Simply, the term ‘arbitration’ is a process of settling disputes. Arbitration means the settlement of disputes by the decision of the person. It is a method of settlement of disputes and differences by referring them to a neutral third party who decides the issues after hearing both sides in a quasi-judicial manner. Thus it is a means of the settlement of disputes between the parties, where a person gives his decision after hearing the disputing parties as neutral as the judge of the general court of law does.

The Nepalese Arbitration Act, 2055, has not defined the term ‘arbitration’ but defined the term ‘agreement’. This term denotes the arbitration agreement. According to section 2(a) of the Act, ‘agreement’ means a written agreement made between parties for settlement by arbitration of a dispute which has arisen at that time or which may arises in future in respect to a defined legal relationship contractual or not contractual.

According to M.R. Romily, ‘arbitration is the reference to the decision of one or more persons, either with or without an umpire of a particular matter on differences between the parties.’

According to M.C. Kuchhal, ‘Arbitration is the settlement of disputes and differences relating to civil matters (eg. Money, property, or breach of contract ) between one party and another in a judicial manner by the decision of one or more persons called arbitrators, appointed by the contending parties, without having recourse to a court of law.’

From the definitions of arbitration, arbitration agreement and agreement stated above it follows that arbitration is a process of the settlement of dispute.