Disagreements are part of life and business, but litigation does not have to be. In fact, smart business owners often do everything they can to avoid litigation as it can be very costly and negatively impact valuable relationships.

Mediation and arbitration are two non-litigious ways to solve business disputes. According to FindLaw, mediation is typically a non-binding approach whereas arbitration is binding.

What is mediation?

Mediation involves representatives from the disputing parties and a mediator. The mediator is not a judge; rather, the mediator’s job is to encourage the disputing parties to discuss the situation with each other and come up with a settlement or other remedy on their own.

Mediation is highly successful because it allows the parties to come together and discuss their issues in a confidential and neutral environment. Often, the ability to “get things off one’s chest” can help solve the dispute on its own. However, mediation is typically non-binding which means that if one party is not happy with the end result, you may end up in court anyway.

What is arbitration?

Arbitration is binding, which means that if either party is unhappy with the remedy the arbitrator(s) provide, it is very difficult to get a second opinion. In fact, overturning arbitration can be more difficult than overturning a regular decision in some instances.

Arbitration also looks much more like regular litigation. However, rather than a judge you have an arbitrator or panel of arbitrators. The parties can choose who these arbitrators are, which can be advantageous in certain highly technical disputes where having an arbitrator with expertise is beneficial.