How does mediation differ from arbitration?

Mediation and arbitration are both methods of alternative dispute resolution, but they serve different purposes and operate in distinct ways.

In mediation, a neutral third party, known as a mediator, assists the parties in reaching a mutually acceptable resolution to their dispute. The role of the mediator is to facilitate conversation, help clarify issues, and explore potential solutions, but the mediator does not impose a decision. As a result, the outcome of mediation is not binding unless the parties voluntarily agree to the terms they discuss and reach a settlement.

On the other hand, arbitration is a more formal process where a neutral third party, called an arbitrator, hears evidence and arguments from both sides and then makes a binding decision that the parties must follow. The arbitration process is similar to a court trial, which can involve rules of evidence and procedures, but it is typically less formal and quicker than litigation in court.

Choosing the correct understanding of these processes highlights the fundamental differences: mediation focuses on collaboration to reach a resolution while arbitration results in a decisive ruling by the arbitrator. This distinction is crucial for parties deciding which method best suits their needs in resolving disputes.