Arbitration is a form of alternative dispute resolution (ADR) that resolves disputes outside the judiciary courts. It is a private process where disputing parties agree that one or several individuals can make a decision about the dispute after receiving evidence and hearing arguments. The dispute will be decided by one or more persons, known as the arbitrators, arbiters or arbitral tribunal, which renders the arbitration award. An arbitration decision or award is legally binding on both sides and enforceable in the courts, unless all parties stipulate that the arbitration process and decision are non-binding.
Arbitration can only take place if both parties have agreed to it. In the case of future disputes arising under a contract, the parties insert an arbitration clause in the relevant contract. An existing dispute can be referred to arbitration by means of a submission agreement between the parties. The parties can select a sole arbitrator together, or if they choose to have a three-member arbitral tribunal, each party appoints one of the arbitrators; those two persons then agree on the presiding arbitrator.
Arbitration is often used for the resolution of commercial disputes, particularly in the context of international commercial transactions. In certain countries such as the United States, arbitration is also frequently employed in consumer and employment matters, where arbitration may be mandated by the terms of employment or commercial contracts and may include a waiver of the right to bring a class action claim.
Arbitration is different from judicial proceedings, alternative dispute resolution, expert determination, or mediation (a form of settlement negotiation facilitated by a neutral third party) . It is a binding procedure, and the arbitrator (usually a retired judge or attorney) renders a decision at the end of an arbitration hearing, and that decision is final and binding, subject only to a very limited court review.
