Which of the following best describes the nature of arbitration?

Arbitration is best understood as a binding decision made by an arbitrator. In this process, parties in a dispute agree to submit their conflict to an impartial third party, known as an arbitrator, who reviews the evidence and arguments presented. The arbitrator then issues a decision, called an award, which is typically enforceable in a court of law. This binding nature distinguishes arbitration from other forms of dispute resolution, such as mediation, where the mediator facilitates negotiation but does not impose a decision.

Other options describe different aspects of dispute resolution: a voluntary agreement without outside influence might apply to mediation, where parties work collaboratively, while a court-mediated approach reflects traditional litigation. Thus, understanding that arbitration involves a definitive resolution imposed by an arbitrator is crucial for grasping its role in business law and dispute resolution contexts.