In the context of economics, a method of dispute resolution where a neutral third party, known as an arbitrator, reviews evidence and renders a binding or non-binding decision. This process provides an alternative to litigation, offering a potentially faster and less expensive way to resolve disagreements. For example, in international trade, if two companies from different countries have a contract dispute, they might agree to submit their case to a panel, instead of pursuing legal action in one of the countries’ court systems.
The utilization of such an approach offers several advantages. It can reduce costs associated with protracted legal battles, maintain confidentiality, and provide a degree of predictability. Moreover, it promotes international commerce by assuring parties that disagreements can be resolved fairly and efficiently, thereby fostering trust in cross-border transactions. Historically, its adoption reflects a desire for more streamlined and specialized methods for resolving economic conflicts.
