Arbitration is a form of alternative dispute resolution that is very similar to traditional litigation. A neutral third party (i.e., arbitrator) resides over the arbitration process. As such, the arbitrator reviews the complaint, evidence, and motions in lieu of a final proceeding. This final proceeding is much like a trial. Unlike mediation, arbitration is binding on the parties. Additionally, the parties do not have the recourse of appeal if the final ruling is not in their favor. Unlike mediation, where the courts review certain conclusions, the court does not have the authority to review and approve binding arbitration judgments. Ironically, the inability to appeal brings a sense of finality to arbitration judgments. The parties cannot seek further recourse from the court, so they are forced to accept the judgment as it stands and move away from the legal dispute at hand. However, if a party can show that exigent circumstances exist – such as fraud, bias, or inappropriate conduct, then it may call on the judicial system to act on the binding arbitration judgment.

Nonetheless, arbitration is an attractive alternative to litigation because it allows the parties to select their own arbitrator and set the rules of evidence and procedures that will govern the proceedings. Arbitration also moves much faster than litigation and is more cost efficient. However, for the purpose of moving arbitration along, some parties may opt to severely restrict relevant evidence and governing regulations. It is important for parties to establish the framework that will provide for a neutral and equal resolution of the dispute. This flexibility also allows parties to resolve their resolutions more quickly since the framework is most conducive to the specific circumstances of the underlying matter. The parties may also decide to adopt the established rules of a particular institution that facilitates the arbitration, such as the American Arbitration Association.

In general, contracts will contain a binding arbitration clause that compels the parties to solve all future legal disputes via arbitration. The Federal Arbitration Act protects contractual provisions that require resolution of legal problems through arbitration. This federal statute also limits the grounds upon which courts may review or set aside binding arbitration awards. Commonly, employers will include a mandatory arbitration provision in employment contracts.

Arbitration has been an especially prominent dispute resolution tool in cases involving allegations of cybersquatting. Under the Anti-Cybersquatting Consumer Protection Act, parties may initiate arbitration to establish rights to a domain name. Although, such technical and specific arbitration methods may take longer than average, the costs generally fall below the cost of traditional litigation. The involved parties may file suit under the arbitration system that the Internet Corporation of Assigned Names and Numbers (“ICANN”) has created to provide a streamlined procedure for such arbitration.