More commonly, one party may select one person, the other party selects another person and the two selected persons mutually select a third person, thus forming an arbitration committee of three persons. This constitutes a committee of three which will be charged with solving conflicts according to what they feel should be done. Yet, this procedure could be of much help if it is used as a step before litigation or formal arbitration. Figure 3 illustrates a mechanism for selecting a level of arbitration compatible with the type and size of the dispute. A wide range of disputes, ranging from small controversial change orders to total contract breach can be settled by arbitration.
Criminal acts are the responsibility of the judicial system and are beyond the scope of arbitration.
The arbitration clause, usually, sets the arbitration terms and defines the arbitrators' authority. It goes without saying that any matter not included in the submission cannot be properly settled by arbitration. The hearings are private, confidential and many court processes are eliminated resulting in substantial savings in time and money. Simple procedures and a direct approach in handling the disputes make arbitration faster than courts in solving problems. Most arbitration awards are final and binding except in a few cases where courts might step in to determine the legality of the arbitration clause or to frustrate the award if the arbitration process did not go by the rules.