Arbitrage can have several meanings depending on the field they come from (law or economics).

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Let’s see the different definitions…

Arbitrage in Economics

In Economics, arbitrage is a purchase and sale at the same time, in two different markets, of the same quantity of a good, in order to benefit from the difference in prices or quotations.

This action is performed by arbitrageurs and ends up leveling prices in all markets, as their purchases raise prices and their sales lower them, and therefore when a market is clearly dominant its prices are imposed worldwide.

Arbitrage in Law

In Law, arbitrage is a way to resolve a dispute without going to ordinary justice.

The two parties to the conflict, by mutual agreement, decide to appoint an independent third party (arbitrator or arbitral tribunal), who will be in charge of resolving the conflict.

Advantages of arbitrage (in Law)

The main 3 advantages are:

• Speed, since deadlines are not extended as much as in a judicial process.
• Flexibility, as the procedure is not assessed, it is not necessary to comply with the formalities that regulations establish for trials.
• Costs can be agreed upon in advance and thus avoid unpleasant surprises.

We hope this information is very useful to you.