There can be binding and non-binding arbitration. A binding arbitration generally means that the winning party can take an arbitration award to a court of law and enforce it if the losing party does not comply with the terms of the decision. Non-binding arbitration refers to a situation where the parties agree to use arbitration as a forum to try to resolve their differences, but neither party is bound to comply with any decision by the arbitrator. Another word that is sometimes used for non-binding arbitration is mediation. The number-one benefit of arbitration is that it serves as a forum to resolve disputes outside of the judicial system.
Arbitration can be fast, quick and easy, whereas lawsuits can drag on for years and years.
Since the rules of evidence and procedure are usually relaxed in arbitration proceedings, the parties are also in a better position to represent themselves without having to get lawyers involved. It naturally follows that arbitration also tends to be less expensive than pursuing a lawsuit. While the parties will usually end up having to pay the arbitrator, his or her fees will inevitably be less than the attorneys' fees that they may have to pay to take the same case to trial. Even in non-binding arbitration, a benefit can be that it serves to bridge the gap in an adversarial proceeding so that the parties can get a better glimpse of where things are headed if they are unable to resolve their differences. Most cases settle, but many times it is not until the parties are on the courthouse steps.