Litigation, arbitration, mediation: what is the difference?
Generally, litigation – the process of taking a dispute through the court to a final judgment – is something that any business will want to avoid. It can be as expensive as it is time consuming, and there are often much more efficient ways to resolve your dispute out of court.
That is why alternative dispute resolution, such as arbitration and mediation, is becoming increasingly popular for businesses.
Arbitration is one of the most effective forms of commercial alternative dispute resolution. It is a formal, legally binding process where the dispute is resolved by the decision of a nominated third party, known as the arbitrator.
Being a private process, confidentiality is one of the key features that draws many private and public sector organisations to use arbitration. Disputes can also be resolved much faster than in standard litigation, and at a much lower expense.
If the relevant contract does not contain a clause that obliges the parties to arbitrate instead of approaching the courts to resolve any disputes that arise, a party to a dispute can still request arbitration by sending a written demand to the other. If the opposition believes that the dispute can be resolved through arbitration, proceedings can begin immediately.
Parties can select their arbitrator, too. This is particularly beneficial in a complex or specialist case, where specialist skills may be useful in deciding a fair outcome for both parties.
Many of the world’s largest companies have chosen to arbitrate and to keep their dispute out of the public eye. One of the few arbitrations that did become public knowledge was a contract dispute between the car manufacturers Volkswagen and Suzuki in 2011.
Mediation is a voluntary, non-binding method of resolving disputes using an impartial third party, who has been specially trained to bring two parties together to reach agreement.
Mediation is a widely recognised form of dispute resolution in commercial matters and its use is still increasing.
Although mediation is not legally binding, a final agreement between the two parties, reached at mediation, can be enforced as a contract.
Whilst arbitration is an alternative to the litigation process, mediation can be used as part of that process. And matters that are in arbitration can be mediated too! In the Commercial Dispute Resolution team at Longmores, we encourage clients who are involved in court litigation or in arbitration proceedings to mediating the dispute. It can often resolve matters quicker and save the cost of a lengthy battle. Resolution by mediation is also far less damaging to any long term relationship between the parties, so it is an especially attractive option if that is a factor.
For advice on litigation, arbitration, or mediation issues, contact Longmores’ commercial dispute resolution team on 01992 300333 or firstname.lastname@example.org.
Please note the contents of this blog are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.