitral proceedings and an arbitral award are generally non-public, and can be made confidential
In arbitral proceedings the language of arbitration may be chosen, whereas in judicial proceedings the official language of the country of the competent court will be automatically applied
In most legal systems there are very limited avenues for appeal of an arbitral award, which is sometimes an advantage because it limits the duration of the dispute and any associated liability