Someone very smart once observed, "There are no perfect solutions; each solution creates new problems."
Litigation is slow, frustrating and expensive. And, when anything is slow, frustrating and expensive, people invariably attempt to come up with alternatives. That is the American Way.
Arbitration is the best known alternative to having a dispute resolved by litigation. In arbitration, the people involved in a dispute do not use the courts (the government-supplied dispute resolution system with published rules and judges paid by the taxpayers), but rather use a private system where the judges are called arbitrators and there are few rules. The hope is that this private system will be quicker and cheaper (the lack of rules is hoped to make it simpler) and somehow fairer.
Anyone comparing the merits of these two systems should keep in mind that all dispute resolution systems can be evaluated on a continuum.