What does arbitration mean?
Arbitration is a formal method of resolving disputes in which the conflicting parties submit their disagreement to an impartial third party — an individual or panel known as an arbiter or arbitrator — whose decision they agree to accept. Unlike mediation, where a neutral figure merely helps the sides reach their own compromise, arbitration ends with a ruling; when the process is described as binding, that ruling has the force of law and can be enforced by courts. Arbitration is widely used in commercial contracts, employment and labor relations, international trade, and sports governance, largely because it is usually faster, more private, and often cheaper than going to court. The word carries a professional, neutral tone and appears most often in legal and business writing. Its root lies in the Latin arbiter, meaning a judge or witness, which also gives us 'arbiter' and 'arbitrary.'
nounThe process of settling a dispute between parties by referring it to an impartial third person or persons, whose decision the parties agree to accept. It is a formal alternative to litigation commonly used in legal, commercial, and labor contexts.
- The settlement of a dispute by an impartial third party whose decision the disputants have agreed (or are bound) to accept.
- (Law) A formal procedure, often contractual or statutory, for resolving disputes outside the courts, as in commercial or industrial arbitration.
"The two companies agreed to settle their contract dispute through arbitration rather than a costly lawsuit."
"After months of deadlock, the players' union and the league submitted their salary dispute to independent arbitration."
"Under the terms of the agreement, any disagreement over the building work would be resolved by arbitration in London."
The plural is uncommon but appears when referring to multiple separate arbitration proceedings or cases.
"The tribunal handled several arbitrations last year involving cross-border trade disputes."
When two sides can't agree, they hand the decision to a stranger — and in 'binding arbitration,' both must live with whatever that stranger decides.
Reviewed by Deb Chak, Editor. AI-assisted content curated by RJS Tech Solutions LLP.
Etymology of arbitration
Arbitration derives from the Latin arbiter, meaning one who is appointed to judge or decide, via the verb arbitrari ('to judge'). The word entered English through Old French in the late medieval period, with the related noun 'arbiter' appearing in English usage around the fourteenth century and 'arbitration' itself attested by the early fifteenth century. Cognates and derivatives from the same Latin root include 'arbitrary', 'arbiter', 'arbitrator', and the verb 'arbitrate'.
Related word forms
How arbitration is actually used
Arbitration is a formal term used mainly in legal, commercial, employment, and diplomatic contexts. It carries a neutral-to-professional connotation. In 'binding arbitration', the arbitrator's decision is legally enforceable; other forms may be non-binding. It is typically distinguished from court adjudication (private vs. judicial) and from mediation (decisive vs. facilitative).
Easily confused with arbitration
In mediation, a third party helps the disputants negotiate their own agreement, whereas in arbitration the third party issues a binding decision.