Arbitration and mediation are both forms of Alternative Dispute Resolution (ADR). ADR refers to methods of dispute resolution that are outside the more traditional means of resolving disputes through litigation in a court of law.
In arbitration, the parties agree to retain a third party – called an arbitrator – to act much as a judge would in a trial. Both sides present their case under the rules of arbitration, which may differ from proceeding to proceeding but are often similar to the rules of evidence and procedure used in courts. After hearing the evidence from both sides, the arbitrator will issue his or her decision. Arbitration is usually binding, meaning that both sides agree to abide by the arbitrator’s decision. In some complex matters, the parties may hire more than one arbitrator to hear the case.
Mediation is a process by which a third party, known as the mediator, facilitates a structured settlement discussion with the parties in an attempt to reach a mutually-agreed settlement prior to the filing of a lawsuit or before the case goes to trial. The mediator acts as a neutral party and is specially trained to provide a structured process to facilitate negotiations that the parties and their lawyers often do not or cannot do themselves.