Arbitration is a mechanism for resolving disputes between investors and brokers, or between brokers. Learn how arbitration can resolve certain disputes out of the court.Instead of a judge, impartial arbitrators make the legal decision. Arbitration is the most traditional form of private dispute resolution. Arbitration is a binding procedure. Arbitration is an alternative to traditional judicial proceedings. Like court, arbitration involves a neutral person deciding the outcome of a dispute. Arbitration has been used as a disputeresolution tool for thousands of years. Arbitration is a method of settling disputes between individuals, groups, or countries.