Arbitration Explained

9 May 2026 in Dispute Resolution Law | 4 min read | skip to FAQs

This article explains the process of arbitration which is a form of Alternate Dispute Resolution (ADR). We discuss the advantages and disadvantages and the steps involved in pursuing this as a form of ADR.

What is Arbitration?

Arbitration is a legal process that attempts to solve disputes between parties. It differs from other forms of alternate dispute resolution such as mediation and negotiation because the final decision made by the arbitrator is binding on the parties. The arbitrator is a dispute resolution practitioner, who is impartial and independent of the parties.

The process is initiated by agreement between the parties to create a dispute settlement process. Arbitration operates similarly to a court in the sense that each party presents evidence, legal arguments and submissions, and, subject to the process agreed by the parties, has the opportunity to cross-examine witnesses. Each party presents its case to the arbitrator in a similar manner to presenting evidence in court to a judge with the aim of persuading the arbitrator to decide the dispute in their favour.

 

What is an Arbitration Agreement?

Arbitration often requires both parties in dispute to enter into a contract, known as an arbitration agreement. Such an agreement may have been included as a clause in the initial contract signed by both parties. It commonly states that in the event that a dispute arises the parties agree to refer the dispute to arbitration. The initial contract may also specify that either party or both parties, may elect to have the dispute referred to arbitration. In this case, the arbitration agreement is pre-dispute.

The arbitration agreement can also be post-dispute where it sets out the details of the process including the selection of the arbitrator, the decisions of the arbitrator and that the decisions made are binding on the parties.

The Commercial Arbitration Act 2010 (NSW)

The Commercial Arbitration Act 2010 (NSW) provides a framework for the conduct of arbitrations in New South Wales. This is based on Model Law given effect by the International Arbitration Act 1974 (Cth). This act facilitates the use of arbitration agreements to manage domestic commercial disputes by adopting the provisions of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration. The other states of Australia have the same or very similar legislation based on this commonwealth legislation.

What are the Advantages of Arbitration?

Arbitration is a very useful form of dispute resolution for complex disputes and is often used in construction, infrastructure and project finance disputes. It is also used extensively in family law, particularly with property and financial disputes. The arbitrator is often an expert in the field of the dispute. Other advantages of arbitration are that it is confidential and private. Unlike the court system it is not open to the public. It also provides flexibility as parties can choose the arbitrator, who is often a specialist in the subject matter. In contrast to traditional litigation, arbitration is faster at delivering outcomes, is less expensive and less formal than appearing in a court of law. In contrast to other forms of ADR such as mediation and negotion, arbitration produces a final and binding decision.

What are the Disadvantages of Arbitration?

The final and binding nature of the decision can be an advantage but can also be a disadvantage in that a party has less control of the decision. In contrast, mediation provides a process in which any decision is subject to the agreement of each party. Some arbitration decisions are also difficult to challenge by an appeal, unlike traditional court hearings. An arbitration agreement will often set out the circumstances in which an appeal may be made by further proceedings in court and this is often restricted to circumstances which involve manifest error or where the arbitrator did not comply with the arbitration agreement.

Some matters are not suitable for arbitration, for example section 7C of the Home Building Act 1989 (NSW) prevents the use of arbitration clauses in home building contracts.

The Preparation and Process

Preparing for and appearing in an arbitration may be complex and should be undertaken with the assistance of legal representation.  

Preparation will involve preparing various documents such as a claim, or defence for the defendant, with evidence supporting every element of any claim or defence. A sound and persuasive legal argument is based on the evidence and written submissions. In addition, expert advocacy is required during the arbitration. The Dispute Resolution Lawyers at Brander Smith McKnight Sydney Lawyers have decades of experience and can guide you through the preparation process and effectively represent you during the arbitration.

What is a Typical Process?

As stated the parties can agree the process to be used for the arbitration. A typical process is set out below as a guide.

1. The applicant, otherwise known as the plaintiff, submits a notice of arbitration.
2. The respondent, otherwise known as the defendant, submits a response to the notice of arbitration. This usually within 30 days of receiving the notice of arbitration.
3. The parties select and appoint an arbitrator.
4. A conference is held between the parties to establish a procedural timetable and hearing date.
5. The applicant presents the claims with evidence supporting the claim. The respondent then provides a defence and statement of facts and evidence in response to the applicants claims.
6. The evidence is presented by both parties to the arbitrator. The dispute resolution lawyers at BSM Law will present the evidence for you.
7. The written submissions, previously prepared by your lawyer in consultation with you, are submitted by both parties to the arbitrator.
8. A hearing is held by the appointed arbitrator and the binding decision is delivered by the arbitrator. The hearing can be conducted either in person or online. Your lawyer will be present during the hearing.

How can BSM Sydney Lawyers assist you?

The dispute resolution lawyers at Brander Smith McKnight Sydney Lawyers have decades of experience in effective resolution of disputes. We listen to you, conduct relevant research and in consultation with you prepare your matter for arbitration. Our lawyers provide a cost effective and personalised service with a fast turnaround. Our senior dispute resolution lawyers provide a free 20 minute consultation to discuss your case.

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BSM Law has offices conveniently located in Sydney CBD, Sutherland, Parramatta, Wollongong and Shellharbour.