Arbitration is simply an alternative means of settling disputes outside of a courtroom. When parties sign an arbitration agreement, they are agreeing that any legal claims that arise out of a relationship or transaction will be handled through arbitration rather than through lawsuits in court.
The process of arbitration is similar to a trial proceeding in court. The parties often have attorneys representing them, and they exchange information, question witnesses, and present each side of the story. However, arbitration proceedings are generally less formal than courtroom litigation. Instead of being heard by a judge and a jury, a case that goes to arbitration is heard by an arbitrator (or a panel of arbitrators).
Arbitration is also usually "binding," which means the decision of the arbitrator(s) is final and cannot be appealed.
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