10 Common Types of Arbitration Explained & When to Use Them

Arbitration isn’t a one-size-fits-all process. While it’s often described simply as “a private alternative to court,” the truth is there are different forms of arbitration — each with its own rules, flexibility, and implications for how your dispute is resolved.

Understanding these types matters because the structure of arbitration can dramatically affect:

• Who decides your case
• How evidence is handled
• Whether the decision can be appealed
• How quickly you reach resolution
• What it costs you to participate

Some forms of arbitration are cooperative and flexible, designed to help parties settle quickly without litigation. Others are rigid, enforceable, and final, mirroring courts in their authority but not in their appeal rights. And while arbitration can be chosen voluntarily, there are situations where it is imposed by contract or even by law.

At Bennett Legal, we’ve seen disputes won or lost not just because of the facts, but because of which type of arbitration was in play. By knowing the differences, you can choose a process that matches the complexity, urgency, and stakes of your dispute — or push back against a type that would jeopardize your position.

10 Common Types of Arbitration Explained

In this guide, we break down 10 common types of arbitration, including binding arbitration, non-binding arbitration, voluntary arbitration, and compulsory arbitration — explaining what each means, why it’s used, and when it works best.

1. Binding Arbitration
2. Non-Binding Arbitration
3. Voluntary Arbitration
4. Compulsory Arbitration
5. Binding Arbitration with Appeal Rights
6. Med-Arb (Mediation-Arbitration)
7. Arb-Med (Arbitration-Mediation)
8. Statutory Arbitration
9. International Arbitration
10. High-Low Arbitration

Because in arbitration, the “type” isn’t just terminology — it’s your roadmap to resolution.

1. Binding Arbitration

Binding arbitration is a dispute resolution process in which the arbitrator’s decision — known as an award — is final and enforceable. Once issued, it can be confirmed by a court and treated as a judgment. This means both parties must comply, and there is generally no right to appeal except in very limited circumstances involving fraud, clear bias, or serious procedural errors.

How It Works:

Both parties agree to submit their dispute to a neutral arbitrator or a panel. The process typically involves presenting opening statements, evidence, witness testimony, and closing arguments — similar to a trial, but usually less formal. After reviewing all submissions, the arbitrator renders a decision in writing. That decision is binding; the losing party cannot reject it without facing enforcement in court.

Pros:

• Provides a definitive outcome without lengthy appeals.
• Speeds up the resolution compared to court litigation.
• Keeps proceedings private, protecting sensitive business or personal information.
• Allows flexibility in scheduling hearings and tailoring procedural rules.

Cons:

• Extremely limited options to challenge or overturn the decision.
• Potentially high costs for arbitrator fees and case preparation.
• If the arbitrator is biased or makes an error, the outcome still stands in most cases.
• Less transparency than public court decisions.

When to Use It:

• When the dispute involves clear facts and straightforward issues, reducing the risk of error.
• In cases where both parties want finality and closure without appeal delays.
• Where confidentiality is a priority, such as intellectual property matters or disputes with sensitive reputational aspects.
• When the relationship between parties needs a quick resolution to continue business.

When NOT to Use It:

• In complex disputes with nuanced legal issues that could benefit from appellate court review.
• Where one party controls the arbitrator selection process, raising the risk of bias.
• In high-stakes cases where a single, unappealable decision could cause major financial or operational harm.
• When one party has far greater resources — they may exploit the expedited process to dominate without fair balance.
• In situations where developing a legal precedent is important, since arbitration decisions do not create public case law.

2. Non-Binding Arbitration

Non-binding arbitration is a dispute resolution process where the arbitrator’s decision is advisory rather than enforceable. The award issued serves as a recommended outcome, but either party can reject it and pursue other remedies, such as court litigation. This form of arbitration is typically used to gauge how a neutral third party might view the dispute, with the goal of encouraging settlement rather than imposing a final judgment.

How It Works:

Both parties present their arguments, evidence, and testimony to an arbitrator or panel, much like in binding arbitration. The arbitrator reviews the information and issues a written decision. Unlike binding arbitration, the losing party can decline to follow the decision. If both parties accept the award, it becomes enforceable as a settlement agreement. If not, the dispute proceeds through other channels, such as mediation or litigation.

Pros:

• Offers a neutral evaluation without the risk of being forced into compliance.
• Helps parties understand how their case might fare in binding arbitration or court.
• Can narrow the issues, making later resolution faster and cheaper.
• Maintains full right to trial if the award is rejected.
• Reduces pressure compared to binding formats, promoting open discussion.

Cons:

• May not lead to resolution if one party rejects the outcome.
• Can add time and cost if followed by a full trial.
• Parties may treat the process less seriously, reducing effectiveness.
• No guarantee of settlement even after the arbitrator’s recommendation.

When to Use It:

• When parties want an independent assessment but are not ready to commit to a binding decision.
• In complex disputes where trial is likely but preliminary narrowing of issues could help.
• When relationships between parties are ongoing, and binding resolution might damage future dealings.
• In cases where public precedent is desired, but a private evaluation could inform litigation strategy.

When NOT to Use It:

• When immediate, enforceable resolution is required to prevent ongoing harm.
• In disputes involving urgent relief, such as injunctions or restraining orders.
• When one party is unwilling to settle unless compelled — making non-binding outcomes ineffective.
• In high-conflict cases where delay may cause additional financial or reputational damage.
• When arbitration costs would add unnecessary expense before inevitable litigation.

3. Voluntary Arbitration

Voluntary arbitration is a process both parties choose to enter into willingly, without contractual or statutory obligation. It is often selected as a pragmatic, faster, and more private alternative to litigation, especially when both sides believe arbitration will produce a fair outcome while preserving flexibility in the process.

Because participation is mutually agreed upon, voluntary arbitration often reflects a higher degree of trust and cooperation between the parties. The terms — including the choice of arbitrator, applicable rules, and whether the decision will be binding or non-binding — are negotiated jointly before proceedings begin.

How It Works:

Parties agree to arbitrate after a dispute has arisen, or they may add an arbitration clause during contract negotiations while leaving it optional. They negotiate the procedural framework, select a neutral arbitrator or panel, and agree on whether the arbitration will be binding or non-binding. With mutual consent driving the process, voluntary arbitration can be tailored to the dispute’s complexity, urgency, and budget.

Pros:

• High flexibility — parties can design a process that suits their needs.
• Greater willingness to cooperate and share information.
• Opportunity to address fairness concerns before proceedings start.
• Often preserves business or personal relationships better than litigation.
• Can opt for binding or non-binding results based on mutual comfort.

Cons:

• Requires mutual agreement — if one party refuses, arbitration cannot proceed.
• May take time to negotiate procedural terms before starting.
• Without shared trust, voluntary arbitration may stall or collapse.
• Risk of vague agreements if terms are not clearly defined in writing.

When to Use It:

• When both parties prefer a private, flexible forum and are open to negotiating fair terms.
• In lower-conflict disputes where cooperation is still viable.
• When preserving the relationship is important, such as in longstanding business partnerships.
• When creative solutions outside strict litigation rules may resolve the matter.

When NOT to Use It:

• In disputes with one party unwilling to negotiate or act in good faith.
• When urgent resolution is necessary and negotiation delays could cause harm.
• In situations where clear procedural structure is essential, and flexibility could lead to confusion.
• When one party has significantly more bargaining power, potentially skewing voluntary terms before arbitration starts.

4. Compulsory Arbitration

Compulsory arbitration is a process mandated by law or contract, meaning parties must arbitrate rather than choosing whether to do so. This obligation can stem from legislation covering specific industries or disputes, or from contractual terms agreed to before any dispute occurred. In compulsory arbitration, refusal to participate can result in penalties or forfeiture of rights.

This form of arbitration is typically designed to divert certain cases from overburdened courts, resolve disputes quickly, or address specialized matters through industry-trained arbitrators. However, since it is imposed rather than chosen, parties may feel less control over procedure, selection of arbitrator, or even whether arbitration is the right forum for their case.

How It Works:

The obligation to arbitrate is triggered by statutory law or a binding arbitration clause in a contract. Once triggered, parties follow the procedural rules outlined, often prescribed by an arbitration organization or statute. The process can be binding or non-binding, depending on the governing law or clause. The parties cannot bypass the process by opting for court unless specifically allowed within the rules.

Pros:

• Ensures resolution without prolonged court delays.
• Can provide industry-specific expertise in resolving disputes.
• Parties know the process upfront if stated clearly in the contract.
• May reduce procedural complexity compared to litigation.

Cons:

• Lack of choice — parties must proceed even if arbitration is unfavorable to them.
• Potential for one-sided arbitration clauses in contracts.
• May limit procedural rights compared to court.
• Risk that the imposed process favors one party more than the other.

When to Use It:

• When the law mandates it — compliance is required.
• Where the designated arbitration body has strong reputation for fairness and competence.
• In industry-specific disputes where technical expertise is crucial.
• When avoiding court backlog is a priority.

When NOT to Use It:

• If the compulsory arbitration clause is heavily one-sided in procedural design.
• In disputes where public precedent or transparency is strategically important.
• When the costs or venue requirements create substantial hardship.
• In high-stakes cases where limited appeal rights could cause irreversible harm.

5. Binding Arbitration with Appeal Rights

Binding arbitration with appeal rights is a variation of standard binding arbitration in which the parties agree beforehand to allow limited appeals of the arbitrator’s decision. This option blends the finality of binding arbitration with a safeguard against serious errors or bias. The appeal may be heard by a second arbitrator, a panel, or, in some cases, a court.

Because appeal rights are not typical in arbitration, they must be clearly defined in the arbitration agreement. This includes specifying permissible grounds for appeal, time limits, and the process for selecting the appeal arbitrator or tribunal.

How It Works:

The case proceeds like standard binding arbitration. When the arbitrator issues a decision, a party dissatisfied with the outcome can file an appeal within the agreed time frame. The appeal is conducted under the terms set in the contract or rules, often involving a review of the record rather than a full retrial. The appellate decision then becomes final and enforceable.

Pros:

• Adds a safeguard against erroneous or biased decisions.
• Provides more confidence in arbitrator selection.
• Can prevent costly enforcement of flawed decisions.
• Retains many efficiency and privacy benefits of binding arbitration.

Cons:

• Appeals increase time and cost compared to regular binding arbitration.
• Requires careful drafting to avoid procedural ambiguity.
• Not all arbitration organizations support built-in appeals.

When to Use It:

• In high-stakes cases where the consequences of error are severe.
• When one party is cautious about surrendering appellate rights entirely.
• In complex legal disputes with multiple potential interpretations.

When NOT to Use It:

• In small-value or straightforward cases where an appeal would be unnecessary.
• Where speed and cost efficiency are the primary goals.
• If the appeals process is poorly defined, risking disputes before it even begins.

6. Med-Arb (Mediation-Arbitration)

Med-Arb is a hybrid process in which parties first attempt to resolve their dispute through mediation — a collaborative negotiation facilitated by a neutral mediator — and, if they fail to reach agreement, proceed directly to arbitration. In many cases, the same neutral performs both roles, though parties can opt to use different neutrals to avoid potential bias.

This approach offers the possibility of settling disputes without a binding decision, but ensures resolution if mediation doesn’t produce results.

How It Works:

The mediator works with both parties to reach a voluntary settlement. If mediation fails, the process transitions to arbitration under pre-agreed rules, producing a binding award. The transition is seamless, avoiding delays between failed settlement and starting arbitration.

Pros:

• Encourages settlement before moving to binding resolution.
• Saves time and money compared to running separate processes.
• Flexibly accommodates different dispute dynamics.
• Guarantees closure if mediation fails.

Cons:

• If the same neutral serves as both mediator and arbitrator, they may be exposed to confidential settlement positions.
• Parties may withhold information during mediation to avoid disadvantage in arbitration.
• Requires careful planning to prevent procedural confusion.

When to Use It:

• In disputes where settlement is possible but a binding backstop is needed.
• When both parties want to avoid prolonged litigation if negotiation fails.
• For commercial and partnership disputes needing relationship preservation.

When NOT to Use It:

• In cases involving sensitive information that should not be revealed to an arbitrator.
• When parties strongly prefer separate neutrals for mediation and arbitration.
• If one or both parties are unwilling to mediate sincerely.

7. Arb-Med (Arbitration-Mediation)

Arb-Med reverses the order of Med-Arb. Parties begin with arbitration, allowing the arbitrator to hear evidence and even draft a decision, but before the award is formally issued, the case moves into mediation. If the mediation succeeds, the dispute is settled privately; if it fails, the arbitrator finalizes and issues the award.

This structure can motivate settlement since parties know an award is imminent if they fail to agree.

How It Works:

The arbitrator conducts a full hearing and may prepare a sealed award. Before the award is delivered, the parties attempt mediation. If settlement fails, the arbitrator unseals and issues the award, making it binding. This keeps the pressure on while giving a last chance for collaborative resolution.

Pros:

• Encourages settlement by leveraging imminent arbitration results.
• Maintains binding resolution if mediation doesn’t work.
• Efficient use of preparation done for arbitration.

Cons:

• Risk that arbitration positions harden, making mediation less flexible.
• Parties may negotiate in mediation without full willingness to compromise, knowing an award is ready.
• Requires strong procedural safeguards to prevent unfair influence.

When to Use It:

• In disputes where existing tensions could block early mediation but settlement may still be possible later.
• For parties seeking to avoid prolonged enforcement battles.
• In commercial and contractual disputes with clear issues.

When NOT to Use It:

• In complex cases where mediation success requires flexibility from the outset.
• When parties have no interest in settlement after arbitration starts.
• If revealing arbitration evidence early could harm mediation outcomes.

8. Statutory Arbitration

Statutory arbitration is arbitration required or governed by specific laws, typically for particular industries, dispute categories, or public policy reasons. Legislatures may mandate arbitration for certain claims to reduce court workload, standardize dispute handling, or ensure specialized expertise. Labor disputes, consumer claims, or securities industry matters often fall under statutory arbitration frameworks.

Because statutory arbitration is defined by law, procedural rules, deadlines, and remedies are dictated by the statute rather than negotiated freely between parties.

How It Works:

Once a qualifying dispute arises, the statutory framework dictates the arbitration process, including selection of arbitrators, timelines, and scope of review. These rules may be administered by a specific arbitration body designated in the statute (e.g., FINRA for securities disputes). The award may be binding, with limited appeal rights as described in the law.

Pros:

• Clear and standardized procedures reduce uncertainty.
• Generally provides arbitrators with subject-matter expertise.
• Avoids extensive litigation for disputes the legislature sees as better handled privately.
• Predictable timelines and costs compared to open-ended court cases.

Cons:

• Limited flexibility — rules are fixed by law.
• May restrict remedies otherwise available in court.
• No negotiation over arbitrator choice in some statutes.
• Appeal options are often extremely narrow.

When to Use It:

• Whenever the law requires it — compliance is non-negotiable.
• In disputes where statutory procedure offers efficiencies and expertise.
• When predictable timelines are critical.

When NOT to Use It:

• If statutory limits on remedies or procedures could disadvantage your position.
• When court precedent is strategically important.
• In disputes where flexibility in rules or arbitrator choice is a priority.

9. International Arbitration

International arbitration resolves disputes where the parties are based in different countries, often under treaties or specialized rules like the UNCITRAL Arbitration Rules or International Chamber of Commerce (ICC) provisions. It is widely used in global commercial contracts, cross-border investments, and multinational partnership agreements.

This type is critical for handling jurisdictional challenges and neutralizing the “home court” advantage in cross-border disputes.

How It Works:

Parties typically agree in advance to arbitrate under a recognized international body or rules. The process involves selecting neutral arbitrators with cross-border dispute expertise, choosing a venue (often in a neutral country), and determining the governing law. The award is generally enforceable in multiple jurisdictions under the New York Convention.

Pros:

• Neutral forum avoids bias toward either country’s courts.
• Awards are enforceable in many jurisdictions worldwide.
• Arbitrators often have specialized international expertise.
• Proceedings can be tailored to language and cultural considerations.

Cons:

• Can be expensive due to travel, arbitrator fees, and translators.
• Complex procedural and enforcement rules.
• Venue selection and governing law can still be contentious.
• Longer timelines due to coordination across borders.

When to Use It:

• In contracts involving parties from different countries.
• For disputes where neutrality and enforceability in multiple jurisdictions are crucial.
• When specialized understanding of international law is required.

When NOT to Use It:

• For purely domestic disputes with no cross-border element.
• When the cost of international arbitration outweighs the claim value.
• If enforcement in multiple jurisdictions is unnecessary.

10. High-Low Arbitration

High-low arbitration, also called bracketed arbitration, is a format in which parties agree in advance on the minimum and maximum award amounts the arbitrator can issue. This structure caps each party’s potential losses and ensures that neither side wins or loses more than the predetermined limits.

It manages risk while still allowing the arbitrator to determine liability and damages within the agreed range.

How It Works:

Before arbitration begins, the parties set the “high” (maximum) and “low” (minimum) limits. After the hearing, the arbitrator issues an award based on the evidence. If the award exceeds the maximum or falls below the minimum, it is adjusted to the agreed limit. This format can be used in binding or non-binding contexts.

Pros:

• Reduces exposure to extreme awards.
• Promotes settlement since outcome ranges are known.
• Maintains certainty while leaving room for merits-based decisions.
• Can expedite proceedings by narrowing disputes.

Cons:

• May cap recovery even if damages proven exceed the high limit.
• Requires negotiation before arbitration, which can delay proceedings.
• Limits arbitrator discretion.

When to Use It:

• In cases where both parties want to minimize financial risk.
• For disputes with unpredictable damages estimates.
• When settlement discussions are ongoing but parties want a binding backstop.

When NOT to Use It:

• When damages are clearly defined or easily provable beyond any set cap.
• If one party believes the cap unfairly limits rightful compensation.
• In high-stakes disputes where full recovery is essential.

Choosing the Right Arbitration Path. Without Fear.

Not all arbitration is the same — and the type you choose, or the type imposed on you, can shape the entire course of your dispute. Binding or non-binding, voluntary or compulsory, domestic or international — each carries distinct rules, costs, and risks.

The wrong choice can limit your remedies, stretch timelines, or lock you into a process that favors the other side. The right choice can protect your interests, save you time and money, and lead to a resolution that actually serves your goals.

At Bennett Legal, we help clients:

• Decode arbitration clauses before you sign, so you know exactly which type you’re agreeing to — and what it means in practice.
• Evaluate the pros and cons of each format in relation to your dispute, your resources, and your priorities.
• Negotiate fair terms — from arbitrator selection to venue, discovery rights, and appeal options — to balance the process.
• Represent you with precision in any arbitration type, keeping the strategy aligned with the rules and facts.
• Challenge unfair proceedings or outcomes when bias, misconduct, or legal violations occur.

Whether your dispute involves a contractor, employer, business partner, or multinational entity, Bennett Legal ensures the arbitration process is a fair forum, not a hidden trap.

Because the fine print shouldn’t decide your future — your informed choice should.