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Arbitration (n.)is the process of bringing a business dispute before a disinterested third party for resolution. The third party, an arbitrator, hears the evidence brought by both sides and makes a decision. Sometimes that decision is binding on the parties.

To arbitrate (v.)a matter is to bring it before an arbitrator.

Arbitration is a form of alternative dispute resolution (ADR), used in place of litigation in the hope of settling a dispute without the cost and time of going to court.

Arbitration is often confused with mediation, which is an informal process of bringing in a third party who goes between the disputing parties to help them settle a dispute. The mediation process is not binding on the parties, and the mediator does not hear evidence.

Pronunciation: ar-bit-RAY-shun, AR-bit-rate
At the end of the arbitration process, the arbitrator made her decision, which was binding on both parties.

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