Contract provisions requiring that any dispute be resolved by arbitration are now very common. While in mediation a neutral third party is present only to facilitate an agreement, in arbitration, an impartial third party or panel holds a hearing and renders a decision. Arbitrations employ a streamlined process and the rules of evidence are relaxed. Resolution by arbitration is generally quicker than litigation in court and often less expensive. The hearing usually can be scheduled sooner and the hearing may last only an afternoon, or a couple of days. Sometimes the proceedings can be handled without the need for lawyers. Unlike most civil court proceedings, arbitration proceedings can be kept confidential.
A common “boilerplate” arbitration clause found in contracts specifies that “any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules.” Other contracts relating to a particular trade may specify arbitration under services provided by a trade association. For example, the New York Stock Exchange and the National Association of Securities Dealers provide arbitration services for securities cases.