Business Disputes – Alternative Resolution

When companies and employees face business disputes, they may question how to resolve these disputes through alternative dispute resolution.  Many people may only see the courts as a valid way to resolve disputes; however, alternative dispute resolution allows the parties to come together and find a resolution without having to go through the entire litigation process.  Business disputes can especially benefit from alternative dispute resolution because it can help make the case move faster and can create a solution that is beneficial for both parties.  However, there are also instances where alternative dispute resolution is not the right choice for business disputes.  This article will discuss how business disputes may be resolved through alternative dispute resolution.  However, it is important, to begin with, a working definition of a business dispute.

Defining Business Disputes

Business disputes are disputes that arise within the course of running and operating a business. They can be both internal disputes among employees or decision-makers, or they can be disputes with other business or government organizations.  Many disputes arise out of contract claims, whether it be product contracts or employment contracts; however, business disputes can be the result of a wide variety of issues that affect the business.  Some other common examples include breach of fiduciary duty, tax issues, incorporation and documentation issues, and immigration issues for employees.  Business law balances the excitement of a varying practice with the steadiness of civil litigation and transactional law.

ADR for Business Disputes

As stated above, there are many ways that alternative dispute resolution may be used to resolve business disputes.  The most common forms of alternative dispute resolution that may be used in business disputes are negotiation, mediation, and arbitration.  Additionally, a form of dispute resolution known as facilitation can be helpful for certain types of business disputes.  Each of these methods may be helpful in certain situations and may be beneficial for certain disputes.

Negotiation:

Negotiation is the process of bargaining for a settlement between the parties in a dispute.  This method is often present in other disputes because any settlement will involve some level of negotiation; however, it can also stand alone as its own process. When the parties reach a settlement based purely on negotiation, it is often an informal process that may take place over days, weeks, or months.  The parties or their attorneys will offer what they would like to get or receive from the other party and the other party will respond until there is an agreement between the parties.  Negotiation will often take place at the same time as litigation as the parties attempt to settle before trial.

Negotiation is particularly suited for disputes where the parties are early in the information gathering process because negotiating gives the parties a better understanding of where everyone believes their strengths lie.  It can also be helpful for this reason because negotiation will often show the parties what is really at the heart of the issue for the other party.  This can lead to settlement if both parties need or want different things out of a negotiation.  It can also be helpful when the parties are facing a time crunch, such as a quickly approaching trial.  At a certain point, it may not be possible to get a mediation or arbitration set up, so the parties can attempt to negotiate and take back control over the outcome of the dispute.  Negotiation is not well suited for parties who are unable to see eye-to-eye or have issues communicating.  It can also be greatly affected by power imbalances if not kept in check.

Facilitation:

Another form of dispute resolution that businesses may find helpful when dealing with disputes, especially disputes among a large group of internal employees, is facilitation.  Facilitation is a process where a third-party neutral, known as the facilitator, brings all the parties to a dispute together and helps guide the discussion toward the real problems at hand and some possible solutions to those problems.  Unlike mediation, the goal of facilitation is not to move toward a settlement, but for the group to have a better understanding of the problem and the issues that the group faces.

Facilitation is best used in group settings where the parties have problems but are not sure what is the root cause.  Facilitation helps guide the parties to determine where the problem is and how to fix it.  This can be especially healing for group dynamics.  Facilitation is not suited for groups who are incapable of working together or will refuse outside help.

Mediation:

Mediation is a process where a third-party neutral brings the parties together and helps them collaboratively problem solve in an attempt to settle.  The mediation will usually take place on one or a few days and is a more formal process of negotiation.  The mediator, depending on their style, may allow the parties to work on their own solutions, or the mediator may present solutions that they have noticed may work.  Mediation will begin with opening statements from both parties and will then move to negotiation until the parties reach an agreement or decide to move forward without one.

Mediation can be helpful in a lot of cases, particularly those that need to preserve relationships or ones that need the guidance of an outside person to help the parties see eye to eye.  Mediation helps preserve relationships because the goal of mediation is to create a collaborative solution to the problem.  This can help both parties walk away feeling satisfied.  It can also be helpful when the parties have discussed settlement, but are having issues crossing the last hurdle to reach that settlement. The addition of a third party can help notice other ways to cross that boundary.

Arbitration:

Arbitration is the most formal dispute resolution process. Arbitration uses a third party to decide the case for the parties, but it is an out-of-court proceeding that allows the parties to participate in a more collaborative effort to determine the case.  The parties will have a chance to present their case, often not bound by the rules of evidence, and the arbitrator or arbitrators will examine the evidence and the testimony to issue an award.  The process is confidential and voluntary, but there is little room for appeal, so it can be difficult to get relief if you do not agree with the decision.

Arbitration can be helpful for parties who need the case to be kept confidential but are unable to settle the case in negotiation or mediation.  The process guarantees a result and confidentiality, so it eliminates the party’s responsibility for determining the terms of the decision.  It can also be helpful, especially in business disputes, when expertise in a certain subject matter is needed to accurately determine the case.  With litigation, the parties will not be able to choose their judge.  However, in arbitration, the parties can choose the arbitrator, so they can pick one with the expertise necessary.  Arbitration does not work well when interim decisions are needed, as many arbitrators will not have that power.

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