Litigation Vs. Arbitration Vs. Mediation: What’s The Difference?

When business disputes arise, choosing the right method to resolve them can significantly impact the outcome, cost, and time involved. The three most common methods are litigation, arbitration, and mediation. While all aim to resolve conflicts, they differ greatly in process, cost, privacy, and control. Our peers from Volpe Law LLC explain the differences so business owners like you can make the right choice to resolve your business dispute.

Litigation: The Traditional Courtroom Battle

Litigation is the formal process of resolving disputes through the public court system. It’s typically the most well-known method and often used when other efforts to resolve a dispute have failed.

Key Characteristics:

• Public Process: Court proceedings and filings are usually public records

• Formal Rules: Governed by strict procedural rules and evidence requirements

• Binding Decision: A judge (and sometimes a jury) issues a final, legally enforceable ruling

• Length and Cost: Litigation can be lengthy and expensive due to court schedules, attorney fees, and discovery

When to Consider Litigation:

• You need a binding decision

• The other party is uncooperative or acting in bad faith

• You want to set a legal precedent or appeal the decision later

Arbitration: A Private Court Alternative

Arbitration is a private dispute resolution process where a neutral third party—called an arbitrator—acts similarly to a judge. The process is less formal than court but typically more structured than mediation. Many commercial contracts include an arbitration clause to resolve business disputes, so, depending on your contract, this may be your only option. 

Key Characteristics:

• Private Proceedings: Unlike litigation, arbitration is confidential

• Binding or Non-Binding: Most arbitrations are binding, meaning the decision cannot be appealed

• Faster Than Court: Arbitration tends to be quicker and more cost-effective than litigation

• Limited Discovery: There are usually fewer procedural steps, which can reduce delays

When to Consider Arbitration:

• You want a faster, private resolution

• Your contract requires arbitration (common in business agreements)

• You need a binding decision but want to avoid court

Mediation: A Cooperative Resolution Approach

Mediation involves a neutral third party (the mediator) who helps both sides negotiate and reach a voluntary settlement. Unlike a judge or arbitrator, a mediator does not make a decision.

Key Characteristics:

• Non-Binding: The parties retain control; nothing is imposed unless both sides agree

• Confidential: Like arbitration, the process is private

• Collaborative: Focuses on communication and preserving business relationships

• Cost-Effective: Generally the quickest and least expensive option

When to Consider Mediation:

• You’re open to compromise and want to preserve the business relationship

• You want a faster, informal solution

• You want to avoid the risk and cost of litigation

Which Is Right For You?

The right method depends on your goals, budget, timeline, and relationship with the other party. Mediation is ideal for cooperative resolutions, arbitration balances efficiency with enforceability, and litigation may be necessary for high-stakes or highly contentious disputes.

Whether you’re facing a breach of contract, a partnership disagreement, or a complex commercial conflict, an experienced business dispute lawyer can guide you toward the best path forward.