Arbitration: A Comprehensive Guide to Alternative Dispute Resolution

Arbitration is a part of ADR (Alternative Dispute Resolution) in which a dispute is resolved outside the court by appointing a third person. In this, the third person appointed to decide is called an arbitrator. Arbitration is mostly used to resolve commercial disputes. In this article, we will discuss about the arbitration and its process for better understanding. 

Definition of Arbitration

Arbitration is a process in which a dispute is resolved outside the court. There is no need for a judge to decide this. In place of the judge, a third person is appointed with the consent of both the parties who listens to the arguments and disputes of both the parties and finally gives a decision. Both the parties have to accept this decision. The biggest advantage of this process is that it saves a lot of time. And also no more legal procedures have to be followed as used in Civil Suits. Arbitration is a very flexible and personal process to resolve disputes.


The arbitrator is a third party in the case of arbitration. he is the one who decides the case by listing both parties. He is a neutral person. Although there are no rules which describe the qualification for an arbitrator it is always preferred that the arbitrator should be an expert in the field related to the case. 

Arbitration Process

Preliminary Agreement

For the arbitration process, it is crucial to have an agreement between both parties. For this, a contract or agreement should be made in which there should be a clause of arbitration, only then you can solve your dispute outside the court. Today, all financial companies use arbitration. Because it saves both their money and time.

Selection of arbitrator

The arbitrator is a third person who listens to the arguments and disputes of both parties and gives a decision. This arbitrator is selected by both the parties. He can be any mutually trusted person of both parties. Nowadays, big financial companies keep retired judges as their arbitrators.

Hearing and evidence

Whenever there is a dispute between the two parties, their hearing is done outside the court by the arbitrator in which the arbitrator listens to both the parties. In this, both the parties are also given a chance to present their evidence.

Decision and award

After looking at the arguments and evidence of both parties, the arbitrator makes the decision. Both the parties have to accept this decision. This decision is in written form and this decision is called an award.

Benefits of arbitration

Instant solution

In this process, the disputes are resolved very quickly because one does not have to face any kind of long legal process. In this, the decision is taken very quickly as compared to the court.

Less expensive

This process is very less expensive. Because in this there is no legal fee or court fee.


It is very confidential. Many times, it is not even known outside that there has been a dispute because the decisions of arbitration are taken inside. In this, the statements, evidence and disputes of both the parties are kept confidential.


Arbitration is a very flexible process. The day and place of the hearing are decided according to the time and convenience of both parties.

Types of arbitration

Institutional arbitration

It is run by an institution. In this, an institution handles and makes all the rules and procedures according to itself.

Ad hoc arbitration

This arbitration is created and run by both parties, in this everything like rules and procedures is made by both parties.

Arbitration in India is governed by the Act 1966. Act 1966 has been amended in 2019. Arbitration in India started with Panchayats. Panchayats are also a type of arbitration in which decisions are made outside the court.

Where is arbitration mostly used?

Commercial disputes

Arbitration is mostly used in commercial disputes.

Construction disputes

Nowadays arbitration is also used in construction disputes. Most of the disputes in construction are due to the Quality of materials and timely payment. Arbitration is very good for resolving these disputes because time and money are very important for construction work. If the construction case goes to court, it takes a lot of time due to which the construction work also stops in the middle.

Limitations of Arbitration

Many cases such as criminal cases are not resolved through arbitration. There is an arbitrator in it who is chosen by both the parties, sometimes he gives a decision in favour of one of them, due to which arbitration can sometimes lack impartiality.


Arbitration is a very effective and Direct dispute resolution process which is capable of settling any dispute very quickly. To use it, when you are making a settlement with someone, make sure to make a contract or agreement and put an arbitration clause in it. With this, whenever you have a business dispute with your partner, you can settle your matter outside without going to court. This process is less expensive than the court, in this, you can also decide the day and place for a hearing according to your time and convenience. In this, your dispute will be heard in a completely fair manner. Due to this your dispute will not have any negative impact on your business.

In India, commercial and construction disputes are resolved very well through this process. Arbitration has emerged as a very good option to resolve disputes. It will become even more popular in the future. Because in the coming times, everyone will choose it to save their time and money.

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