How is "arbitration" defined in legal terms?

Arbitration is defined as a method of resolving disputes where a third party makes a binding decision. This process involves the disputing parties agreeing to submit their conflict to an arbitrator or a panel of arbitrators instead of going through the court system. The arbitrator reviews the evidence and arguments presented by both sides and then issues a decision, known as an award, which is enforceable by law.

The distinctive feature that sets arbitration apart from other dispute resolution methods is the binding nature of the arbitrator's decision. Unlike court procedures, which involve formal legal processes, or negotiations and informal discussions that may not result in a binding outcome, arbitration culminates in a final decision that both parties are obliged to follow. This provides a level of closure and certainty that can be beneficial for parties seeking to resolve their disputes efficiently.

By understanding arbitration's binding characteristic and the role of the third party in the process, one gains insight into its legal significance as a preferred method of dispute resolution in many sectors.