ALTERNATIVE DISPUTE RESOLUTIONAdvantages and Disadvantages

5th Sem

ACKNOWLEDGEMENT

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I would like to thank my ADR teacher, Ms. Jasneet, for giving me an opportunity

to work on this project. Without her support and cooperation, this project would

not have been possible. I would also like to thank the library staff for making

available the books required. In the end, I also want to thank my family and friends

for their support.

INTRODUCTION

Alternative Dispute Resolution (ADR) consists of methods and techniques to deal

with disputes without involving lawsuit or any other litigation process. Due to

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quicker and cost effective decision capability of ADR, it has gained noticeable

popularity among the commercial and social parties around the world. Though the

techniques have disadvantages, the benefits are widespread and considered as most

effective ones. The major types of ADR and their characteristics are renowned

amongst the law practitioners as well is to the lawyers. Thus, ADR serves

significant deal of settling a dispute or conflict.

In general terms, dispute is referred to as a disagreement or argument between the

parties. The dispute generally takes place between two parties which can be a

person or a group of person composing a single entity.  Parties comprise of

plaintiff and defendant. In this case, plaintiff is the person who brings charges and

files a suit and defendant is the person accused with charges. Dispute can be

resolved in both using legal jurisdiction and also compromising settlement without

reaching the court. This dispute can be between individuals and corporations and

even between public officials.

Perhaps, different parties try to resolve the dispute which they considered to result

with the best outcome. Thus there is necessity of Alternative Dispute Resolution

(ADR) in order to ensure justified resolution without the involvement of legal

jurisdiction and court. The aspects of ADR are perhaps extended since there are

different methods and implications of resolving disputes. The resolution of ADR is

not only for commercial conflicts but also in many cases found in the dispute

resolution of public officials.

DISPUTE RESOLUTION

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Dispute resolution refers to the settlement of conflicts or arguments between

various parties. The conflict is resolved by considering satisfying at least some of

each side’s needs and addressing the interest.

Dispute resolution processes fall into two major types:

1. Adjudicative processes, such as litigation or arbitration, in which a judge, jury

or arbitrator determines the outcome.

2. Consensual processes, such as collaborative law, mediation, conciliation, or

negotiation, in which the parties attempt to reach agreement. These processes

are not influenced by the court judgment and settlement is rather privately

decided. Thus it is in simple form called alternative dispute resolution (ADR).

ALTERNATIVE DISPUTE RESOLUTION (ADR)

Alternative Dispute Resolution (ADR) includes dispute resolution mechanisms and

techniques that perform as a means for disagreeing parties to attain an agreement

short of lawsuit. It is basically a substitute of formal court hearing. It is a

cooperative term for the ways that parties can settle disputes, with (or without) the

help of a third party. ADR are conducts and methods of resolving conflicts outside

the judicial practice. Despite the resistance of many renowned parties and

advocates, ADR has gained prevalent reception both among the general public and

legal profession. Even now in many situations, court requires the parties to execute

of some type of ADR before the permission of case trial. The rising popularity of

ADR can be explained by the increasing caseload of traditional courts, the

perception that ADR imposes fewer costs than litigation, a preference for

confidentiality, and the desire of some parties to have greater control over the

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selection of the individual or individuals who will decide their dispute1. Many of

the sovereign countries refer ADR as an extra judicial procedure (i.e. Australia).

Some of the senior judiciary in certain jurisdictions (of which England and Wales

is one) are strongly in favor of the use of mediation to settle disputes2.

The adoption of ADR depends on three major factors:

1. The degree to which disputants and their advisors are responsive of ADR

2. The sufficiency of the supply of ADR services for those that would wish to

take-up ADR services

3. The perceived advantages and disadvantages of ADR

Therefore, by satisfying the three crucial factors, ADR can be successfully

implanted for resolving critical dispute issues. The third critical factor indicates the

perception of parties regarding the pros and cons of ADR, since legal hearing is

perhaps avoided. Thus, both the parties require being fully conscious of the

advantages and disadvantages prior to the successful implication of ADR.

TYPES OF ADR

1 Totaro, Gianna, “Avoid court at all costs” The Australian Financial Review Nov. 14 2008. (April 19, 2010). Derived 01-12-2011.2 SSRN: http://ssrn.com/abstract=1599420. Derived 20-12-2011.

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Alternative Dispute Resolution is essentially categorized into 4 major types:

(a)     Negotiation

(b)     Mediation

(c)     Conciliation, and

(d)     Arbitration

ADR is also applicable alongside the existing legal system such Sharia courts

within the jurisdiction of Common Law. The types of mentioned ADR techniques

differ based on the countries culture and traditions.

The historic types of ADR techniques are defined in two ways:

(1)   Methods for resolving disputes outside of the official judicial mechanisms

(2)   Informal methods attached to official judicial mechanisms

Additionally there are independent methods, for example mediation programs and

ombudsmen offices within organizations. Generally the independent ADR

techniques apply similar techniques and set of negotiation skills in resolving

conflicts.

NEGOTIATION

ADR process is the simplest for negotiation.  According to this process two people

having a dispute can negotiate and come to a solution themselves. The benefits to

the parties involved are that it is completely private and it’s fast and cheap.

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Where parties to a dispute cannot resolve it themselves they possess authority to

instruct solicitors who will negotiate on their behalf3. Even when negotiation fails

at these early stages of a dispute and court proceedings start solicitors will usually

continue to negotiate on their client’s behalf.  This results in many cases being

settled out of court.

MEDIATION

According to this ADR a neutral person (the mediator) assists the parties to reach a

compromise.  The job of the mediator is to consult with each party and see how

much common ground and interest there is between them4. S/he should act as an

initiator, taking offers between the parties.  The mediator doesn’t offer an opinion. 

Mediation is most suitable where there is some chance that the parties will co-

operate.  Mediation is not legally binding on the parties.

Based on the opinion of Centre for Dispute Resolution it is found that around 80%

of the disputes that are dealt reach a settlement without the need for any court

action5.

CONCILIATION

Conciliation is similar to mediation where a neutral third party helps the parties to

resolve their dispute; however, the conciliator plays a more dynamic role in the

process.  S/he will be expected to recommend ways in which a compromise could

be reached.  Conciliation is not legally binding on the parties. The Advisory,

Conciliation and Arbitration Service (ACAS) are used by many employers and

3 Roger Fisher, William Ury, and Bruce Patton, Getting to Yes: Negotiating Agreement without Giving In (New York: Penguin, 1991. Derived on 01-12-2011.4 Simkin, W. E., (1971); Mediation and the Dynamics of Collective Bargaining; Bureau of National Affairs Books, Washington DC5 “Alternative Dispute Resolution”.www.nolo.com/legal-encyclopedia/mediation. Derived 25-11-2011.

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Trade Unions to settle disputes before (and sometimes during) industrial action

takes place.  The success rate of such ADR process is found to be around 60%

without the necessity of hearing the Employment Tribunal.

ARBITRATION

Among the all the ADR processes, arbitration is the most formal method used

settle any dispute. In this process the parties with a disagreement transfer their

dispute to a third party, who will make a judgment on their behalf.  This ruling will

then be legally obligatory on the parties. Arbitration ADR is strictly followed by

Arbitration Act 19966. The agreement to go to arbitration can be made by the

parties at any time.  It can be written into a business contract by what is called

a Scott v Avery clause or the parties may just agree on arbitration when a dispute

arises. The parties can agree the number of arbitrators who will hear their dispute. 

It could be three, two or just one person.  The parties will normally appoint

someone who is a professional in their particular area of business.  There is also

the Institute of Arbitrators who will provide trained conciliators to parties who

wish to settle a dispute7.

ADVANTAGES OF ALTERNATIVE DISPUTE RESOLUTION

ADR is beneficial for resolving any critical dispute. The result varies from

situation to situation but outcomes are more effective than of legal procedure.

There are few key benefits of ADR:

(a)   Cost Saving: One of the largest reasons parties choose to resolve their

disputes outside of the courts is cost. Judicial process for resolving any disputes 6 An act to restate and improve the law relating to arbitration.www.legislation.gov.uk/ukpga/1996/23/contents. Derived 25-11-2011.7 “International Arbitration: Corporate Attitudes”. http://www.pwc.co.uk/eng/publications/international_arbitration_2008.html. Derived on 02-12-2011.

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involves court fees, documentation fees, advocate’s fees and many other extra

costs. Moreover, if there is corruption present, the cost may rise even higher.ADR

does not involve expert fees or courts costs. Alternative dispute resolution usually

costs much less than litigation, allowing smaller financial disputes a financially

viable way to be settled. ADR also saves the money of government.

(b)   Speed: Adjudicative process for resolving conflicts are very lengthy since

there are court decisions upon which the hearing is dependent. Litigation can take

over a year to resolve because of different timing and dates involved. Matters that

are being solved using the ADR method may take months or even just weeks to be

resolved. ADR can be arranged by the parties and the panelist as soon as they are

able to meet. Compared to the court process, where waits of 2-3 years are normal,

dispute resolution is as fast as the parties want it to be8.

(c)    Control:The parties have control over some of the processes in ADR.

Usually selecting the method of ADR, selecting the panelist for the dispute

resolution; the length of the process; and, in a mediations case, even the outcome

are controlled and maintained by the parties. In case of lawsuit process the control

is totally possessed by the court and supreme authority. Opposed to the court

system, where the legal system and the judge control every aspect, ADR is much

more flexible. Furthermore, in the case of arbitration the parties have far more

flexibility in choosing the application of relevant industry standards, domestic law,

the law of a foreign country, a unique set of rules used by the arbitration service, or

even religious law, in some cases.

(d)   Confidentiality: Privacy is fully securitized when it comes to Alternative

Dispute Resolution. ADR is conducted in private, therefore avoiding publicity

from the media.  The public are also unable to attend. On the other hand disputes

8 “What You Need to Know about Dispute Resolution: The Guide to Dispute Resolution Processes.” American Bar Association. http://www.abanet.org/dispute/draftbrochure.pdf. Derived on 27-11-2011.

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resolved in court are public and the judgments awarded are also in public. ADR

provides certain resolution processes such as, Mediation, arbitration, and mini

trials that are conducted in private maintain strict confidentiality.

(e)   Experienced Neutral Panelists:The panelists are professional mediators and

arbitrators with training and expertise in dispute resolution. Disputing parties are

able to select their panelist from a list of qualified individuals who are specialized

in specific aspects of environments. In the court system, binding decisions are

made by judges who may lack expertise in different practices.

(f)     Cooperative Approach: All ADR services take place in a more informal,

less confrontational atmosphere. This is more conducive to maintain a positive

business relationship between the two parties. With mediation, specifically, the

result is collaboration between the two parties. Therefore ADR is a process that

looks into the best interest of both parties in order to conclude a compromised

mutual decision.

(g)   Flexibility: Legal and non-legal disputes can be addressed during this process

proving it to be more flexible. Some may think this is a suitable package in the

sense that it takes into account fundamental concerns of the parties and offers

remedies not available when at court.

(h)   Parties into Good Terms: The aim of ADR is to find a compromise solution

which is satisfactory to both parties.  Court proceedings create a winner and a

loser.  Using ADR to settle a dispute means businesses can remain on good terms

and continue to trade with each other once their dispute is resolved.

The benefits or advantages of ADR is realized when the dispute or conflict is

successfully resolved and all the participant parties respect and value the outcomes

provided by such procedure. The failure to compromised decision pinpoints the

weakness of ADR which to be adjusted for attaining fruitful outcome.

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DISADVANTAGES OF ALTERNATIVE DISPUTE

RESOLUTION

There are several disadvantages blocking the way of successful dispute resolution

and often affecting both parties sentiment to settle for a compromised decision.

Some the disadvantages are:

(a)   Unequal Bargaining Power: In certain situations one side is able to control

the other. Therefore a significant imbalance of power exists. For example,

employment and divorce cases make the courts a better option for a weak party.

(b)   Lack of Legal Proficiency- Where a dispute involves difficult legal points a

mediator or arbitrator is unlikely to have the same legal expertise and knowledge

as a judge. Dispute can be of various situations such as, commercial conflicts,

social conflicts, legal conflicts and many others which require specialized

mediator. Most of the cases the mediator does not possess a judge’s point of view.

(c)    No System of Specific Model- It isn’t easy to predict the outcome of a

dispute decided through ADR as there is no system of precedent. Therefore, it is

easier to obtain evidence from the other party in a lawsuit. Lack of system results

in restricted prediction of outcomes.

(d)   Enforceability - Most forms of ADR are not legally binding, making any

award difficult to enforce. Legal arbitration has some kind of process for internal

appeals, which enables the decision as binding and only subject to the review of

court.

(e)   Required Court Action: The arbitrator’s decision can require a court action

if one of the parties refuse to accept the arbitrator’s decision. This would not only

create chaos but also a mandatory review by the court. Thus, ADR sometimes

raises the question of biasness of arbitrator’s decision. Also, there is very limited

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opportunity for judicial review of an arbitrator’s decision. A court might also

overturn an arbitrator’s decision if it decided issues that were not within the scope

of the arbitration agreement.

(f)     Might not be a Good Fit: Alternative dispute resolutions generally resolve

only issues of money or civil disputes. Alternative dispute resolution proceedings

will not result in injunctive orders. They cannot result in an order requiring one of

the parties to do or cease doing a particular affirmative act.

(g)   Limits Discovery Process: ADR generally proceeding without the

protections offered parties in litigation, such as those rules governed through

discovery. Courts generally allow a great deal of latitude in the discovery process,

which is not active in alternative dispute resolution.

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CONCLUSION

Essentially the advantages and disadvantages of Alternative Dispute Resolution

(ADR) are important to consider before agreeing to any sort of ADR techniques. It

reduces the chances of unknowingly agreeing in any arbitration. The perception of

advantages over the cons of ADR fully depends on situation to situation where the

parties are in severe need of perusing such techniques to attain mutual interest.

After satisfying certain standards, many lease agreements and employee contracts

have mandatory arbitration provisions which will usually be enforced. ADR can be

a good alternative to the courts as long as it is used in the exact way and for the

exact type of disputes. Though there are few minor deficiencies, ADR can save

both time and cost and legal fees.

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BIBLIOGRAPHY

INTERNET SITES:

“What Is ADR?”, Business and Society Exploring Solutions

wiki, BASESwiki.org

http://www.britishcouncil.org/adr.doc

http://www.adrgroup.co.uk/types.html

http://courts.state.de.us/Courts/Superior%20Court/ADR/ADR/

adr_history.htm

http://en.wikipedia.org/wiki/Arbitration

BOOKS:

“Alternative dispute resolution,” Ed. P.C. Rao and William Sheffield, 1 st ed.

1997, Universal Law Publishing Co. Pvt. Ltd., Delhi

S.R. Myneni, “Arbitration, Conciliation and Alternative Dispute Resolution

Systems,” 1sted. 2004, Asia Law House, Hyderabad.

Gary Born . “International Commercial Arbitration” (2009 Kluwer)