How is arbitration defined in the context of dispute resolution?

Arbitration is defined as a method of resolving disputes outside of court, where an impartial third party—known as an arbitrator—makes a binding decision on the matter after hearing arguments and evidence from both sides. The key aspect of arbitration is that it involves an authority who has the skills or qualifications to make a decision, aimed at resolving the conflict and stabilizing the situation for both parties involved. This process typically provides a structured environment, where the arbitrator serves as a neutral entity who evaluates the case and determines a resolution based on the merits of the arguments presented.

In contrast, other options describe processes that lack the formal and binding decision-making characteristic of arbitration. While subjective discussions or informal negotiations may allow for dialogue among parties to reach mutual agreements, they do not involve an authority making a conclusive decision. The notion of "both parties must win" is not a standard characteristic of arbitration, as it focuses on decisively resolving the conflict rather than ensuring mutual success. Understanding arbitration's structured approach and its role in dispute resolution helps clarify its importance in legal and professional contexts.