Gift Importers Ltd. has a contract with a Philippine government exporting agency for the purchase of numerous handmade artifacts. Since neither party was comfortable having the courts of the other party's country adjudicate any disputes between them, the contract contains a clause that identifies the procedure by which a third party acceptable to both would settle any disputes. This procedure is known as commercial arbitration.

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Commercial arbitration is a method of resolving disputes outside of court, where parties agree to have a neutral third party make a decision regarding their dispute. The scenario described involves a contract specifying a third-party arbitration process, which is a common practice in international business to avoid legal disputes in domestic courts.