Arbitration
What is arbitration?
Arbitration is the final stage of the dispute process, in which the reviews the case file and issues a binding ruling on who carries the loss. It's reached only after the merchant and the have each presented evidence and neither side will concede.
Arbitration starts when a merchant escalates a for network adjudication, or when an issuer refuses to accept the merchant's representment evidence. Visa and Mastercard each run their own process with different filing windows and fee schedules, and in both the network reads the submitted case against its own dispute rules rather than weighing the commercial merits. Most disputes close before this point, because the filing fee frequently exceeds the value of the .
Key facts
- Decided by: the card network, not the issuer or the
- Triggered by: an unresolved case, usually following a second chargeback
- Who pays: the losing party covers the plus the disputed amount
- Filing window: counted in days from the previous stage, and set separately by each scheme
- Outcome: a binding liability decision; appeal paths are limited and scheme-specific
- Also known as: network arbitration, chargeback arbitration
How it works
- Chargeback filed. The cardholder disputes a charge with the issuer, and the issuer files a chargeback under a .
- Representment. The merchant answers through its acquiring bank with tied to the requirements of that reason code.
- Pre-arbitration. The issuer rejects the evidence and re-files, producing a second chargeback.
- Arbitration filing. The escalating party submits the case to the network inside the scheme's filing window and pays the filing fee up front.
- Network review. The network examines the case file against its published dispute rules and the evidence each side submitted.
- Ruling. The network assigns liability, and the losing party absorbs the transaction amount and the fee.
The three escalation stages are often used interchangeably in conversation, though each has a different filer and a different cost.
| Stage | Filed by | What happens |
| Representment | Merchant, via acquiring bank | Transaction is resubmitted with supporting evidence |
| Issuer | Evidence is rejected and the dispute is re-filed | |
| Arbitration | Either party, via the network | Network rules on liability and assigns the fee |
Why it matters
- Arbitration fees are charged per case regardless of outcome, so a dispute worth less than the fee costs more to win than to write off.
- The network rules against scheme documentation, so evidence that doesn't map to the specific reason code loses even when the underlying sale was legitimate.
- A ruling against the merchant stacks the fee on top of an already-lost transaction, which turns a marginal escalation into a double loss.
- Because the decision closes the case, arbitration is where an issuer's refusal to accept evidence stops being negotiable.
Common issues
- Missing the filing window. Escalation deadlines are measured in days from the previous stage, and a late filing ends the dispute by default.
- Evidence that doesn't match the reason code. A compelling delivery record does nothing for a dispute filed as unauthorized use.
- Escalating low-value disputes. Cases below the fee threshold rarely justify the cost of a filing.
- Confusing pre-arbitration with arbitration. Pre-arbitration is still a negotiation between the issuer and the merchant; arbitration hands the decision to the network.
