Arbitration and mediation are forms of “alternative dispute resolution,” meaning that they are alternatives to trying the case to a jury or to negotiating the case directly with the other side. Mediation is essentially a settlement negotiation with someone (the mediator) facilitating the negotiations.
Neither side is required to do anything or to accept the mediator’s suggestions. The mediator will usually meet with each side to find out what the case is about, then start to help them realize the risks involved by pointing out the strengths of the other party’s case or the weaknesses of your own case.
In arbitration, an arbitrator or panel of arbitrators decides the issues of law like a judge, and also finds facts like a jury. The arbitrator’s decision is usually delivered by letter setting out the conclusions and award. The advantage of arbitration is that it is usually cheaper and quicker than a jury trial, and the rules of evidence and procedure are a bit more relaxed. The disadvantage of arbitration is either that it is not appealable or that it is not final. Binding arbitrations, which often happen for UM/UIM policies, are not appealable, which means there will be no review of the arbitrator’s decision. Oregon’s mandatory court-annexed arbitration program has a provision allowing a request of a trial de novo, which will allow for a jury trial revisiting all issues of law and fact. The hitch is that if the appealing party does not improve it’s position with the jury’s verdict, that party will owe the other side some attorney’s fees, capped at a certain amount.