Final answer:
Arbitration is the process of settling a dispute by submitting it to a neutral third party who renders a legally binding decision. It is a formal method and distinct from mediation, litigation, and negotiation. Examples include WTO's dispute settlement process and internal organizational conflicts requiring third-party intervention.
Step-by-step explanation:
Settling a dispute by submitting to a neutral third party who renders a legally binding decision is known as arbitration. This is a process where the parties to a dispute agree to be bound by the decision of a neutral third-party, the arbitrator. Unlike mediation, where the mediator helps the parties find a solution, an arbitrator examines the evidence and then makes a decision that is typically binding on both parties. Litigation refers to taking a dispute to court, while negotiation is an informal discussion aimed at reaching a mutually acceptable agreement.
An example of arbitration in action is the World Trade Organization's procedure for dispute settlement, which plays a crucial role in international trade relations. It ensures that trade flows smoothly and predictably by providing a rule-based process for resolving trade disputes. In the absence of such mechanisms, internal conflicts within countries or organizations may be resolved through the intervention of a neutral third-party when informal approaches fail.