What is the difference between litigation and mediation?

Small and medium-sized enterprises, or SMEs, are vital to the UK economy, but disputes are an inevitable part of doing business. Whether it’s a disagreement with a client, supplier, or partner, the way in which a dispute is resolved can have a major impact on cost, time, and future business relationships. Two of the most common approaches are litigation and mediation-each offering very different paths to resolution.

What is mediation?

Mediation is an Alternative Dispute Resolution process that helps parties settle issues outside of court. A neutral mediator encourages discussion and negotiation but does not impose a decision. This collaborative approach is often quicker, more affordable, and confidential, making it particularly attractive for SMEs seeking to preserve ongoing business relationships and avoid the expense and publicity of a court case.

What is litigation?

Litigation, by contrast, is conducted through the courts, where a judge delivers a binding ruling based on legal argument and evidence. It can clarify rights and obligations and produce enforceable outcomes, but often at the cost of time, money, and goodwill.

Litigation funding options

Given the likely costs of litigation funding, businesses often prefer to exhaust options like mediation before instigating or defending a case in court. In some cases a judge will insist on it. However, if a dispute does end up before the courts, many finance businesses offer flexible arrangements for litigation funding, which can ease the financial burden on litigants.

Ultimately, SMEs should assess each dispute’s nature, financial implications, and commercial priorities before deciding whether mediation’s flexibility or litigation’s authority best serves their interests.