Mediation, Arbitration, Or Litigation: Which Should You Choose?

When you have a business dispute, there are generally three ways to handle it: mediation, arbitration, or litigation. Depending on your situation, one of these options could be better than the others. It's also possible that you may go through all of these options.

Mediation: The Pros and Cons

In a mediation, a third party comes in and attempts to resolve the conflict. Mediation is best used when both parties are willing to work together, but simply haven't determined a fair way in which to do so. Mediation is usually not binding in any way; it's just an attempt to prevent the situation from escalating. At the same time, a skilled mediator can often find solutions and compromises that will work for both parties, without any one party feeling wronged. If mediation is not successful, the process may move onto arbitration or litigation.

Arbitration: The Pros and Cons

Arbitration is a binding form of mediation, in which the individuals involved agree to let a third party make a decision on their case. Arbitration is frequently a requirement of many contracts, to prevent the costs and time associated with litigation. An arbitration usually involves a panel rather than a single individual. When the arbitration is completed, the panel will take a vote, and the results of the arbitration will be legally binding.

Arbitration is often considered to be a good choice because it is faster and cheaper than litigation. However, arbitration will not necessarily follow the letter or spirit of the law, as it is up to the third parties who are voting. Arbitration may be more likely to be swayed toward an unfair opinion.

Litigation: The Pros and Cons

Many people seek to avoid litigation because it tends to be more expensive. However, if both parties cannot come to a compromise, and neither wants to risk the potentially unpredictable decisions made in arbitration, litigation may be the only answer. Litigation is valuable because it explores the issue in full and because either a jury or a legal professional will give their ruling.

Litigation is seen as a last resort, but it's a last resort for a reason; it's often the best way to get a fair and final ruling.

Ultimately, many people may actually go through all three options, starting in mediation and ending up in litigation regardless. In all three options, it's a good idea to have a business litigation expert or legal adviser.