Arbitration is a way to resolve contract disagreements without using the court system. When two people or companies disagree, a third person will decide who has the better argument. The third person can legally require the loser to pay the winner or to take some other action, resolving the disagreement.

Arbitration is a process between two disputing parties that acts as a resolution method outside of the court of law. Arbitration can be faster and more cost-effective than the process of litigation.

Who Needs To Be Involved in Arbitration?

In addition to the two disputing parties, the arbitrator(s) (one to three individuals)—the neutral party who will decide the outcome—will be involved in the process. The parties get to choose their arbitrators from a list of qualified and impartial individuals.

Everyone involved in the process will have to show up to an “arbitral seat,” a venue where these kinds of hearings can occur.

What Will the Process Typically Look Like?

Here is what the arbitration process will typically look like:

Initiating the Process With a Claim

To begin the process, a file for arbitration will need to be submitted. This file will have information on the dispute, including a timeline and details of events relevant to the claim. Additionally included will be solutions the claimant is expecting from a resolution.

Wait for an Answer From the Second Party

Next, the claimant must wait for a response from the other party. The second party must respond with their side of the story and with defense.

Selection of the Neutral Arbitrator

Moving forward, both parties will receive a list of arbitrators they can choose as their panel for the hearing.

Pre Hearing Consults With Each Involved Party

Once the arbitrator(s) are selected, they will consult with each party to get more information, resolve any issues before the hearing, and schedule a date.

Exchange of All the Necessary Documents (Discovery)

Parties will present the necessary documents and necessary information for the hearing.

The Hearings

Finally, on the scheduled date, both parties must be present in person. Then, they state their respective cases and provide evidence for their arguments in front of their selected panel.

The Final Decision

Once the hearing concludes, the arbitrator(s) will take some time to deliberate and come up with a decision. With these hearings, this final decision is called an award. Whatever the outcome, both parties must cooperate with the award.

Before leading to these steps, any time before the hearing, parties can opt-in for mediation instead of going through the arbitration process. Mediation involves a trained, impartial individual who facilities the negotiations.

What Kinds of Disputes Can Arbitration Resolve and What Has To Go to The Court of Law?

Arbitration can resolve commercial disputes, employee and employer disputes, tenant/landlord issues, and similar cases. Essentially, an arbitration hearing works when a case involves a monetary dispute between two parties without any criminal offenses, like foreclosure. It’s important to learn more about foreclosure so you know what your options are.

Any matters that fall under family law, criminal law, or immigration law cannot be arbitrated.

Some of the Advantages and Disadvantages of Arbitration

There are pros and cons of using this method of hearing vs. going to the judiciary process.

A Few Advantages

  • More cost-effective when compared to a court case
  • Faster than the legal system
  • Allows both parties to choose the arbitrator(s)—this can be a considerable advantage, especially when dealing with a specialized subject matter.
  • Outcomes and processes are not public like court trials are.

Potential Disadvantages

  • Depending on the terms of the arbitration, parties may waive their right to a court trial.
  • The appeal process for these hearings is highly limited.
  • The discovery period may not be completely through as a court case would be.
  • The potential for the process to get expensive (even if still cheaper than a court trial) is especially true if there are attorneys involved.
  • You may not be a participant by choice, rather participating because of a legally binding clause when signing up for a job or purchasing a product.

What Are the Possible Outcomes of the Process?

Once an arbitrator grants the award, it is legally binding, and in most instances, final. Awards can include a combination of money, ordered injunction, and relief from pending liabilities.

Once granted, there can be clarification for both sides, clerical errors and other minor errors corrected. Then finally, the party receiving the award can begin the proper steps to collect it.


If legally possible, both parties can pursue an annulment. However, there are only a few very rigid requirements that may allow for an annulment to take place:

  • If there is fraud, corruption, or undue tactics involved to receive the award
  • If there is bias and corruption with the arbitrator(S)
  • Evidence left out or not looked at by the arbitrator(s)
  • If the arbitrators fail to come to a final decision on the award
  • Either party did not have enough time and notice to prepare their case.

Arbitration is a hearing that resolves disputes outside of criminal, immigration, and family law. The process involves presenting both arguments and respective evidence to a neutral party. From here, they make a decision called an award. In most cases, the award is final.

There are advantages and disadvantages of using this process over a court trial. Before pursuing this option, individuals may want to consider mediation or court trial.

If you’re currently dealing with arbitration, or any other financial hardship and you need some extra cash, learn more about bad credit loans.


Arbitration Overview
Arbitration Frequently Asked Questions
American Arbitration Association

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