Alternative Dispute Resolution

INTRODUCTION TO BUSINESS LAW


Alternative Dispute Resolution


Cleverness In This Article

  • What Is Alternative Dispute Resolution?
  • Why Is ADR Important?
  • What are the different types of ADR?
  • Mediation
  • Arbitration
  • Med Arb
  • Mini trial
  • Summary Jury Trial (SJT).
  • What are the advantages of ADR?
  • What are the disadvantages of ADR?

What is Alternative Dispute Resolution (ADR)?

Alternative dispute resolution (ADR), is the process of resolving a dispute between parties. The process provides a means for the parties to come to an agreement, usually through a third party, without the need for legal action (litigation).

Why Is ADR Important?

Law court systems and the Judiciary are often very busy. Alternative dispute resolutions can provide a means of resolving issues outside of the court system. This can reduce both time and costs for the parties involved and reduce the workload on the legal system. ADR has proved to be so effective at resolving some issues prior to litigation that some courts require parties to try alternative dispute resolutions, such as mediation and arbitration, before they will begin formal legal proceedings.

What Are the Different Types of Alternative Dispute Resolution (ADR)?

There are several types of ADR methods. Some methods are binding. This means that the parties must comply with the outcome, even if they disagree with the decision. Some methods are non-binding. This means that the ruling can be ignored.

There are a number of ADR processes, the two most common types are arbitration and mediation. Processes and methods may vary but, in general, the different resolution methods will have many elements common to those listed below.

Negotiation

Negotiation is usually the first part of any dispute process. The parties involved in the dispute simply work together to come to an agreement. A third party does not assist in the negotiations. The parties may choose to be represented by their attorneys during negotiations so that they are aware of their rights and duties in respect of the dispute they are trying to solve.

Mediation

Mediation occurs when an impartial third party helps the parties with a dispute to reach an agreement. The mediator does not decide the outcome of the dispute. The parties involved in mediation are encouraged to actively participate in finding a resolution. The mediator works to try to reach a solution that both agree with. The process is voluntary, private and confidential. Any agreements are generally non-binding. If the parties involved in the dispute do not reach an agreement, they have the right to pursue litigation if necessary.

Arbitration

This is similar to an informal trial. Any party to the dispute can start the process of appointing an arbitrator. The process begins when there is a written Arbitration Agreement between the parties in the dispute. Arbitration uses an impartial third party similar to the mediation process. The main difference between the two is that the disputing parties first agree to whether the final arbitration decision will be binding or not.

Each side presents their side of the case to the third party (arbiter). After hearing each side the arbiter gives their decision on the case. If the parties decided to make the arbitration binding then the decision is considered final and can be enforced by a court of law.

There are two grounds where a party can challenge the appointment of an arbitrator:

  • Reasonable doubt of the impartiality of the arbitrator
  • A lack of proper qualification of the arbitrator.

Med-Arb

This is a mix of the two ADR systems above where the arbiter starts as a mediator and if the mediation process fails to reach a resolution, the arbiter will impose a binding decision.

Mini Trial

The mini trial is different from other ADR processes as it often comes after formal litigation. Once both parties have agreed to the process, attorneys for each party present a summary of their case as if at a trial. It is a private process and they present to neutral advisors and representatives from each side who have the authority to settle the dispute. At the end of the mini trial, the representatives attempt to settle the issue.

If they fail to settle the dispute, the neutral advisor, if requested by both parties, may act as a mediator and may give a non-binding opinion as to the likely outcome in court.

Summary Jury Trial (SJT)

A summary jury trial may be ordered by the court rather than being agreed by the parties involved in the dispute. It is similar to a mini trial except that the case is presented to a mock jury. Attorneys for each party make summary presentations to a mock jury, party representatives and a judge or magistrate.

After the hearing, the SJT produces an advisory verdict. Although the verdict is not binding, the process allows the parties to experience an official court hearing and see how a jury of their peers would view the case. This can be particularly useful where one party has an unrealistic view of their case.

Once the verdict has been made, the court generally requires the parties in dispute to attempt to come to an agreement.

Advantages of ADR

  • Promotes cooperation between the parties involved
  • Each party has the opportunity to understand the other’s position and develop different solutions
  • The process is less formal than a full trial court
  • The processes is more flexible than a full trial court
  • Many of the rules of evidence do not apply
  • Costs are generally lower
  • The process may be quicker to resolve an issue
  • The parties' have greater control over the process
  • Solutions may be more practical
  • Greater confidentiality
  • Can be a less confrontational alternative to the court system.

Disadvantages Of ADR

ADR may not be suitable when:

  • There is an imbalance of power between the parties involved
  • The case is complex
  • The case requires specific rules of evidence
  • Live evidence or complex analysis is required
  • There is a need for expert evidence
  • Court orders are required

It is generally advised that parties involved in a dispute should always consider ADR before beginning formal legal proceedings.


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