Mediation is a process where two or more parties get together with a neutral third party – a mediator – whose job it is to facilitate discussions between the parties with the goal being to settle or resolve their disputes. The mediator doesn’t decide the issue like a court or a jury. The parties negotiate settlement of some or all of their disputes with the help of the mediator. If they reach an agreement in mediation, that would be binding on the parties – assuming they had the authority to do so – but the process itself is not binding.
Arbitration, on the other hand, is a process whereby two or more parties agree to bring their dispute in front of a neutral third party – in this case an arbitrator, who, like a judge or a jury decides the dispute. Arbitration can be binding or nonbinding, depending on the parties’ arbitration agreement; however, it is typically binding, because most arbitration agreements call for arbitration in lieu of litigation. In other words, it’s meant to replace the l traditional litigation process.
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