How Does Arbitration Differ from Mediation? A Comprehensive Guide to Process, Outcomes, Costs, and Legal Authority
When it comes to resolving legal disputes without stepping into a traditional courtroom, arbitration and mediation are the two ADR (Alternative Dispute Resolution) methods most often considered in California and nationwide. These processes share a few similarities, but also present important distinctions that can drastically affect your rights, risks, costs, and outcomes. Understanding the difference between arbitration and mediation is essential before agreeing to any ADR clause or deciding how best to resolve a dispute.
The Underlying Processes—Who’s in Charge?
Arbitration and mediation both involve a neutral third party, but their role and authority differ dramatically.
In arbitration, a neutral arbitrator (or panel) acts much like a private judge. The arbitrator hears evidence, considers the facts and legal arguments, and ultimately makes a decision (“award”). This award is typically binding on the parties, meaning it’s enforceable in court and has the same effect as a traditional judgment (Cal. Civ. Proc. Code §§ 1283.4, 1287.4; Federal Arbitration Act, 9 U.S.C. § 9).
Mediation, by contrast, relies on a mediator to facilitate discussion and help the parties find common ground. The mediator does not render a decision or have authority to impose any outcome. Instead, all agreements must be reached voluntarily by the disputing parties themselves (Cal. Evid. Code §§ 1115–1129).
Process Overview: How Each Procedure Works
Both arbitration and mediation typically begin because of a contract clause (Cal. Civ. Proc. Code § 1281; Cal. Evid. Code § 1118) or court order, and are usually private.
Arbitration usually follows this structure:
Parties jointly select an arbitrator (Cal. Civ. Proc. Code § 1281.6; 9 U.S.C. § 5).
A preliminary conference sets timelines, evidence rules, and fees (Cal. Civ. Proc. Code §§ 1282–1284.2).
The hearing occurs privately—witnesses testify, evidence is presented, and legal arguments are made (Cal. Civ. Proc. Code § 1282.2; 9 U.S.C. § 7).
The arbitrator issues a written decision (“award”), which is final and enforceable (Cal. Civ. Proc. Code §§ 1283.4, 1287.4).
Mediation, in contrast, generally involves:
Selection of a trained mediator by agreement or from a court list (Cal. Evid. Code § 1115).
A confidential process where both sides discuss their issues, usually first together, then separately in caucus sessions.
The mediator uses negotiation techniques but cannot compel a result (Cal. Evid. Code § 1119).
If the parties agree, the mediator may help draft a written settlement (Cal. Evid. Code § 1123).
If mediation fails, parties retain all rights to pursue litigation or arbitration.
Binding vs. Non-Binding Outcomes
Perhaps the most significant difference between arbitration and mediation is whether the outcome is binding.
Arbitration awards are almost always binding and enforceable under California and federal law (Cal. Civ. Proc. Code § 1287.4; 9 U.S.C. § 9). Challenges are limited to extreme misconduct or fraud (Cal. Civ. Proc. Code § 1286.2; 9 U.S.C. § 10).
Mediation results are only binding if a written settlement is signed by all parties (Cal. Evid. Code § 1123). No party can be forced into a settlement through mediation.
Confidentiality Protections
Both processes offer privacy, but the statutory protections differ:
In arbitration, hearings and documents are private and not part of public record unless litigation is required to confirm or challenge the award.
In mediation, California law provides robust confidentiality—virtually everything said, done, or prepared for mediation is inadmissible in any subsequent legal proceeding (Cal. Evid. Code §§ 1119, 1121). Mediators cannot be compelled to testify about statements or conduct during mediation (Cal. Evid. Code § 703.5).
Costs: What to Expect
Arbitration generally involves higher expenses than mediation due to its structure. Parties typically pay the arbitrator’s hourly or daily rate, filing fees, and possibly attorney and expert witness fees (Cal. Civ. Proc. Code §§ 1281.97–1281.99). Complex matters may cost tens of thousands of dollars, particularly if a panel is used or the process is lengthy.
Mediation is often more affordable. Mediators charge by the hour or session, with total costs frequently divided equally unless agreed otherwise. Court-connected mediation programs may offer reduced rates.
Outcome and Appeal Rights
After a binding arbitration award, appeals are extremely limited. Courts can only overturn an award for narrow reasons like fraud or arbitrator bias (Cal. Civ. Proc. Code § 1286.2; 9 U.S.C. § 10). Parties have far more control over their outcome in mediation and may walk away at any time with no agreement—preserving full litigation rights.
Practical Use Cases for Arbitration and Mediation
Arbitration is often used for:
Commercial/business contract disputes (Cal. Civ. Proc. Code §§ 1280–1294.2; 9 U.S.C. § 2)
Employment contract claims
Construction and real estate disagreements
Some consumer and health care cases
Mediation is frequently preferred for:
Family law/divorce and custody issues
Neighbor or community disputes
Situations needing creative, relationship-preserving solutions
Cases in early stages, before litigation becomes expensive
Which ADR Process Is Right for You?
There is no one-size-fits-all answer. Arbitration provides closure and avoids uncertain court timelines but at the cost of limited appeal and potential expenses. Mediation maximizes your input, is often faster and cheaper, and is ideal for preserving relationships or exploring compromise—though it does not guarantee a resolution.
Whenever reviewing a contract or contemplating legal action, check for ADR clauses and weigh your options carefully. Legal counsel can help interpret how California law (Cal. Civ. Proc. Code §§ 1280–1294.2; Cal. Evid. Code §§ 1115–1129) and the FAA (9 U.S.C. § 1 et seq.) affect your rights and options.
Conclusion
Arbitration and mediation share the goal of resolving disputes efficiently and privately, but their differences—the role and power of the neutral party, the binding nature of outcomes, confidentiality rules, and costs—can have a major impact. Know the rules, read the fine print, and consult an attorney before making your ADR decision.
Citations
Cal. Civ. Proc. Code §§ 1280–1294.2 (California Arbitration Act, covering arbitration agreements, procedures, awards, and challenges)
Cal. Evid. Code §§ 1115–1129 (California Mediation Confidentiality and procedure)
Federal Arbitration Act, 9 U.S.C. §§ 1–16
