What Is Arbitration?

In binding arbitration, the arbitrator's decision is final and enforceable in court — parties give up their right to appeal in most circumstances. In non-binding arbitration, the decision serves as a basis for negotiation but either party can reject it and proceed to court. Arbitration can be agreed upon in advance (through an arbitration clause in a contract) or after a dispute arises. Rules are typically set by an arbitration organization such as the American Arbitration Association (AAA) or JAMS. Arbitration is common in commercial contracts, employment agreements, consumer agreements, and financial services. It offers privacy (proceedings are not public record), speed, and the ability to select arbitrators with subject-matter expertise. Critics note it can favor repeat players (like corporations) over individuals in consumer or employment disputes.

Arbitration clauses are standard in many employment, financial, and consumer contracts — often limiting your right to sue or join a class action. A business attorney can advise whether to include arbitration clauses in your contracts, how to draft them favorably, and how to navigate arbitration if a dispute arises.