Appealing to arbitrators or tribunals to resolve disputes. Recourse to arbitration implies an engagement by both parties to submit in good faith to the decision rendered.
Arbitration has been used customarily for the settlement of disputes between members of trade associations and between different exchanges in the securities and commodities trade. Its usefulness and significance is demonstrated by its increasing use by the business community and legal profession in many countries of the world. The method of selecting arbitrators is an important aspect of the process, for the arbitrator's ability and fairness is the decisive element in any arbitration. Arbitration between states has a long history. A Permanent Court of Arbitration was established in The Hague in 1899, and was used twenty times between 1902 and 1932. It is also mentioned as a proper method of settling disputes between countries in the Charter of the United Nations, as it was in the Covenant of the League of Nations.
The general practice is for both parties to select an arbitrator at the time a conflict is recognized. The arbitrators then select a chairman, forming a tribunal. Selection of arbitrators is also often made by agencies administrating commercial arbitration. Challenges to the arbitration process are not uncommon, sometimes resulting in recourse to the court systems for final resolution.
Arbitration as a process for resolving disputes can save considerable time over court procedure, and can protect the privacy of the parties to the controversy.
Participation in arbitration procedures, rather than attempting to resolve the dispute by the interested parties, can avoid recourse to violence or lasting breach of relations due to unresolvable controversies.
Only very specific disputes would ever reach arbitration; it is thus not appropriately considered a general strategy for dispute resolution.