Alternate Dispute Resolution- Methods and Advantages


While dealing with people, whether in business or in your personal life, differences of all kinds tend to arise. There are cultural differences, personality differences, differences of opinion, situational differences, etc. Unresolved differences lead to disagreements. Disagreement causes problem. Disagreement unresolved becomes a Dispute. This article looks at the ways in which these disputes could be resolved in a way that saves time and money, and can even help preserve a business relationship and reputation. 

What is ADR?

Alternative Dispute Resolution (ADR), also known in some countries as External Dispute Resolution, includes processes and techniques that act as a means for disagreeing parties to come to an agreement short of litigation. This means that disputing parties can avoid going through the court process by deciding to give ADR a try. ADR is a collective term for the ways in which parties can settle disputes, with, or without the help of a third party. It has gained popularity in recent years, and some laws mandate that parties attempt to settle matters through the use of ADR (mediation for commercial and family disputes) before resorting to full blown litigation. We discuss a few of the commonly used ADR methods below: 

Commonly Used ADR Methods:

A wide variety of processes, practices, and techniques fall within the definition of ADR. Arbitration and mediation are the best known and most frequently used types of ADR. These ADR techniques have little in common except that negotiation plays a prominent role. Parties to ADR procedures generally agree that a negotiated settlement is worth pursuing before investing time and money in full blown civil litigation.

  • Negotiation: Negotiation is "a basic means of getting what you want from others. It is back-and-forth communication designed to reach an agreement when you and the other side have some interests that are shared and others that are opposed." (Fisher and Ury). In short, it is "Communication to Persuade”. The prerequisites of any negotiation are: two opposite parties, both with an interest (vested or otherwise) in the same objective, called the object of conflict. This object of conflict can be something tangible like a piece of property or something intangible like a business deal. The process of negotiation involves both parties sitting down to discuss and trash out the issues, each to his/her benefit and reach a final settlement. A negotiation is successful if both parties are satisfied at the end of it (win-win). 

  • Arbitration: Arbitration is the process of referring a dispute to an impartial intermediary chosen by the parties who agree in advance to abide by the arbitrator's award that is issued after a hearing at which all parties have the opportunity to be heard. Arbitration resembles traditional civil litigation in that a neutral intermediary hears the disputants' arguments and imposes a final and binding decision that is enforceable by the courts. One difference is that in arbitration the disputants elect to settle any future disputes by arbitration before a dispute actually arises, whereas with civil litigation the judicial system is generally chosen by a disgruntled party after a dispute has materialized. Another difference is that the disputants to arbitration select the intermediary who will serve as arbitrator, whereas parties to civil litigation have little to no control over who will preside as the judge in judicial proceedings. In order to be able to resort to arbitration, however, there would have to be an agreement with an arbitration clause mandating that the parties commit the dispute to arbitration. 

  • Mediation: Mediation is a rapidly growing ADR technique. It consists of assisted negotiations in which the disputants agree to enlist the help of a neutral intermediary, whose job it is to facilitate a voluntary, mutually acceptable settlement. A mediator's primary function is to identify issues, explore possible bases for agreement, discuss the consequences of reaching impasse, and encourage each party to accommodate the interests of other parties through negotiation. However, unlike arbitrators, mediators lack the power to impose a decision on the parties if they fail to reach an agreement on their own.

  • Conciliation: Like mediation, conciliation is a voluntary, flexible, confidential, and interest based process. The parties seek to reach an amicable dispute settlement with the assistance of the conciliator, who acts as a neutral third party. The main difference between conciliation and mediation proceedings is that, at some point during the conciliation, the conciliator will be asked by the parties to provide them with a non-binding settlement proposal. A mediator, by contrast, will in most cases and as a matter of principle, refrain from making such a proposal. 

Advantages of ADR over litigation:

It is beneficial to give ADR a shot before resorting to the court process because of these advantages:

  • Confidentiality - ADR proceedings are usually private and confidential. The parties involved in the conflict can also sign a Non-Disclosure Agreement (NDA) to ensure the privacy of these discussions. This assurance of confidentiality allows the conflicting parties to focus on the details of the dispute instead of dealing with concerns such as reputation. 
  • Time-efficient - It is no secret that courts in India and around the world function at a very slow pace, are overburdened, have excessive procedural requirements, and there’s the matter of adjournments as well. You can avoid all of this by resorting to a consensual dispute resolution process instead.
  • Cost-efficient - Less time spent to resolve a dispute means lower costs in terms of lawyers’ fees. In addition, rules for discovery and evidence are much more limited in a process such as arbitration, and appeals are very limited, so those costs are all saved as well.
  • Flexible - In the case of ADR, the parties involved in the conflict have much more flexibility to select the procedural laws and the discovery rules regarding the dispute as compared to litigation. The parties concerned have the liberty to choose their method of resolution, the arbitrator or mediator involved and have greater authority over the resolution than a court ordained legal action.
  • Greater control over outcomes - These resolutions are concluded with the consent of all the parties involved in the conflict and keeping in mind the most suitable action for everyone concerned. The parties mutually agree upon the method to be employed, the expert who is to facilitate the process, as well as the contents of the settlement, if any. In litigation, the final outcome rests with the court and one party necessarily loses.

Summing up:

ADR methods like mediation and arbitration not only help your organisation avoid unnecessary expenditure in litigation but also save time and preserve your reputation. If your business is facing a conflict with a client or an employee, or a dispute arises between you and a rival business, consult an experienced expert to get it resolved speedily and efficiently.