Both mediation and arbitration have the same end goal -- a fair resolution to all parties involved in a conflict or dispute. Because disputes that are taken to court in a formal hearing are both time-consuming and expensive, two methods have evolved to settle disputes between parties with less expense and less time. Arbitration and mediation are similar processes with the same objectives; however, there are significant differences, which are important for all parties to understand.

One of the major differences between the two is that the mediation process uses a third party, who is neutral, to act as a negotiator. On the other hand, in arbitration, an arbitrator is involved, which could be an attorney or judge. Another difference between arbitration and mediation is that in the latter, the mediator may meet with each party privately, whereas most discussions are out in the open with arbitration.

In most cases, mediation is a process that is non-binding, where a mediator helps to achieve a mutually agreed upon settlement between the parties. Conversely, in arbitration, an arbitrator hears testimony and reviews evidence. The arbitrator then makes a decision, which is binding, on all parties. A further difference between mediation and arbitration is that arbitration tends to be reserved for more complex and complicated legal conflicts and disputes, such as product liabilities and contract negotiations between labor and management. On the other hand, mediation is more readily seen in more informal civil disputes, such as divorces, child custody and even tenant/landlord issues.