Mediation, Arbitration or Litigation? How to Choose the Right Path

Note: This article describes Danish dispute resolution options specifically.

If disagreement arises in connection with a business sale — over price, terms, or something that only surfaces after the takeover — there are fundamentally three ways forward: mediation, arbitration, or ordinary litigation. They differ markedly in cost, speed, and what you actually end up with.

Mediation: Fastest and cheapest, but requires agreement

Mediation is a constructive process where a neutral mediator helps the parties find their own way to a solution. It's typically far faster and cheaper than litigation, but requires both parties to be genuinely willing to collaborate on a solution. If you can't agree, the mediation ends without a binding agreement, and you need to move forward via another path.

Arbitration: Private, faster than court — but binding

Arbitration takes place behind closed doors, so the case doesn't become publicly known, which many business owners value. Processing time is often shorter than at the courts, and an arbitration award can typically be enforced more easily across borders than an ordinary judgment. In return, the award is binding for both parties — generally there's no right of appeal, as there often is with litigation.

Litigation: The most formal — and most time-consuming — path

Litigation at the courts is the most formal path, with the option of appeal through the court system. In return, it's often the slowest and most expensive solution, and the case generally becomes publicly accessible — something that can be problematic if you want to keep a conflict about the business discreet.

How do you choose the right path?

• Choose mediation if both parties fundamentally want to find a solution, and the relationship between you has value afterward — e.g. if the seller continues in the business for a period.
• Choose arbitration if you want a binding decision, but want to avoid public exposure and a drawn-out lawsuit — and preferably have agreed to it in advance in the contract.
• Choose litigation if the case is a matter of principle, requires a binding court decision with the option of appeal, or if the other party won't cooperate on any of the other solutions at all.

Can you combine them?

Yes — it's actually quite common to try mediation first, even after arbitration or litigation has been initiated. If the mediation succeeds, the original case can simply be withdrawn, and you save time and costs on the rest of the process.

Facing a conflict in connection with a business sale? Read about how a mediator can help move the negotiation forward, or book a no-obligation call.