Arbitration is a form of alternative dispute resolution that submits a civil dispute to a third party for a decision that will typically be binding on the parties. A hearing is held before the “arbitrator,” with both sides presenting their cases, which may include witnesses and evidence. The level or formality of the hearing and the evidentiary rules that apply vary greatly, but arbitration hearings are typically less formal than civil trials.
Although they are not agents of the court, arbitrators are typically required to rule in accordance with the applicable laws of the jurisdiction or the law chosen by the parties in their arbitration agreement.
Arbitration can be agreed to by parties after a dispute has arisen or parties can agree to go to arbitration in an arbitration clause in a contract. Arbitration clauses are common in business agreements because of the time and money the parties can save over civil litigation.