Litigation. This means meaning resolution in a court by a judge. Although litigation is often thought to be relatively expensive, other forms of dispute resolution such as mediation are costly, and- unlike litigation- may fail to produce a decisive result.
Arbitration is where the judge is replaced by an arbitrator sitting in private. The procedure is much like that of a case in court (except that the hearings are in private) and the arbitrator will make orders for the preparation of the case in question in much the same way as a judge in court. The arbitrator will then conduct a hearing to determine who is right. Arbitrators have to be paid for by the parties, and arbitrators do not come cheap.
Mediation is where the parties are encouraged to settle their differences by agreement, but cannot be forced to agree. There is usually a meeting at which a mediator tries to find common ground between the parties and broker an agreement. The mediator (and any advisers in attendance on the parties) have to be paid for by the parties, and mediators are not cheap. The result is often that money has been spent, but nothing has been resolved. If agreement does not take place, the parties may have to litigate the dispute.