What is the difference between arbitration and mediation?

Answer

Mediation is a process by which both sides of a conflict are assisted into finding a middle term, mediation is sometimes a negotiation with the difference that it is supervised by a person or authority empowered to oversight and lead the process.

When mediation fails, then the litigation or conflict may be placed under arbitration. This process is fully directed by a person or authority empowered as arbitrator who has in fact the same powers of a judge but limited to the conflict in question. Arbitration is not directed to find a middle term to be agreed by the sides but it is directed to conclude and impose a final decision or resolution of the conflict in the most fair possible way following justice and after hearing and studying the versions of both sides.

During mediation the sides in conflict have part in the final decision while in an arbitration they can only present their claims but have no part in the final decision.


Answer

Arbitration is commonly known as Alternative Dispute Resolution (ADR). It's a process where both sides come together and agree to follow and respect the decision of the arbitrator. The arbitrator is usually an attorney familiar with the field of law being decided. The decision of the arbitrator is legally binding against both parties.
Mediation is the process by which a neutral third party intervenes between two conflicting parties to promote reconciliation, settlement, or compromise. Mediation is an effective tool for resolving almost all civil (non-criminal) disputes. Mediation provides disputing parties with the opportunity to identify and cope with divisive interpersonal issues not originally thought to be part of the dispute.

Unlike an arbitrator, a mediator does not have the power to render a decision, and determine an award

Arbitration is an alternative means of setttling a dispute by impartial persons without proceeding to a court trial. It is sometimes preferred as a means of settling a matter in ordert to avoid the expense, delay, and acrimony of litigation. There is no discovery and there are simplified rules of evidence in arbitration.
Mediation is a non-adversarial method of alternative dispute resolution (ADR) in which a neutral third party helps resolve a dispute. The mediator does not have the power to render a decision on the matter or order an outcome. If a satisfactory resolution cannot be reached, the parties can pursue a lawsuit.
On the face of it 'Arbitration' is just like a regular court with certain exceptions.
An Arbitrator derives his jurisdiction through the agreement of the parties. He has to judiciously decide on matters coming within the scope of the agreement. He has to follow the procedural law and rules laid down in the agreement. His decision on matters in Issue is called an "Award". An Arbitrators Award can be challenged in the court of law. However in most of the Jurisdictions an Award can not be appealed to on grounds of facts.
Mediation is much more informal in nature and a Mediator normally encourages the parties to arrive at a compromise on their own. He doesn't pass any orders etc. The parties finally draw a settlement or compromise agreement with the help and advice of the Mediator and file it in the Court of Law for execution. The final settlement can not be challenged in a court of law except for fraud & misrepresentation.