SCC Guide: Difference between litigation, arbitration, and mediation
When a commercial or legal dispute arises, the method chosen to resolve it can significantly influence time, cost, enforceability, and ongoing business relationships. Whether you are negotiating an international contract, managing a dispute with a commercial partner, or seeking to enforce your rights, understanding your options is essential.
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This guide provides an overview of the three principal dispute resolution methods: litigation, arbitration, and mediation. Each has distinct features and may be suitable for different types of disputes. The guide also provides information on a unique method of dispute resolution, SCC Express.
At the SCC Arbitration Institute, we administer arbitration and mediation proceedings on an international and domestic level. We recognise, however, that different disputes call for different solutions. This guide aims to provide clear, practical information to support informed decision-making.
Overview: three paths to resolving disputes
When parties cannot resolve a dispute through negotiation, three principal methods are available:
- Litigation – resolution through national courts
- Arbitration – a private process resulting in a binding award
- Mediation – a facilitated negotiation aimed at voluntary settlement
Each differs in terms of formality, privacy, enforceability, and party control.
High-level comparison
| Aspect | Litigation | Arbitration | Mediation |
|---|---|---|---|
| Decision-maker | Judge (and possibly jury) appointed by the court | Arbitrator(s) appointed by or for the parties | Neutral mediator (facilitator only) |
| Outcome | Binding judgment | Binding award | Non-binding, parties may agree on a contractually-binding settlement |
| Basis | Court jurisdiction | Party agreement, binding | Party agreement, voluntary |
| Process | Public and formal | Private and flexible | Confidential and informal |
| Control | Court controls process | Parties and arbitrators share control | Parties control outcome |
| Finality | Subject to appeal | Very limited review | Final if parties settle |
How do you choose the right method? The answer depends on the nature of the dispute, confidentiality needs, enforceability requirements, time considerations and the relationship between the parties. No single method is universally preferable.
Litigation: resolving disputes through the courts
What is litigation?
Litigation involves bringing a dispute before a national court. A judge determines the outcome according to applicable law and procedural rules. In some jurisdictions a jury may act as the fact finder, deciding what really happened in the case.
The process typically includes written submissions, exchange of evidence, hearings and, where necessary, a trial. Courts serve a public function, resolving disputes and developing legal precedent to inform future decisions.
Key characteristics of litigation
Public proceedings
Court hearings are generally open to the public and judgments are usually published. This promotes transparency but may expose sensitive information.
Formal procedures
Litigation follows established procedural and evidentiary rules. While designed to ensure fairness, these rules can make proceedings complex.
Right of appeal
Most legal systems provide one or more levels of appeal. This offers an additional safeguard but can prolong the process.
Enforcement through state mechanisms
Courts have strong enforcement powers within their jurisdiction. Cross-border enforcement, however, may depend on treaties or reciprocal arrangements.
Advantages of litigation
- Established procedural framework
- Strong powers to compel (e.g. disclosure, witness summons)
- Structured appeals system
- No prior agreement required
- Development of legal precedent
Potential drawbacks of litigation
- Public nature of proceedings
- Limited procedural flexibility
- Potentially lengthy process, especially with appeals
- Costs can escalate in complex cases
- Cross-border enforcement may be challenging
- Judges (and the jury) may have less experience of a particular industry or sector
When litigation may be appropriate
Litigation may be suitable where:
- A legal precedent is sought
- Public accountability is important
- Compulsory powers are required
- No arbitration agreement exists
- The dispute is domestic and enforcement abroad is not a consideration
Arbitration: private dispute resolution with binding outcomes
What is arbitration?
Arbitration is a private dispute resolution process based on agreement. The parties agree to submit disputes to an arbitral tribunal comprised of one or more independent arbitrators, waiving their right to turn to the national courts.
The arbitral tribunal issues a binding arbitral award.
Arbitration is rooted in party autonomy, procedural flexibility and finality.
Contractual basis
Arbitration requires an arbitration agreement, typically included in a contract. The agreement may specify:
- The scope of the agreement
- The arbitration rules
- The seat (legal place) of arbitration
- The number of arbitrators
- The language of the proceedings
Key characteristics of arbitration
Private proceedings
Arbitration hearings are not public. Many institutional rules contain provisions addressing confidentiality, although their nature and effect may be subject to the applicable rules and governing law.
Party autonomy
Parties may influence the composition of the tribunal and key procedural elements.
Final and binding award
Awards are final and binding, with only limited grounds for challenge.
International enforceability
Arbitral awards are widely enforceable under the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), adopted by more than 170 states.
Limited review
Courts generally cannot review the substantive questions of the arbitration. Challenges are confined to narrow procedural or jurisdictional grounds.
Types of arbitration
Institutional arbitration
Administered under established rules by an arbitral institution.
Founded in 1917, the SCC Arbitration Institute administers arbitrations under its own rules, providing procedural oversight, appointment services and administrative support.
Institutional arbitration offers a structured framework and administrative assistance throughout the proceedings.
Ad hoc arbitration
Conducted without institutional administration. Parties and arbitrators manage procedural matters directly, often under a national legal framework or established ad hoc rules such as those of the United Nations Commission on International Trade Law.
Ad hoc arbitration offers flexibility but requires parties to manage administrative and procedural matters themselves.
Advantages of arbitration
- Neutral forum for international disputes
- Strong cross-border enforceability
- Ability to appoint decision-makers with relevant expertise
- Procedural flexibility
- Typically private proceedings
- Finality of outcome
Potential drawbacks of arbitration
- Requires a valid arbitration agreement
- Limited right of appeal
- Costs may be significant in complex matters
- Arbitrators generally have more limited powers over third parties than courts
When arbitration may be appropriate
Arbitration is often suitable where:
- Parties are based in different jurisdictions
- International enforcement is anticipated
- Confidentiality is important
- A neutral forum is preferred
- Specialist expertise is desirable
- Finality is valued
The SCC arbitration process
The SCC administers arbitration proceedings under the SCC Arbitration Rules. The process typically includes:
- Filing of a Request for Arbitration
- Constitution of the tribunal
- Written submissions
- Hearing (where required)
- Issuance of a reasoned award
The SCC provides administrative support and oversight to ensure efficiency and procedural integrity. Further information is available in the SCC Rules and guidance materials.
Mediation: collaborative problem-solving
What is mediation?
Mediation is a voluntary process in which a neutral third party assists disputing parties in reaching a negotiated settlement.
The mediator does not impose a decision. The parties retain control over whether, and on what terms, the dispute is resolved.
In our SCC Spotlight Talk with Gert Nilsson Eldrimner, he points to a notable statistic: 92% of commercial mediations lead to an agreement, meaning only 8% will need to resort to litigation or arbitration. Moreover, in Sweden mediation costs on average 11% of the cost of litigation, and 7% of arbitration.
Key characteristics of mediation
Voluntary and non-binding
Parties may withdraw at any time. A binding outcome arises only if the parties conclude a settlement agreement.
Flexible and informal
The process can be tailored to the dispute and the parties’ needs.
Confidential
Discussions in mediation are generally confidential and conducted on a without prejudice basis.
Party control
The outcome is determined by the parties themselves, allowing commercially practical solutions.
Advantages of mediation
- Often faster and less costly than adversarial proceedings
- Preserves commercial relationships
- Encourages practical and creative solutions
- Confidential process
- Settlement agreements often result in high levels of voluntary compliance
Potential drawbacks of mediation
- No guaranteed outcome
- Requires good faith participation
- No formal mechanisms to compel the disclosure of evidence
- Does not create a binding legal precedent
When mediation may be appropriate
Mediation may be particularly suitable where:
- The parties wish to preserve an ongoing relationship
- A swift resolution is preferred
- Confidentiality is important
- The dispute involves commercial or relational issues beyond strict legal rights
- Parties wish to retain control over the outcome
SCC mediation services
The SCC administers mediations under its Mediation Rules and assists parties in appointing experienced mediators. Mediation may be used as a standalone process or combined with arbitration through multi-tier dispute resolution clauses.
Side-by-side comparison
| Feature | Litigation | Arbitration | Mediation |
|---|---|---|---|
| Formality | Highly formal | Formal structure but flexible | Informal and flexible |
| Privacy | Generally public | Private proceedings | Confidential |
| Speed | Can be lengthy | Often more time-efficient | Generally swift |
| Cost | Can be high | Varies with complexity | Generally lower |
| Finality | Subject to appeal | Limited challenge | Binding only if settled |
| Party control | Limited | Moderate to high | High |
| Third-Party Neutral | Judge assigned | Parties may select arbitrator | Mediator facilitates only |
| International enforcement | May require additional procedures | 170+ jurisdictions under the New York Convention | Can be contractually binding; international framework under Singapore Convention |
| Compulsory powers | Strong | More limited | None |
SCC Express
SCC Express Dispute Assessment (SCC Express) offers a streamlined, timeefficient route to dispute resolution under the SCC framework, designed for parties who prioritise speed, proportionality, and pragmatic outcomes.
What is SCC Express?
SCC Express provides rapid access to SCC administered dispute resolution services, grounded in the same principles of neutrality, party autonomy, and institutional credibility that underpin SCC arbitration and mediation, but with a lighter, more flexible procedural structure.
SCC Express offers a fast, fixed‑fee process, with a procedural timeline of three weeks, focused on the essentials only, with minimal submissions and a streamlined procedure, resulting in a non‑binding assessment by an independent neutral. The parties may agree to make the neutral’s assessment contractually binding.
It has often been described as a “halfway house” between arbitration and mediation, a deliberately “quick and dirty” option for resolving disputes where parties want a structured process and neutral involvement, without the formality, time, or cost of full arbitration.
SCC Express ensures the parties have sufficient certainty as well as flexibility in the process.
How SCC Express fits among dispute resolution options
- Compared to litigation
SCC Express avoids public court proceedings and rigid procedural rules, offering a private, flexible, and internationally oriented alternative.
- Compared to standard arbitration
SCC Express is suitable where speed and proportionality outweigh procedural depth. It is particularly attractive for disputes that do not justify a full arbitral process but still benefit from an SCCadministered framework.
- Compared to mediation
While mediation focuses on facilitating negotiated settlement, SCC Express may be used where parties seek a more directive, outcomefocused process, without fully committing to adjudication.
When SCC Express is particularly suitable
SCC Express may be a good fit where:
- time pressure is critical;
- the dispute is narrow, technical, or commercially urgent;
- parties want cost control and procedural simplicity;
- a fast, pragmatic solution is preferred over a formally reasoned award or a purely facilitative process.
Key Takeaways
- SCC Express complements, rather than replaces, litigation, arbitration, and mediation.
- It reflects the SCC Guide’s core message that the optimal dispute resolution method depends on the nature of the dispute and the parties’ priorities.
- SCC Express is best understood as a fasttrack, pragmatic option within the SCC toolbox, positioned between mediation and arbitration.
Making your choice: practical considerations
Selecting the appropriate method requires consideration of:
Nature of the dispute
Technical disputes may benefit from arbitration. Relationship-driven disputes may be well suited to mediation or SCC Express. Novel legal issues may favour litigation.
Relationship between the parties
Where ongoing cooperation is important, mediation or SCC Express may offer advantages.
Confidentiality
Arbitration, mediation and SCC Express provide greater privacy than court proceedings.
International elements
Arbitration offers neutrality and strong cross-border enforceability.
Time and cost
Mediation is often the quickest and most cost-effective option. SCC Express provides speed with a more formalised procedure. Arbitration is typically faster than litigation, though complexity matters.
Enforceability
Arbitral awards benefit from the New York Convention framework. Court judgments may face greater hurdles internationally. Mediation and SCC Express are generally only contractually binding.
Industry practice
Standard dispute resolution clauses in certain sectors may influence the choice.
Parties are encouraged to consider dispute resolution mechanisms at the contract drafting stage.
Find the SCC’s dispute resolution clauses in a variety of languages here.