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What is Arbitration?

Arbitration is an alternative dispute resolution process where a neutral third party, known as an arbitrator, makes a decision about a dispute. Unlike litigation, it is generally quicker, more cost-effective, and less formal. The parties involved in a dispute agree to be bound by the arbitrator's decision, which is usually confidential and final, thus reducing the possibility of lengthy appeals. Arbitration can be either binding (parties must follow the arbitrator's decision) or non-binding (the decision is advisory).

Types of Arbitration

Arbitration can take various forms. Some types of arbitration include:

  • Voluntary Arbitration – This form of arbitration is voluntary, meaning both parties agree to it up front and submit their dispute to an arbitrator for resolution. This form of arbitration is often part of a contract and is a cheaper, quicker resolution than civil litigation.
  • Binding Arbitration – In some cases, the parties are required to follow the decision of the arbitrator. This is known as binding arbitration.
  • Arbitrator Impartiality – An arbitrator must remain impartial and unbiased throughout the process and is tasked with reviewing the facts and arguments impartially.

Advantages of Arbitration

Arbitration offers several advantages over traditional court proceedings. These include:

  • Cost efficiency – Compared to civil litigation, arbitration is a cheaper and faster way to settle disputes. Arbitration can be conducted remotely, which further reduces expenses.
  • Expert Decisions – The arbitrator chosen by the parties is an expert in the field, so the final decision is likely to be consistent with applicable law and remarkable.
  • Confidentiality – Arbitration proceedings are confidential and not part of the public record, so the parties don’t have to worry about embarrassing details being released.
  • Flexibility – The parties can agree to change the scope of the arbitration process, allowing them to come up with solutions that better fit their needs.

Disadvantages of Arbitration

While arbitration offers numerous advantages, it does have some downsides. They include:

  • Expense – Although typically cheaper than litigation, arbitration can still be costly. The parties must pay an arbitrator, as well as the cost of witnesses and transcriptions.
  • Lack of Appeal – Once the arbitration is complete, the decision is final and appealable. This can be a disadvantage if the arbitrator mistakenly ignores evidence or misinterprets the law.
  • Determination of Law – An arbitrator may not always adhere to the law in making their decision. This could create a situation in which the parties receive an unfair outcome.
  • Deprivation of Rights – There are some rights afforded to individuals under the Constitution that can be waived in arbitration.


Arbitration is a preferred method of resolution for many legal disputes. It is cost-effective, confidential, and binding. However, it does have some disadvantages, such as the lack of appeal and possible deprivation of rights. Ultimately, the decision to use arbitration should be made based on the particular situation and the needs of the parties.

Frequently Asked Questions

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