Arbitration is one form of ADR It has aspects in common with litigation and can be equally cumbersome. It is relatively formal, and it involves an independent third party (or a panel of independent individuals) agreed by the parties in dispute, who considers both sides of the dispute and makes a binding decision. Very popular in international disputes, commercial disputes (especially those between large corporations), but it is also commonly used in consumer disputes and employment rights disputes. Arbitration very often results from arbitration clauses in contracts.

Arbitral awards are binding on the parties, and, unless successfully overturned, can be enforced by court order.

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