What is an Arbitration?

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  • Written By: Jessica Ellis
  • Edited By: Bronwyn Harris
  • Last Modified Date: 15 December 2019
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Arbitration is a form of private dispute resolution that allows disagreeing parties to seek resolution outside of court. In most cases, arbitration results in binding resolutions, but may be a simpler and less expensive alternative to litigation. Arbitration is used in business disputes, copyright infringement claims, divorce settlements, and labor conflicts.

The process of arbitration may vary regionally, but tends to follow a basic pattern. Both parties must sign an agreement agreeing to arbitration as a means of settling a dispute, waiving the right to a court trial. Arbitrators are then chosen by the parties to oversee the dispute; one arbitrator may be used, but a panel of three is often chosen so that each party may elect an arbitrator of its choosing, allowing the two arbitrators to choose the third member together. Arbitrators hear testimony and examine evidence before making a binding decision.

There are several distinct advantages to arbitration as opposed to court proceedings. Some parties like the idea of being able to appoint arbitrators instead of being assigned a random judge who may have a history of bias in similar cases. Unlike court trials, hearings and proceedings are not required to be open to the public or the media, allowing a greater opportunity for privacy. Additionally, the process is generally far more streamlined than a court trial, allowing faster and more convenient decisions.


Downsides of this process include cost, which may be prohibitively expenses in some cases. Unlike a court case, in which the judge is not permitted to charge a fee for services, arbitrators are paid by the parties involved in the suit. Additionally, arbitration is usually a binding step that cannot be appealed unless there is clear and demonstrable evidence of fraud. Losing parties are usually not permitted to appeal decisions in court.

Arbitration is often used when negotiation fails. Warring sides, whether they are spouses in the middle of a divorce or a labor union demanding changes from an employer, may quickly come to a stalemate or series of heated conflicts that result in no progress. The job of the arbitrator is usually to look at the list of demands that each side has made and try to create a solution that is both legal and equitable. The world of arbitration is therefore usually less black-and-white than a court system; both sides may get some of what they want, but unless one party is acting completely unreasonable and refusing to yield on anything, it is unusual that one side will score a complete victory.


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