Arbitration is settlement of a dispute between parties to a contract by a neutral third party (the arbitrators) without resorting to court action. The arbitrators decision (the 'award') is binding. The exact procedure to be followed (if not included in the contract under dispute) is governed usually by a country's arbitration laws, or by the arbitration rules prescribed by an institute such as the International Chamber of Commerce (ICC).
Arbitration is either agreed after the dispute has arisen or beforehand in an arbitration clause in the contract. Arbitration is often administered by an Institute. I am listed as an arbitrator with the Dutch Arbitration Institute (NAI), the Transport and Maritime Arbitration Association Amsterdam/Rotterdam (TAMARA) the ICC Court of Arbitration, the Indian Institute for Arbitration and Mediation (IIAM) and the China International Economic and Trade Arbitration Commission (CIETAC).
Of all forms of alternative dispute resolution arbitration is most similar to court proceedings. Important differences are that the parties themselves appoint the arbitrators and that arbitral awards are recognized and enforceable in almost all countries in the world.
Arbitration proceedings can be conducted more time efficiently than court proceedings. As the arbitrators are appointed by the parties themselves, they may choose the nationality, gender, speciality and qualifications of the arbitrator(s).
When arbitration is administered by an institution, such as the ICC, NAI or LCIA, the arbitration procedural rules of the institute usually apply.