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Arbitration is the word used to describe a process that allows for binding non-judicial disposition of a dispute. The parties to a dispute may agree, or be compelled by contractual clauses, to submit their dispute to a neutral arbitrator or an arbitration panel. Usually a panel consists of three persons. The arbitrator(s) acts as both judge and jury. The Arbitrator will hear the evidence presented by both sides to a dispute and then upon conclusion of the case, he will make a decision that will bind the parties. This form of ADR is distinguished from mediation which is advisory only. In arbitration, the Arbitrator decides who wins and loses.

Arbitration is another form of ADR that is used with increased frequency. It's growing popularity stems from the fact that it is much faster and less costly than litigation in the judicial system. The rules of evidence and procedure are relaxed and the process is more informal.