The 21st Century has ushered in a litigious age, where many seem to be looking for an excuse to fight.  Arbitration can sometimes be a less costly alternative to dragging a case through the courts, and it can lead to an orderly and cost effective way to bring business disputes to a quick conclusion. Its best use is in commerce, business. It is much less beneficial to consumers of more limited means who have unequal bargaining power.

In simple terms, arbitration is the use of a hopefully unbiased third party (the arbiter) to settle a dispute with both sides agreeing to be bound by the decision.  This means that both sides of the case are heard in private, with no judge or jury present.

However, once both sides have put all their information on the table and have made their point as to why they feel they are in the ‘right’, it is up to the arbitrator to decide how the case will be settled.

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Commercial disputes will most likely be heard by an Arbitrator who is a member of the American Arbitrators Association (AAA) or other similar organizations.  They have to possess years of industry specific knowledge and experience, which can be good or bad, and their panel includes more than 7,000 individuals located throughout the world and they are guided by the AAA’s Code of Ethics and Rules and Procedures.

The AAA’s Rules and Procedures detail the steps in the resolution process and ensure that all parties to a case are treated fairly and equitably.  This is the objective, but objectives are not always met. There are different rules and procedures for commercial, consumer, employment and labor disputes, as well as for state programs that are outlined on their site at

While arbitration will save time and money in resolving a dispute, there are a whole list of other pros and cons for using this method of resolution.  In my next article I will outline the more specific reasons why arbitration can be a good idea, followed by a third article in this series that will articulate in what instances that using arbitration can be a really bad idea!