Probably the most widely-known form of alternative dispute resolution, binding arbitration is a contractually agreed-upon, legally binding evaluation by a third-party neutral.
This form of ADR has gained televised popularity as the well-known "judge" shows like the People's Court and Judge Judy. The parties agreed before the filming that any decision made by the arbitrator (called the judge for familiarity) will be binding and settle the issue. These decisions can be appealed, but are generally as legally binding as any other trial or contract.
What is Arbitration?
Arbitration is the alternative dispute resolution process that is most like a traditional court proceeding. Rules of evidence apply, the parties are often accompanied by attorneys, and a final legal decision is given after both parties present their cases. The decision given by the arbitrator can be either binding on the parties or non-binding, which is determined by agreement of the parties before the arbitration begins.
Most non-binding arbitrations function much like an early neutral evaluation, giving the parties a professional, legal opinion that they can either use as a functional settlement agreement or as a starting point for a mediation.
Non-binding arbitration can help both parties understand the case and often be an eye-opening experience for participants with unreal case expectations.