What is arbitration? The definition itself has not been set in stone, be it national law or conventions regulating them, however their principal characteristics are:
– A mechanism for the settlement of disputes;
– Arbitration is consensual;
– Arbitration is a private procedure; and
– Arbitration leads to a final and binding determination of the rights and obligations of the parties
How does arbitration work? First, there has to be a dispute. Most disputes arise when one party fails to pay a sum of money owed to the other. Remember that as arbitration is consensual, both parties of the dispute must consent to arbitrate the dispute, meaning that the authority of the arbitral tribunal’s judgment is limited to only certain aspects to which the parties have agreed.
How do we know that we have chosen arbitration as our forum of dispute? Most arbitration agreements are in the form of an arbitral clause in the principal contract. If that is not the case, then there may be an arbitration agreement ongoing with the dispute.
Where does arbitration stand? Arbitration is not part of the state’s court system, however it fulfills the same function as litigation. The difference is that arbitration is a one-stage procedure whereas courts have appeals. The end result of arbitration is an award that is enforceable by the courts.
In what aspects is arbitration favorable? Arbitration permits the parties to choose their arbitrators. This gives the advantage to choose specialized knowledge arbitrators. This means that engineers and architects may serve as an arbitrator (in a construction arbitration) as compared to judges that have limited technical knowledge of the dispute. Keep in mind that the freedom to choose arbitrators with specialized knowledge is not available in states that have restrictive arbitration laws.
 Bergsten, Eric E. United Nations Conference on Trade and Development, Module on Dispute Settlement International Commercial Arbitration, United Nations, 2005, Page 5.
 Ibid, page 6.
 Ibid, page 7.
 Ibid page 14.