When a company you do business with or a worker that you contract violates their contract with you or otherwise causes a significant dispute, you might think that the best way to resolve the situation is to go to court. After all, a judge can review the contract and the circumstances and make a fair and impartial ruling.

However, court is expensive. It can disrupt your normal business practices. It can also lead to embarrassment depending on what becomes part of the public record for your company. For all of these reasons, agreeing to arbitration can be a good way to resolve an ongoing dispute with an individual or a business.

Why arbitration can be a good way to resolve conflict

Arbitration is one of a handful of strategies known as alternative dispute resolution techniques. These systems allow people or companies in an active dispute with another business or person to resolve the issue without involving the legal system.

An arbitrator is a neutral third party who will learn the facts of the situation and then make a determination on what they believe would be a fair and appropriate resolution. In some cases, people can agree to binding arbitration, meaning that both parties have to comply with whatever terms the arbitrator sets even if they are unhappy about the outcome.

Other times, the solution proposed by the arbitrator can be a jumping-off point for the parties involved to continue negotiations on their own behalf and find a solution that works. They can then agree to terms and execute a binding contract that will resolve the conflict.

Arbitration offers a number of benefits for modern businesses

Sometimes, it just takes a fresh set of eyes to find a solution that works well for everyone involved because neither party can understand the other’s perspective. A neutral opinion from someone who won’t benefit from the outcome is one benefit of arbitration.

Another benefit is that arbitration is often confidential, meaning that the discussions you have stay behind closed doors and do not become part of the public record like the transcript of what you say in court would. Finally, arbitration can be more cost-effective than protracted litigation, which can generate substantial costs for everyone involved.