Legal arbitration is a form of alternative dispute resolution wherein a dispute between parties is settled by a third party that is neither judge nor jury but acts in the same capacity. An arbitrator or arbitration panel is the third party which resolves a disputed by handing out a judgment or decision, referred to as an award, as much as a judge or jury does. However, arbitration is not the same as a court trial as much as it acts as a scaled version of one.
Members of an arbitration panel are selected based on the parties involved, the nature of the case, and if a party was compelled to submit to a legal arbitration based on a provision in a contract entered into with the other involved parties. If the last condition is not fulfilled, all the involved parties may mutually select members of the arbitration panel.
The arbitration panel acts like a judge in that the members must hear all the necessary and relevant information presented by all involved parties before passing a decision that may or may not be legally binding depending on the terms of arbitration to which both parties agreed to.
As mentioned previously, an arbitration contract clause determines whether or not the decision reached by the arbitrator will be binding to both parties. If the disputing parties agree to a binding arbitration, the judgment passed during the legal arbitration is final and the case can no longer be brought to a court of law.