What is the difference between arbitration and mediation?

The distinction between arbitration and mediation lies significantly in the role and authority of the third party involved in each process. In arbitration, a neutral third party or arbitrator listens to the evidence and arguments presented by both sides and then makes a binding decision that the parties are required to follow. This means that the arbitrator has the authority to determine the outcome of the dispute, which can provide a clear resolution and is often used in legal contexts where parties are looking for a definitive end to their disagreements.

Mediation, on the other hand, involves a third party who helps facilitate conversation and negotiation between the disputing parties. The mediator does not have the authority to impose a decision; instead, they work with the parties to help them reach a mutual agreement. Because mediation relies on the willingness of both parties to agree and negotiate, any resolution reached is not legally binding unless both parties decide to formalize it in another agreement.

This key characteristic of arbitration, where the arbitrator's decision is final and binding, clearly differentiates it from mediation, where the mediator merely facilitates discussion without enforcing any decisions.