Arbitration is similar to a trial, but it is generally less formal than court proceedings conducted before a judge. An arbitrator is an independent person chosen by the parties to preside over a hearing and make a decision concerning the disputed issue(s). Sometimes, a panel of three arbitrators are used to conduct the hearing and participate in making the decision.

At the arbitration hearing, witnesses may be called to testify and exhibits may be submitted as evidence. Arbitration is most often "binding," where the parties have agreed before the hearing that they will be bound by the arbitrator's decision in the same manner that they would be bound by a decision of the judge in a court. Some of the advantages are that scheduling arbitration can be more flexible, and a resolution can be reached must faster than the court system would normally allow. Arbitration saves time and money over litigation before a judge in a court.