Arbitration is a form of dispute resolution by way of final decisión rendered by one or more arbitrators. For arbitration to exist, an arbitration agreement is necessary. It may be included in a contract, as clause or in a separate agreement, that can be signed before or after the dispute has arisen. When parties chose arbitration, they are chosing not to bring their dispute before the official state courts.
The obligation to arbitrate may also derive from the assignment of contractual rights (provided the original contract included an arbitration agreement), and by incorporation by reference.
Arbitration has certain characteristics that give it some advantages over traditional court litigation, among them:
It is a flexible process, in which the parties may agree to the manner how the process will be conducted, including the place where the hearing will take place, or if the parties decide to not hold one.
It is more expeditious, because the parties in conflict are not facing the backlog typical of state courts, nor are they bound the rigid procedural rules. Additionally, there is no appeal in arbitration.
Arbitraiton is confidential. This can become an important element for businesses, either because they need to maintain their dispute in prive, or to protect important information such as patents or trade secrets.
It is also specialized. Often times, the parties chose an arbitration based on the particular needs of their contract, which may demand that the arbitration tribunal have certain qualifications or experience.
Arbitration may also be international, when the parties in dispute or their contract have connections with more than one countries. In fact, the arbitrators can be of any nationality and may even conduct the arbitration in any language that the parties have chosen.