What is the Difference Between Mediation and Arbitration?

What Is The Difference Between Mediation And Arbitration

What is the difference between mediation and arbitration?

Mediation and arbitration share a common lineage as alternatives to the traditional legal system of court and jury trials.  Known as different forms of alternative dispute resolution (ADR), they are both intended to offer less expensive, more efficient outside-of-courtroom approaches to resolving disputes than afforded by more formal litigation.  Yet there, the similarities end.  Mediation and arbitration are fundamentally different processes involving distinctly different conflict resolution approaches.


The Continuum of Dispute Resolution Processes

To best understand these important distinctions, it’s helpful to envision dispute resolution processes along a continuum of choices.  To the far left lie the less formal, less expensive, and voluntary processes, including conciliation and mediation.  As one moves conceptually toward the right end of the continuum, one moves towards the more formal tribunals like arbitration until reaching the most formal approach to dispute resolution — litigation — the civil trial and appellate process.

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Alternatives to Litigation for Resolving Disputes

Before deciding on an alternative to litigation for pursuing a conflict, it is essential to understand the key differences in the alternative dispute resolution processes.



Arbitration is a method of resolving a civil dispute outside of the court system in which the disputants present their case to an impartial third party, who then makes a decision for them that resolves the conflict.  Historically, arbitration was synonymous with alternative dispute resolution as it was the first process developed to save the time and expense of protracted litigation.  

Situated to the right of the center of the dispute resolution continuum, arbitration is more formal than mediation or conciliation and can look more like the litigation process.  That is because, like litigation, arbitration is, at its core, an evidence-based, adjudicative process.  

Arbitration involves a hearing resembling a trial that takes place outside the courtroom, requiring the participation of the parties in dispute.  The arbitration process is conducted according to formal rules of arbitration administered by a single neutral arbitrator (or a panel of arbitrators) whose task is to conduct a formal hearing, including lay and expert testimony.  Like a trial, the hearing can often take weeks to complete.  Once testimony is concluded, the arbitrator rules on the evidence by issuing a decision.  The arbitrator’s decision, or “award,” is legally binding (unless the parties previously agreed to a non-binding arbitration).  Because the decision is final, there is no formal appeals process available.  Even if one party feels the outcome was unfair, unjust, or biased, they cannot appeal it. Unlike mediation, in an arbitration there are no discussions about working out the parties’ differences.

Arbitration is typically compelled by contract or statute, although parties can also agree to arbitrate after a conflict occurs.  A contract that includes an agreement to arbitrate disputes (an arbitration clause) will outline some key aspects of any potential future arbitration.  The rules and procedures that will be used in arbitration are typically part of this agreement.  If a third-party alternative dispute resolution service such as JAMS or AAA will be used to handle an arbitration, the contract may specify whether the rules and procedures of that third-party service will be used.   Rules typically address:

  • Number of arbitrators
  • Selection of arbitrators
  • Timeline for arbitration
  • Evidence
  • Awards
  • Confidentiality and records

The Arbitration Process

The main phases of an arbitration process include:

Initiation: An arbitration case begins when one party submits a demand for arbitration which outlines the parties involved, the nature of the dispute, and the relief being sought.

Selection of Arbitrator: both parties identify and select an arbitrator

Preliminary Hearing: Conducted by the arbitrator, a preliminary hearing with the parties may be held to discuss the issues in the case witnesses, depositions, sharing information, and other procedural matters.

Discovery: The parties identify witnesses, evidence, and experts, exchange information, and prepare for the hearing.

Hearing: At the hearing, parties present testimony and evidence to the arbitrator.  There is usually only one hearing before the arbitrator unless the case is very complex.

The Award: the arbitrator concludes testimony, closes the record on the case, and issues a decision, including an award.



A more recent approach to alternative dispute resolution is mediation, often defined as a facilitated negotiation.  Mediation is a process where two parties meet outside of court with a qualified and neutral third party, the mediator, and discuss their various issues to try to come to an agreement.  In commercial mediation, lawyers represent the disputants and are referred to as Mediation Advocates.

The mediation process is flexible, reflecting both the dispute’s unique requirements and the parties’ underlying needs and interests.  Typically, mediation involves a combination of face-to-face discussions with the parties and private meetings with the mediator.  Because there is no formal presentation of evidence, mediation can often be called upon early in a dispute before the parties’ positions harden and costs become another component of the conflict.  

Perhaps most important, what distinguishes the mediation process from arbitration is that the mediator’s role is to assist the parties in fashioning a solution of their choosing and “getting to yes” in the process.  Unlike arbitration, the mediator’s role is to facilitate difficult conversations, not sit in judgment of the parties.  In other words, the parties in mediation, at all times, retain control of decisions impacting the outcome of the dispute and their lives.  If and only if the parties voluntarily agree on an optimized solution, will they move toward concluding the dispute. 

As a voluntary, non-binding process, many courts and contracts will require mediation as a first step in a stair-step approach to other more formal dispute resolution processes.  All these advantages are capped with an appreciation that mediation is successful more often than not and can often be successfully implemented in a single day or less.  It is thought to be the preferred alternative, particularly where an ongoing relationship between the parties might otherwise be destroyed by the fallout of an adverse arbitration ruling.  


The Mediation Process

More and more, courts are adopting mandatory requirements for mediation as a first step in solving civil disputes.  In cases where mediation remains discretionary, most parties initiate mediation before or sometimes after litigation has been undertaken, without any involvement by the court.  This could be at one of the following critical junctures in a case: 

  • At the outset, following a demand letter or service of the complaint 
  • Just after a dispositive motion has been filed and is pending 
  • After the completion of limited but critical discovery 
  • On the eve of trial, following the completion of expert discovery 

Selection of the mediator:  

Once both sides have agreed to mediate, they jointly agree on a mediator.  The parties should try to find a mediator who is knowledgeable about the subject matter of their case, has experience litigating or mediating similar cases, and whom they think has the mediation skills necessary to bring the parties together in a settlement.

The Mediation Brief  

Once a mediator is chosen, the parties submit to the mediator copies of briefs and exhibits that they may have filed in court or may have created for the mediator.  The mediation brief is a central tool for the mediator to understand the factual, legal, and practical issues affecting settlement.  An effective mediation brief includes a concise statement of material facts, applicable law, damages, and settlement expectations, wrapped in a historical overview of the case.

In-person mediation meeting

The mediation is held in an office, usually provided by the mediator, not in the courthouse.  The parties, their lawyers, and the mediator attend the meeting.  The typical length of a mediation is less than one day.

Joint meetings in the mediation process

Mediation in a complex case typically begins with all parties, their attorneys, and occasionally experts assembled for a joint meeting to present the facts and legal arguments to the other parties, attorneys, and the mediator.  

Private caucuses

Following the joint meeting, particularly in commercial mediation, the mediator will typically separate the parties and begin meeting with them in a series of private, confidential meetings, or “caucuses.” In the caucuses, the mediator works with each side to discuss the strengths and weaknesses of the case, bring the parties’ positions closer together and explore settlement opportunities.  Either or both parties can decline to accept settlement offers.  

Closing the mediation

The goal of mediation is to obtain a durable settlement agreement acceptable to all parties.  If a settlement is reached, the mediator will draft, and the parties will execute, a binding settlement agreement that will include the dismissal of the case or the entry of an agreed judgment.  The mediator may encourage the parties to reconvene to continue settlement efforts if no settlement is achieved. 




Conciliation is a form of alternative dispute resolution similar to mediation.  In the United States, conciliation is commonly referred to interchangeably with mediation as both involve the intervention of a trained neutral facilitator appointed by the parties in the conflict.  However, there is a slight difference in the role played by the neutral facilitator.  In conciliation, the conciliator plays more of an advisory role and proposes workable solutions for both parties to help them to settle their disputes.  While the conciliator can recommend solutions, the disputing parties are not legally obligated to abide by the conciliator’s opinion.  As in mediation, only the conflicting parties in a conciliation can settle the dispute.  The conciliator is there to guide the conversation and make suggestions.  


Comparison of the Key Characteristics of Arbitration and Mediation

By understanding the key characteristics of arbitration and mediation and their place on the continuum of alternative dispute resolution processes, parties in a dispute can decide on the process that best suits their needs.




Place of Hearing

Outside of court

Outside of court

Type of Process/Hearing



Time to Settlement


Longer than Mediation



Less economical than mediation

Decision Maker


Arbitrator/Panel of Arbitrators

Role of Decision Maker

Mediator helps parties come to a mutual agreement

Arbitrator rules on evidence and decides the outcome

Type of Remedies

Creative remedies possible

Legal only


Parties decide the outcome

Award imposed by an arbitrator

Legally Binding 

Yes, if both parties agree on settlement



If agreement is not reached, may result in litigation

Award is final.  No appeal possible.




Satisfaction with Settlement

Win: Win agreement: Relationships likely retained

Winner and loser: Relationships may be strained

What is better, mediation or arbitration?

Both mediation and arbitration have their advantages and disadvantages.  Both are effective ways of solving disputes outside of court that are faster and more economical than traditional litigation and take place outside the public eye.

Certain situations nevertheless may benefit from mediation rather than arbitration.  Meditation may be the preferred option when:

  • Both parties believe they can reach an understanding on their own terms.
  • It is a first attempt to deal with a conflict, and it will likely not escalate to arbitration or litigation.
  • The parties will continue working together and must maintain an ongoing relationship despite disagreement.

Mediation in civil disputes often involves business partners, landlords and tenants, and labor unions and management.  Mediation is one of the most commonly used alternative dispute resolution methods in the construction industry and is also becoming increasingly more prevalent in the area of franchise law.

Arbitration may be preferred over mediation in other conflicts—particularly those with high stakes or complexity.  Arbitration may be a better option than mediation when:

  • A legal matter has escalated and become a more serious issue
  • Both parties have not been able to settle on an agreement

Generally, arbitration is used as a step to resolve the dispute before going to court.  It is widely used to resolve a wide range of commercial disputes.   Arbitration clauses are found in many construction contracts, contracts for the sale of consumer and business products, contracts between employers and employees and between co-owners of a company, and in many other situations.  Some agreements, such as insurance contracts, require a dispute to be resolved by arbitration and not by the traditional court system.

In summary, Many disputants, in-house counsel, courts, and judges are demonstrating a strong preference for mediation, arbitration, and other forms of dispute resolution for resolving conflicts outside the courtroom.  Offering a less expensive, more efficient option to traditional litigation, they are effective methods of resolving civil disputes of all complexities.

By understanding the key characteristics of arbitration and mediation and their place on the continuum of alternative dispute resolution processes, parties in a dispute can decide on the process that best suits their needs.

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