When serious business disputes spring up, whether it’s between two companies or an employer and a former employee, all too often, the assumption is that litigation is the only feasible way to resolve the issue. Going to court can lead to massive expenses, often pushing companies to settle without really have their side of the story heard.

However, litigating in open court isn’t your only option. There are alternative dispute resolution options that are viable solutions for resolving many business disputes. The two most common and well-known are mediation and arbitration, both of which have benefits depending on the circumstances.

Familiarizing yourself with the two most common forms of alternative dispute resolution can help you decide if such an approach might benefit your business as it works to resolve this current conflict.

Arbitration is like going to court, but far more private

Arbitration is the form of alternative dispute resolution that most people know, largely because it is often a part of contracts with certain kinds of businesses, like financial companies. Credit card companies often mandate binding arbitration for the resolution of conflicts with cardholders, for example.

Since some companies demand arbitration for conflict resolution, people can have a negative view of this alternative approach to conflict resolution, but it can be quite beneficial. In arbitration, a neutral third-party holds the authority to make decisions and create a solution.

That arbitrator serves the same role that a judge would if the case were to wind up litigated in court. Going through arbitration is often more cost-effective than litigation. It is also more private because your negotiations are not part of the public record.

Mediation can work if there is room for compromise

In situations such as a conflict about a partnership or employment contract, mediation could be the best way to resolve the disagreement. Mediation, like arbitration, involves a third party overseeing the process.

Unlike in arbitration or court, they don’t have the authority to make decisions. Instead, they simply guide the negotiations and help the parties find resolution. Typically, compromise from both parties is necessary for successful mediation.

If you think it may be possible to resolve your contract issues outside of court, suggesting alternative dispute resolution can be a great way to avoid the expense, frustration and potential damage to your reputation that court can cause.