Arbitration and mediation are two types of Alternative Dispute Resolution (ADR). Most people who choose to utilize these procedures do so because they want to avoid litigation. Litigation can be stressful, unpredictable and extremely expensive. Letting the courts decide your fate in a case is scary because you have zero control over the end result.
What is mediation?
Mediation is an informal process where one person (the mediator) helps facilitate dialogue between disputing parties in an effort to reach an agreeable conclusion. The mediator will do their best to provide a comfortable environment and encourage compromise. Their job is to be an unbiased third-party; they are not there to take sides.
Once the disputing parties reach an agreement, it is up to them to honor it. Since mediators cannot make legally binding decisions, they do not have authorization to enforce resolutions.
Mediation can also be used in conjunction to litigation; it's known to help streamline the court process and lower associated fees.
What is arbitration?
Arbitration is also an informal process that uses a third-party (or third-parties) to help facilitate dialogue. In contrast to mediation, arbitration is not focused on getting all parties to agree on an arrangement. Each party will be given an opportunity to present their side but in the end the arbitrator(s) will act as the judge and decide how the case will be settled. When there are multiple arbitrators on your case, a majority vote will dictate the resolution.
Many people choose arbitration over mediation because it can be a legally binding agreement. If you want to stay away from litigation but don't trust the other party to honor an agreement; arbitration is likely your best option.