It's a contractual clause that forces you to go to a private court like thingy to resolve issues instead of going to a real court of law.
It's not necessarily bad but given that there's usually one party deciding which arbitration provider to use and might even pay the bills and since those providers are a profit seeking organization at the end of the day, it's questionable if they're truly impartial. There's some research that they overwhelmingly decide for the big corp side of disputes but I'm to lazy to look it up and I'm also not sure if that's conclusive in any way (maybe the corp's position really is better?)
It's essentially a private court, where the parties ask a third party to quickly and cheaply settle a disagreement.
When used responsibly, it's great.
It's bad when a corporation requires arbitration (at the arbiter they choose -- which is a conflict of interest) and bans using the public government court system, as part of the terms of service of the product.
> a bit of topic, but what is arbitration and why is it bad? We don't have it here in Europe (or at least is not very diffused).
You have plenty of arbitration in the EU. It involves a "third party" (supposedly outside of the control of either party involved) which resolves the dispute between the two parties according to the law en possibly some other set of rules which both parties agreed to before entering into a contract. This avoids going to the judiciary and is usually a lot cheaper for the customer as well as the loser of the proceedings. The disadvantage is, that in some cases the use of such arbitration voids legal (civil) cases to be made (e.g. agree to arbitrage, you cannot sue).
Some arbitration is set up by law (enacted by law), some is set up by special interest groups to avoid differences between companies within the same line of work and some are set up by companies themselves. In the EU it is mostly the first two.
My personal opinion is to avoid them like the plague unless you have no way to go to court (e.g. no money) as they rarely have solid arguments and rule in favor of the companies way more often than not.
As far as I am aware you are always allowed to reject arbitration in the EU and go to court, though that might be more difficult and expensive and not always wise. Contact a lawyer beforehand would be my advise, most EU countries have some form of basic (free/cheap) legal assistance.
Can someone eli5 for me? Thanks