Arbitration is an informal trial held before a neutral court official called an arbitrator. An arbitration hearing is an informal legal proceeding held before a neutral court official called an arbitrator.The majority of US employers now require new employees to sign a mandatory agreement to arbitrate any significant disputes that arise between them. Arbitration is a commonly used form of alternative dispute resolution (ADR). ADR is a process for resolving disputes outside of the public court system. What is binding arbitration? Binding arbitration involves the submission of a dispute to a neutral party who hears the case and makes a decision.