Mediation is an informal process where the parties confer with a neutral party, the mediator. He or she hears both sides of the case and helps negotiate a compromise agreement that is acceptable to both parties. It is a non-binding form of alternative dispute resolution; however, the agreement can be incorporated into binding court orders.
In arbitration, the parties submit their facts of the dispute to a neutral party, the arbitrator, who takes on a role similar to a judge. After reviewing the fact, the arbitrator delivers a judgment. As opposed to mediation, arbitration is a binding form of dispute resolution.
This is a combination of mediation and arbitration. First, the parties attempt to resolve the dispute with non-binding mediation. However, if the parties are unable to come to a mutually acceptable resolution, then they turn to binding arbitration. The mediator becomes the arbitrator and delivers a judgment. The parties agree to binding mediation before beginning the process. This sometimes helps encourage the mediation process as the parties want to avoid an arbitration and are more reasonable in their negotiations in the mediation process.
Mediation is a more cost-effective alternative to litigation. There are many expenses associated with preparing for and going to trial. The cost of mediation is significantly less.