Arbitration Definition

Discover the definition of arbitration, a form of dispute resolution outside of the court system. Learn about how arbitration works, its benefits, examples, case studies, and statistics.

What is Arbitration?

Arbitration is a form of alternative dispute resolution where parties agree to submit their disputes to a neutral third party for a binding decision. It is a voluntary process that allows parties to resolve their conflicts outside of the court system.

How Arbitration Works

During arbitration, each party presents their case to an arbitrator or panel of arbitrators who then weigh the evidence and make a final decision. This decision is typically binding and enforceable.

Benefits of Arbitration

  • Quicker resolution compared to court litigation
  • Cost-effective
  • Confidentiality
  • Flexibility in choosing arbitrators

Examples of Arbitration

Many business contracts include arbitration clauses that require disputes to be resolved through arbitration. For example, a construction contract may specify that any dispute over the quality of workmanship will be settled through arbitration.

Case Study: Uber

In 2019, Uber faced a class-action lawsuit from drivers seeking employee benefits. The company’s arbitration clause required drivers to resolve disputes through arbitration, limiting the scope of the lawsuit and potentially reducing its financial impact.

Arbitration Statistics

According to the American Arbitration Association, over 10,000 commercial cases are filed for arbitration each year. This shows the growing popularity of arbitration as a method for resolving disputes.

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