What is the difference between mediation and arbitration?

What is the difference between mediation and arbitration?

• A. Mediation involves a neutral third party facilitating discussion for a non-binding solution, while arbitration involves a third party making a binding decision
• B. Mediation results in a binding decision, whereas arbitration is non-binding
• C. Mediation is a formal court process; arbitration is an informal discussion
• D. Mediation makes a final binding decision; arbitration does not

Answer: (A)

The key difference is who controls the outcome and whether it is binding. In mediation, a neutral facilitator guides discussion and helps the parties negotiate a settlement, but no one imposes a decision. The result is non-binding unless the parties explicitly sign a separate settlement agreement. In arbitration, a neutral arbitrator hears the case and issues a decision that is binding on the parties and typically enforceable like a court judgment. Arbitration is usually more formal, and its outcome ends the dispute unless specific appeals are allowed. So the best description is that mediation facilitates discussion for a non-binding solution, while arbitration involves a third party making a binding decision. The other statements mix up binding versus non-binding or mischaracterize formality and control.