Litigation involves a method in which a dispute between two parties is resolved by court order for a judgment. However, because of the rigidity and high cost involved in litigation, there are cases where the parties go to arbitration.
Arbitration is a process for resolving a dispute between the parties in which an independent person is chosen by the parties mutually to settle the case. The main difference between arbitration and litigation is that the court is involved in the case because it is a judicial process.
While in arbitration, the settlement between the parties is conducted out of court. Arbitration involves an extrajudicial process in which a neutral third party is intended to resolve disputes between the parties rather than a judge.