"Arbitration is a procedure in which a case is referred to one or more than one arbitrator who makes a binding judgment based on the parties' agreement. Instead of proceeding to court, the parties use arbitration as a private dispute resolution option."

In the English case Collins v. Collins[1], the court gave the term of arbitration a broad meaning, which reads as follows:

Arbitration refers to the rulings of one or more people, with or without the assistance of an umpire, on an issue between them. The court went on to say that conflict resolution hearings are arranged in such a way that executives of the disputing parties meet in the presence of an impartial counsel and, after hearing both sides and assessing the proof and merits of the dispute, seek a voluntary settlement.


The arbitration procedure varies depending on the situation. The following is a list of the essential steps in arbitration; however, it's not designed to be exhaustive.

  • Arbitration Initiation– A request for a case to be given to arbitration from one side.

  • Appointment of Arbitrator – Arbitrators may be chosen in either of three ways: (1) directly by the disputing sides, (2) by current tribunal judges (for example, each side appoints an arbitrator, and the arbitrators appoint a third), or (3) by another group (For example, the court or institution or an individual nominated by the parties).

  • Preliminary Meeting – A consultation with an arbitrator and the parties and their legal representation is a good idea to go at the case and negotiate a suitable procedure and timeline.

  • Statement of Claim and Response – In a declaration of argument, the applicant outlines the issues at hand and the solution requested. This is required to advise the respondent of the questions that must be answered.

  • Discovery and Inspection – There are civil processes under which the parties do background research. Each group must have a list of all related records under their authority. This is referred to as "discovery."

  • Interchange of Evidence – Before the hearing, the written evidence is shared and given to the arbitrator for analysis.

  • Hearing – The hearing is a meeting in which the arbitrator hears all oral testimony, questions witnesses, and requests clarity on facts. All sides have the right to make their case and be present.

  • Legal Submissions – All parties' attorneys submit a review of their findings and relevant rules to the arbitrator. These submissions are submitted verbally during the hearing or in writing as soon as the hearing is over.

  • AwardThe arbitrator analyses all the evidence before making a verdict. The hearings are summarized, and recommendations are made in an award. The explanations for the arbitrator's decision are generally included in the award.[2]


Arbitration can be broadly classified into:

  • Ad hoc- It applies to a form of arbitration in which procedure is defined by the parties themselves, in the absence of an arrangement, by the arbitral tribunal. There is no arbitral institution that oversees ad hoc arbitration. If parties to the conflict are unable to reach an agreement through the help of the arbitrator, then the Chief Justice of the HC may help on cases relating to domestic arbitration.

  • Institutional- In this form, if the parties disagree, they will assign the matter to a specific institution, such as the FICCI or the WIPO. These agencies have their own set of arbitral laws that extend to their arbitration hearings.

  • Contractual- Rather than pay the costs of lengthy, protracted legal proceedings, parties prefer to include an arbitral clause in their settlement, stating that in the event of a disagreement between the contracting parties, the parties will assign their disputes to an arbitrator.

  • Statutory- As the name implies, in this form of arbitration, the law of the land imposes arbitration on the parties, and the parties are required to abide by it. This type of arbitration differs from the other three because the other three types are based on the parties' consent, while statutory arbitration is not.


  • Compared to mediation, arbitration is faster and less expensive.

  • Unlike in courts, arbitration trials are not open to the public. The arbitral award is only given to the parties involved in the case.

  • Unlike legal litigation, parties in arbitration may choose their arbitrators.

  • International acceptance of arbitral decisions is greater than that of court rulings.

  • The arbitral tribunal's verdict is definitive and irrevocable for the disputants.

  • With mutual consensus, the sides will choose the location of arbitration. It does not have to be as formal as a court case.[3]


Knowing the potential disadvantages of arbitration will help you make a wise decision on whether to participate or stay in a consumer transaction that requires it or whether to use it as a dispute settlement method if one exists.

  1. If arbitration is binding, both parties surrender their right to appeal. That means there is no natural way to amend an arbitral ruling where one party believes is incorrect.