There are multiple reasons why a business would want to avoid litigation. Litigation can be time-consuming, costly and can squander valuable relationships.
The two most common ways to avoid litigation is to choose either mediation or arbitration. The main difference between mediation and arbitration is that mediation is always non-binding whereas arbitration can be binding or not.
What are the advantages of mediation?
Mediation is where both parties involved with a dispute invite a neutral third-party mediator to discuss the issue. In this instance, the mediator is not judging the case, but rather guiding a conversation between the two parties.
The big advantage of mediation is that it is far cheaper than litigation and can result in disputes going away quickly and easily. The negative is that mediation is not binding, which means that if the disputing parties cannot come to an agreement the case may go to court anyway.
What are the advantages of arbitration?
Arbitration involves the disputing parties selecting either a single arbitrator or a panel of arbitrators to judge the case. Arbitration has a lot in common with litigation, only arbitration is still generally faster and cheaper. Arbitration can be non-binding like mediation, but most of the time it is a binding decision.
One of the big benefits to arbitration is that you can choose arbitrators who are knowledgeable in your particular dispute. This is in comparison to litigation, where you cannot choose the judge. A negative associated with arbitration is that it can be very difficult to reverse the decision of an arbitration panel, even if there is ample evidence that the panel made an incorrect decision.