Background and Objective: In light of the expansion of commercial relations and the increasing disputes arising therefrom, this study examines the legal function of commercial arbitration in comparison with judicial adjudication. Its main objective is to clarify the conceptual distinction between “settlement of disputes” and “resolution of disputes” and to analyze why arbitration, unlike courts, which are generally regarded as institutions for the settlement of disputes, has the capacity to achieve genuine dispute resolution.

Materials and Methods: This research is theoretical in nature and adopts a descriptive-analytical methodology.

Findings: The findings indicate that settlement of disputes refers to the legal termination of a claim through the issuance of a binding decision, whereas resolution of disputes involves creating a real balance between the parties’ interests and reducing the likelihood of recurring conflict.

Ethical Considerations: Throughout all stages of writing this study, originality of the texts, honesty, and integrity were duly observed.

Conclusion: Due to their limited flexibility, obligation to apply legal rules, and lack of subject-matter specialization, courts primarily function as institutions for the settlement of disputes. In contrast, arbitration, relying on the selection of specialized arbitrators, the possibility of proceedings tailored to the circumstances of the case, and the ability to take equity into account, has the capacity to achieve genuine dispute resolution. Therefore, strengthening the structure of arbitration in Iran can contribute to greater efficiency and sustainability in commercial relations.