Callie Yu | Madison Law
Not every legal dispute needs to go to court. In fact, many conflicts can be resolved faster and more affordably through alternative dispute resolution (“ADR”) methods such as mediation or arbitration. Understanding the differences between these options can help you choose the best approach for your case.
Mediation
Mediation is a private dispute resolution process where a neutral third party, called a mediator, helps the disputing parties communicate and work toward a mutually acceptable agreement. Unlike arbitration or litigation, the mediator does not make a binding decision. Instead, the mediator facilitates discussion and negotiation. The only aspect of mediation that may result in a binding obligation is if the process results in the parties settling their dispute, which is almost always formalized in a written agreement.
- Advantages: Mediation is private and confidential, encouraging open and honest communication. It is flexible, allowing parties to switch mediators if needed. Because of its confidential nature, mediation is highly effective in resolving disputes. The process is typically less adversarial than arbitration or litigation, helping preserve relationships.
- Approach: One common approach is the caucus approach, where the mediator meets privately with each party, often in separate rooms, to discuss concerns and negotiate. The mediator’s role is to help the parties communicate and work toward a reasonable resolution of their dispute. Whether the mediator takes an advisory role (offering suggestions) or simply acts as a messenger depends on what the parties prefer. It is important for the mediator to clarify this role early in the process by consulting each party separately.
Arbitration
Arbitration offers a middle ground between informal negotiation and formal litigation. It is a streamlined, private process where disputes are resolved by an arbitrator or a panel or arbitrators rather than a judge. Where the parties agree to submit their conflict to a neutral individual or a panel of arbitrators for review. Before the process begins, both sides decide whether the arbitrator’s decision will be binding (final and enforceable) or nonbinding (a recommendation that either party may reject). Arbitration is generally less formal and more efficient than court litigation, while still providing a structured process for presenting evidence and arguments.
- Advantages: Arbitration is typically faster and less costly than litigation. Although it often has a greater up front cost given the arbitrator’s compensation. Because it doesn’t depend on a court’s schedule, hearings can be held remotely or in person, making the process more flexible and convenient. It also tends to be less adversarial, helping preserve business or personal relationships. In cases where similar disputes occur repeatedly, arbitration can provide greater predictability and consistency in outcomes, especially if the arbitrator chosen has industry-specific knowledge.
- Disadvantages: Arbitration has its limitations. Arbitrators are often more conservative than juries, meaning the potential for a large monetary award is lower. The process is also private, so there’s no public recognition or precedent—and for some parties, that lack of notoriety or validation can feel unsatisfying. Finally, because arbitration decisions in binding cases are difficult to appeal, there is limited recourse if one side disagrees with the result.
Litigation
Litigation is the traditional court process where a judge or jury decides the outcome of a dispute. While it provides a structured and enforceable resolution, it also comes with significant tradeoffs.
- Advantages: Despite its challenges, litigation offers unique benefits. It allows parties to gather evidence through discovery, which can be critical for uncovering the truth, and is at its broadest in traditional court litigation. It also has the potential for a significant win, especially in cases with large damages or important legal principles at stake. Litigation can also set precedent, influencing how similar cases are decided in the future. For some, simply having their day in court provides validation and a sense of closure. After the case concludes, and absent an appeal, a final, enforceable judgment is issued that formally resolves the dispute.
- Disadvantages: Litigation can be expensive and time-consuming, often taking months or even years before a final judgment is reached. There is also a high degree of uncertainty—no matter how strong a case seems, outcomes can depend on factors like jury perception or procedural rules. Additionally, lawsuits are public and often damage relationships, especially in business or personal disputes.
Hybrid Approach
Sometimes people use a mix of mediation and arbitration—if they can’t agree during mediation, they take the unresolved issues to arbitration to get a final decision. The chart below shows different ways to handle conflicts, from informal talks all the way to formal decisions.
Resolution Approaches
| Private decision making by parties | Private third-party decision making | Legal (public), authoritative third-party decision making |
| Informal discussion and problem solving Negotiation Mediation | Administrative decision Arbitration | Judicial decision Legislative decision |
Figure adapted from:
Moore, C. W. (2014). The mediation process: Practical strategies for resolving conflict (4th ed., p. 6). Jossey-Bass.