What Arbitration Is

Arbitration is a process in which disputants bring their differences before one or more arbitrators, who make a final, binding decision. In most cases the arbitrators' decision is not appealable. The process is private and confidential, and the parties have the ability to formulate their own rules of procedure, or refer the matter to providers of alternative (or early) dispute resolution services such as the American Arbitration Association or the International Chamber of Commerce. Those providers have established rules of procedure and it is not uncommon to see contractual provisions requiring arbitrations to be held in accordance with the rules of such providers.

When to Use Arbitration

Arbitration is used when required by contract, and when the parties want an independent neutral (or panel of neutrals) to make a final, binding resolution of a dispute which they cannot resolve themselves.

Benefits of Arbitration

Arbitration can be more efficient and less costly than litigation in the traditional courtroom forum. It is a private proceeding and the results can be kept confidential. Thus the results would not become binding precedent.

Costs of Arbitration

The parties retain control of the process and schedule, but must pay the fees of the ADR service providers and decision-making neutrals. Complex arbitration can involve discovery proceedings, which are similar to traditional litigation forums. Costs of arbitration may be substantially less than those incurred in litigation; sometimes those costs can be comparable.