What is the difference between "mediation" and "arbitration"?

Mediation fundamentally differs from arbitration in that it serves as a facilitated negotiation process rather than a judicial one. In mediation, a neutral third party, the mediator, helps the disputing parties try to reach a mutual agreement. The key characteristic of mediation is that it does not result in a binding decision; rather, it empowers the parties to control the outcome of their dispute, making it a collaborative process.

In contrast, arbitration is a more formal process where an arbitrator acts similarly to a judge, reviewing the evidence presented by both parties and making a binding decision that resolves the dispute. The outcome of arbitration is enforceable in a manner similar to a court judgment, meaning that the parties are obligated to comply with the arbitrator's decision.

Understanding this distinction clarifies that mediation focuses on cooperation and negotiation, while arbitration centers on a definitive ruling, which is why the correct choice accurately captures the essence of how these two dispute resolution processes operate.