When a disagreement becomes intense and neither party will compromise, people often wind up litigating the issue in court. Having a judge hear both sides of the story and then rule on the situation can be a way to validate your perspective and receive the financial compensation you need after a breach of contract or similar issue.

However, going to court can be expensive. It can strain your relationship with the other party and could mean dealing with an unfavorable outcome. Before you head to court, it might be worth considering alternative dispute resolution options.

Mediation and arbitration are the two most popular forms of dispute resolution outside of court. What are the differences between these two systems?

Arbitration closely mirrors how court works

When you agree to an arbitration session, you and the other party involved in a conflict will sit down with your own lawyers and a neutral arbitrator. The arbitrator serves a very similar role to that of a judge.

They will hear both sides of the situation and then propose a solution based on their interpretation of the circumstances. Arbitration can be binding, meaning both parties agree to abide by the decision before they go into arbitration. Other times, arbitration can be non-binding and simply provide a starting point for future negotiations.

Mediation requires that you come up with a solution yourself

If an arbitrator is like a judge, then a mediator is like a referee. They are there merely to facilitate conversations and guide potential compromises. In mediation, those involved in a conflict work together to create a solution where both sides compromise but still get part of what they want. If mediation is successful, the parties can enter in to an agreement that outline their resolution of the dispute.

Before you file a lawsuit and go to court, you may want to think about whether mediation or arbitration might be a way for you to resolve the issue through one of these alternative dispute resolution processes.