What’s the difference between mediation and arbitration in Malta?

These are genuinely different processes with different outcomes. Mediation is a voluntary process where a neutral mediator helps both parties try to reach their own mutually agreed settlement, but the mediator has no power to impose a binding decision on either party, meaning the process only succeeds if both sides genuinely agree to a resolution, and either party can generally walk away if agreement isn't reached. Arbitration, by contrast, regulated in Malta under the Arbitration Act, Chapter 387 of the Laws of Malta, and often administered through the Malta Arbitration Centre, involves an arbitrator or panel actually deciding the dispute and issuing a binding award, similar in effect to a court judgment, which the parties are legally obligated to comply with, generally without a full right of appeal on the merits. Given that mediation is non-binding and lower-risk to attempt first, it can often make sense to try mediation initially, particularly where preserving the business relationship has value, and only move to the more formal, binding arbitration process (if your agreement provides for it) if mediation genuinely fails to produce a resolution both sides can accept.