Arbitration may be voluntarily chosen by the parties, or may be mandated by contract. For instance, most agreements between securities brokers and their customers mandate arbitration. In arbitration, the parties submit their case to a neutral third party of their choice. Sometimes the case is heard by a panel of arbitrators, one of whom serves as the chairperson. As in court, the claimant submits a written complaint or statement of claim, and the respondent submits an written answer.
Discovery is usually more limited than in a typical court case. The hearing before the arbitrator is conducted much the way it is done in court, with each party presenting evidence, examining and cross-examining witnesses, and arguing legal points. The rules of evidence are usually more relaxed, however. The arbitrator hears the evidence, applies the law to the facts, and issues a decision. The decision is binding, and the avenues of appeal are very limited.
The benefits of arbitration are:
The dispute can usually go to hearing faster than in most courts, where the dockets are generally congested.
The parties can, if they wish, choose an arbitrator with expertise in the issue in dispute.
Arbitration can be less expensive, especially if discovery is limited.
Reduced opportunity for appeal also reduces costs and puts the dispute behind the parties more quickly.