What is Arbitration?

Legal Definition
Arbitration, a form of alternative dispute resolution (ADR), is a technique for the resolution of disputes outside the courts. The parties to a dispute refer it to arbitration by one or more persons (the "arbitrators", "arbiters" or "arbitral tribunal"), and agree to be bound by the arbitration decision (the "award"). A third party reviews the evidence in the case and imposes a decision that is legally binding on both sides and enforceable in the courts.

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.

Arbitration can be either voluntary or mandatory (although mandatory arbitration can only come from a statute or from a contract that is voluntarily entered into, in which the parties agree to hold all existing or future disputes to arbitration, without necessarily knowing, specifically, what disputes will ever occur) and can be either binding or non-binding. Non-binding arbitration is similar to mediation in that a decision cannot be imposed on the parties. However, the principal distinction is that whereas a mediator will try to help the parties find a middle ground on which to compromise, the (non-binding) arbitrator remains totally removed from the settlement process and will only give a determination of liability and, if appropriate, an indication of the quantum of damages payable. By one definition arbitration is binding and non-binding arbitration is therefore technically not arbitration.

Arbitration is a proceeding in which a dispute is resolved by an impartial adjudicator whose decision the parties to the dispute have agreed, or legislation has decreed, will be final and binding. There are limited rights of review and appeal of arbitration awards. Arbitration is not the same as:

  • judicial proceedings, although in some jurisdictions, court proceedings are sometimes referred as arbitrations
  • alternative dispute resolution (ADR)
  • expert determination
  • mediation (a form of settlement negotiation facilitated by a neutral third party)
-- Wikipedia
Legal Definition
An ADR method with one or more persons hearing a dispute and rendering a binding decision. An agreement to arbitrate disputes can be made before or after a specific dispute arises. Since the parties can agree to the rules of arbitration (e.g., selecting qualified arbitrators with knowledge of the issues), they can save costs as compared to litigation.

See Federal Arbitration Act, Alternative dispute resolution, Alternative dispute resolution service, and Mediation.
Legal Definition
Practice. A reference and submission of a matter in dispute concerning property, or of a personal wrong, to the decision of one or more persons as arbitrators.

2. They are voluntary or compulsory. The voluntary are, 1. Those made by mutual consent, in which the parties select arbitrators, and bind themselves by bond abide by their decision; these are made without any rule of court. 3 Bl. Com. 16.

3. – 2. Those which are made in a cause depending in court, by a rule of court, before trial; these are arbitrators at common law, and the award is enforced by attachment. Kyd on Awards, 21.

4. – 3. Those which are made by virtue of the statute, 9 & l0 Will. III., c. 15, by which it is agreed to refer a matter in dispute not then in court, to arbitrators, and agree that the submission be made a rule of court, which is enforced as if it had been made a rule of court; Kyd on Aw. 22; there are two other voluntary arbitrations which are peculiar to Pennsylvania.

5. – 4. The first of these is the arbitration under the act of June 16, 1836, which provides that the parties to, any suit may consent to a rule of court for referring all matters of fact in controversy to referees, reserving all matters of law for the decision of the court, and the report of the referees shall have the effect of a special verdict, which is to be proceeded upon by the court as a special verdict, and either party may have a writ of error to the judgment entered thereupon

6. – 5. Those by virtue of the act of 1806, which authorizes " any person or persons desirous of settling any dispute or controversy, by themselves, their agents or attorneys, to enter into an agreement in writing, or refer such dispute or controversy to certain persons to be by them mutually chosen; and it shall be the duty of the referees to make out an award and deliver20it to the party in whose favor it shall be made, together with the written agreement entered into by the parties; and it shall be the duty of the prothonotary, on the affidavit of a subscribing witness to the agreement, that it was duly executed by the parties, to file the same in Iiis office; and on the agreement being so filed as aforesaid, he shall enter the award on record, which shall be as available in law as an award made under a reference issued by the court, or entered on the docket by the parties."

7. Compulsory arbitrations are perhaps confined to Pennsylvania. Either party in a civil suit or action,, or his attorney, may enter at the prothonotary's office a rule of reference, wherein be shall declare his determination to have arbitrators chosen, on a day certain to be mentioned therein, not exceeding thirty days, for the trial of all matters in variance in the suit between the parties. A copy of this rule is served on the opposite party. On the day. appointed they meet at the prothonotary's, and endeavor to agree upon arbitrators; if they cannot, the prothonotary makes out a list on whicb are inscribed the names of a number of citizens, and the parties alternately strike each one of them from the list, beginning with the plaintiff, until there are but the number agreed upon or fixed by the prothonotary left, who are to be the arbitrators; a time of meeting is then agreed upon or appointed by the prothonotary, when the parties cannot agree, – at which time the arbitrators, after being sworn or affirm and equitably to try all matters in variance submitted to them, proceed to bear and decide the case; their award is filed in the office of the prothonotary, and has the effect of a judgment, subject, however, to appeal, which may be entered at any time within twenty days after the filing of such award. Act of 16th June, 1836, Pamphl. p. 715.

8. This is somewhat similar to the arbitrations of the Romans; there the praetor selected from a list Of citizens made for the purpose, one or more persons, who were authorized to decide all suits submitted to them, and which had been brought before him; the authority which the proctor gave them conferred on them a public character and their judgments were without appeal Toull. Dr. Civ. Fr. liv. 3, t. 3, ch. 4, n. 820. See generally, Kyd on Awards; Caldwel on Arbitrations; Bac. Ab. h. t.; 1 Salk. R. 69, 70-75; 2 Saund. R. 133, n 7; 2 Sell. Pr. 241; Doct. PI. 96; 3 Vin. Ab. 40; 3 Bouv. Inst. n. 2482.
-- Bouviers Law Dictionary
Legal Definition
In practice. The investigation and determination of a matter or matters of difference between contending parties, by one or more unofficial persons, chosen by the parties, and called "arbitrators," or "referees." Duren v. Getchell, 55 Me. 241; Henderson v. Beaton', 52 Tex. 43; Boy-den v. Lamb, 152 Mass. 416, 25 N. E. 609; In re Curtis-Castle Arbitration, 64 Conn. 501, 30 Atl. 769, 42 Am. St. Rep. 200. Compulsory arbitration is that which takes place when the consent of one of the parties is enforced by statutory provisions. Voluntary arbitration is that which takes place by mutual and free consent of the parties. In a wide sense, this term may embrace the whole method of thus settling controversies, and thus include all the various steps. But in more strict use, the decision is separately spoken of, and called an "award," and the "arbitration" denotes only the submission and hearing.
See also
-- Black's Law Dictionary
Legal Definition
The submission of a cause to an arbitrator. See 42 Am. St. Rep. 200.
-- Ballentine's Law Dictionary