What is the difference between arbitration and mediation?

Arbitration is an authoritative method of solving disputes. The court passes a judgement on the basis of the collected evidence. The judgement unambiguously settles the dispute in favour of one of the parties. Mediation, on the other hand, is an amicable settlement of a dispute with participation of a mediator who is supposed to work out a solution that would be satisfying for both parties. In this case, the parties are trying to reach a mutual understanding. The mediator facilitates communication between them and creates a space for constructive discussion. However, the mediator does not impose an authoritative solution upon the parties. This is the main difference between mediation and arbitration.