"He shall pay double to his neighbor" — the Torah requires a thief who is caught to pay twice the value of what he stole. But Rabbi Shimon noticed a conflict with another verse. (Leviticus 5:24) says that a thief who confesses must pay "the principal at its head, and its fifth shall he add to it." One verse requires double payment; the other requires the principal plus a fifth. How are they reconciled?
Rabbi Shimon explained: the two verses address different situations. The person who pays only the principal plus a fifth is one who confessed voluntarily and returned the stolen property. His honesty earns him a lighter penalty. The person who pays double is one who was caught and convicted — he did not come forward on his own. The severity of the penalty corresponds to the degree of the thief's cooperation.
Furthermore, Rabbi Shimon taught that the person who pays the principal plus a fifth is exempt from the double payment, and the person who pays double is exempt from the additional fifth. The two penalty structures are mutually exclusive. You are in one track or the other, never both.
The Mekhilta adds two final limitations: "to his neighbor" — the double payment goes to a fellow Israelite, not to the Temple treasury. And "to his neighbor" — not to gentiles. The scope of the double payment is restricted to disputes between members of the Israelite community.