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A third party can act as mediator between the two parties and therefore enable them to settle differences without going to Court. This third party will issue a decision that is binding for both parties.

Most types of arbitration have the following in common:

• Both parties agree to use this process
• It is carried on in private
• The final decision is made by the third party and not the people involved
• It is legally binding and final
• There are limited grounds for challenging the decision
• The hearings are less formal than court hearings. However, some forms of arbitration do not involve hearings but are decided on the production of document

Arbitration is used for international disputes, employment rights disputes, consumer disputes and disputes between major corporations. It is governed by the Arbitration Act 1966, which applies in England, Wales and Northern Ireland. Consumer disputes only apply in Scotland although the position of arbitration in Scotland is now under review.

ACAS provides arbitration for employment disputes and offers an arbitration service to handle unfair dismissal claim and claims related to flexible working requests.

Arbitration takes place under very strict rules but the basis for decisions are not as rigid as in court. Rules of evidence are not as strict and parties can have a say in how they want the hearing to be conducted. Many consumer arbitrations are based on documents submitted.

In private arbitration the parties choose the arbitrator and are free to select someone who is an expert in the subject matter.

Once the parties have decided to use arbitration they usually give up their right to seek a decision elsewhere – court or tribunal.

After consideration the arbitrator decides upon a final and binding award. The award usually includes the reasons for the decision.

There is limited scope for appeal of an arbitrator’s award under the 1966 Act.

Arbitration awards can be enforced in court if necessary