What is the primary function of arbitration in a dispute resolution?

Arbitration serves the primary function of having a third party render a decision that is legally binding to all parties involved in a dispute. This process occurs outside of the traditional court system and is designed to provide a more efficient and less formal setting for resolving conflicts. In arbitration, the arbitrator hears evidence and arguments from both sides before making a decision that both parties must adhere to, similar to a court judgment.

This binding nature of arbitration is a key distinguishing characteristic, as it finalizes the dispute and typically precludes further litigation on the same issue, offering a sense of closure to the parties. Arbitration is often chosen for its speed and reduced costs compared to conventional court proceedings, making it an attractive option for many contractual agreements, especially in industries such as construction.

Other approaches, such as negotiation or mediation, do not carry the same binding force. Negotiation allows parties to seek resolution through dialogue, while mediation involves a facilitator helping both sides reach a mutual agreement, but neither guarantees a binding outcome. Thus, the role of arbitration as a binding resolution mechanism is vital in the context of dispute resolution.