IR - One Definition A Day : Arbitration (p. 33, Ref. 1)
A method of conflict settlement involving third-party intervention. Arbitration is a favored method of settlement in domestic labor-management conflicts, at least in the advanced industrial countries (AICs). The basis of an arbitration award is that the parties to the conflict agree to submit their differences to the third party to make a binding decision to settle the dispute. The arbitrator may apply known rules, precedents and laws in seeking a settlement and the arbitration award may be reinforced by sanctions to secure compliance. It is possible, and desirable, for the parties to agree to these rules, at least implicitly, in advance. This means that existing rules and practices can be abandoned in favor of any agreed-upon set of principles. Thus arbitration is more flexible than adjudication because the latter process tends to rigorously eschew innovation and to reflect a status quo frame of reference.
In international relations arbitration as a form of settlement has always had powerful advocates but, apart from a short period in the late nineteenth and early twentieth centuries, it has been little used. Anglo-American diplomacy provides the best examples in the modern world. The Jay Treaty of 1794 inaugurated arbitration as a method of settlement between the two states. The most famous case is that of the Alabama Arbitration of 1872. Scholars are generally agreed that this settlement in favor of the US was prompted by the desire of both parties to improve their relations rather than by any philosophical commitment to the arbitration process.
Many idealists regarded the development of arbitration as essential if war was to be eradicated from international relations. The two Hague Peace Conferences (1899 and 1907) failed to achieve agreement on compulsory arbitration but succeeded in creating the Permanent Court of Arbitration. This was, in point of fact, neither permanent nor a court. It was a list of persons from which the parties to a conflict could select a name.
Arbitration has not had the success or impact that the nineteenth and twentieth century idealist believed. Essentially the consensus that is required to make arbitration work has been absent. Moreover, although it is marginally more flexible than adjudication, arbitration appears not to be favored in the present system as a means of settlement. The growth of international regional institutions in the contemporary system must be as accounted a major force in reducing the potential for arbitration as a third party mode.
(Source: Penguin Dictionary of IR)
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