Mediation and Arbitration both are considered to be Alternative Dispute Resolution methods (ADR) or private dispute resolution methods. Before discussing the difference between both, let me briefly outline the basic meaning of arbitration and mediation.

Arbitration:

Well, according to this technique the disputes are resolved outside the court. The parties involved in the dispute agree to be bound by the arbitration decision. Finally, a third party called arbitrator imposes the decision after looking into the matter and evidence. This final decision is called award and is legally imposed on both the parties equally.

International Arbitration is one such kind of arbitration in which resolution of international commercial disputes is made between different companies or individuals in different states or different countries.

Mediation:

The process is somewhat similar to arbitration as in this process two parties sits together along with the mediator and tries to compromise and settle their dispute out of court. Here the third party role is played by the Mediators who help to resolve the matter.

In the end, if mediation is successful, the parties are satisfied with the agreed outcome. They make an agreement and sign it.

Many countries use International Mediation to settle their disputes on a variety of issues such as trade, commerce or armed conflicts.

As you can see both are quite similar as they follow the same criterion but yes there is a little difference between both.

In case of Arbitration, the third party acts as a judge and hands down a decision to which both the parties are bound whether they like it or not. On the other hand in case of mediation, the decision is made by a collaborative effort of everyone to arrive at a satisfactory outcome.

Secondly, in case of arbitration, once the parties have submitted a dispute, no party can is allowed to opt out unilaterally. In contrast, while mediation any party can withdraw at any time.