Mediation is the less formal form of ADR. Mediation uses a neutral third party, sometimes a judge, lawyer or an individual trained in mediation, to help the feuding parties work through their differences in a matter. The parties are encouraged to work through their issues while the mediator simply guides the discussion and offers their opinion on the matters at hand. Although a mediator does not have to be a judge or attorney, it is helpful for that person to have an understanding of the matters at hand. The mediator's role is not to give the parties a judgment on the matter. The parties themselves decide when a matter has been resolved and the terms of the settlement. This is beneficial because, unlike trials or arbitration, the parties are more likely to carry out the settlement. The downside of mediation is that if the parties do not come to an agreement and they feel that an agreement is not forthcoming, the matter may end up in a court of law anyway.
Arbitration is a more formal form of ADR and may follow formal rules or procedures. In these cases, the neutral third party (or parties in some instances) usually has a background in law, although it is not required in all cases. The arbitrator decides the matter at hand and their decision is legally binding. The downside of this is that one or both parties may not like the decision that is made, and if the mediation is binding, there is no appealing from the decision. Cases that are arbitrated are never heard in a court of law because the arbitrator's decision is legally binding on both parties.
Alternative dispute resolution has become more common as people try to save money and time when dealing with a legal matter. Understanding the differences, similarities, benefits and risks of both mediation and arbitration are important in making the decision of whether they may be helpful in your case. If you are interested in using an alternative dispute resolution process to decide your case without litigating in a court of law, talk to your attorney about the benefits and risks in relation to your case.