What Is Arbitration?

Arbitration is an informal means of resolving a dispute between two or more parties.  

Rather than going the route of litigation, a small panel of impartial individuals will judge the dispute and help the parties to reach a compromise. 

Arbitration is often one of the stipulated contract terms when opening financial accounts, such as a brokerage account, as it keeps the dispute out of the public eye.

Two person shaking hands this is what Arbitration is all about, means resolving conflicts between two or more partiesImage Source: Pixabay

What Are Some Benefits of Arbitration?

  • A decision which comes from arbitration is legally binding.
  • It is often cheaper and quicker than going through a trial.
  • The judgment of arbitration is confidential unless it results in an unpaid award.

What Are Some Drawbacks of Arbitration?

  • There is no appealing a decision made by an arbitration committee; each decision is final with very few exceptions.
  • Arbitration is more expensive than mediation, which is even less formal.

When Might Arbitration Be Appropriate?

Arbitration may be particularly useful in cases where opposing parties are from different countries. 

There might be hesitation to trust an unfamiliar court system in another country; in this case, arbitration may provide more equal footing.

Arbitration may also be used when one or both parties have an interest in keeping the dispute private. 

In addition, arbitration is the faster and cheaper alternative to litigation, which makes it an appealing option when time and money are factors.

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