Arbitration is often used in the resolution of international disputes, allowing the parties to choose their arbitrator, or panel of arbitrators. It is a judicial style process; commercial contracts will commonly include provision for how disputes relating to that contract are to be resolved. If the parties choose arbitration, the arbitration agreement will generally be part of the document recording the terms of the commercial transaction. Parties can also enter into an arbitration agreement after a dispute has arisen.

In entering into an arbitration agreement, the parties agree to refer their dispute to a neutral tribunal to decide their rights and obligations. Although sometimes described as a form of alternative dispute resolution, arbitration is not the same as mediation or conciliation. A mediator or conciliator can only recommend outcomes and the parties can choose whether to accept those recommendations. By contrast, an arbitration tribunal has the power to make decisions that bind the parties.