Arbitration involves an impartial third party – known as an arbitrator – who has the ability to resolve disputes by making a legally binding decision. However, the arbitrator does listen to the disputing parties and seek a mutually acceptable resolution. The process is more formal than mediation and conciliation, as the arbitrator physically sits above the disputing parties. The Magistrates’ Court and VCAT use arbitration in claims for less than $10,000.
By listening to the parties, but still imposing a legally binding decision, arbitration can achieve a mutually acceptable decision that courts often cannot.
The parties may maintain some animosity between each other, and be reluctant to fulfil their terms of the agreement, as the decision is not entirely theirs.
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