What is ADR? Alternative dispute resolution (ADR) is a blanket term used to speak to a series of defined processes that conflicting parties can use as an alternative to traditional litigation. The principle is comprised of two traditional methods for settling disputes that opposing parties may opt for when an agreement is being a mutually acceptable resolution is sought. The first is mediation, while the second is arbitration.
Mediation relies on a neutral third party to facilitate the dispute resolution process. While the mediator does not enforce any hard and fast rules, the neutral and impartial person called in serves an essential role in helping the opposing parties agree to a settlement without litigation.
ADR that relies on arbitration requires a neutral third party to facilitate the process. However, mediation and arbitration differ in more than the names. The arbitrator is also present to facilitate a decision between disputing parties, but it’s not in the same amicable manner that a mediator would. The final decision is taken by the arbitrator as the successful resolution of the dispute does not depend on the cooperation of the opposing disputing parties in an arbitration context.
Features of Mediation and Arbitration as ADR Methods
Though alternative dispute resolution may take the form of both, there are defining characteristics that you can use to contrast and identify the different types.
Mediation, while being the more flexible dispute resolution method, aims to use a structured negotiation style to help the parties involved resolve a dispute by choosing to agree on a mutually beneficial way forward. The mediator’s role is one of balance, which is why a neutral third party must be selected.
The structure present is usually informal. A few rules are made to maintain the desired case flow, but there aren’t many binding principles that guide how solutions are discovered. The control of these discussions rests solely within the hand of the parties going through the negotiation process. The free-flowing and voluntary nature of the proceeding does not make it more non-binding.
Parties must still take the time to schedule a hearing in advance, but they have a more generous time window to do so than they would with a traditional trial. They need only to have things set up a few weeks ahead of time consuming the designated hearing date.
Costs are usually not very exorbitant, but business disputes may sometimes attract higher charges. No formal rules of evidence are present, and parties can enjoy full privacy.
Tension is a non-issue with mediation as it fosters a cooperative effort to have parties reach a binding decision. A negotiation style of compromise tends to result, and the parties become more likely to communicate. When a contract or settlement agreement is reached to settle the dispute resolved, it is generally honored by each party. However, there are cases in which one of the parties may decide to file an appeal of the arbitrator’s decision in a court of law.
The focus of mediation-based settlements tends to be centered around future events.
Arbitration uses a more formal process flow than mediation does, which makes it a less flexible dispute resolution alternative.
However, it remains a more flexible dispute resolution method than Litigation. The arbitrator plays an early neutral evaluation to a more active judge role, though a neutral evaluation is still required.
The parties agree on binding arbitration rules before the hearing begins. The need for each party to be heard and actively participate in the final, binding decision is no longer a factor in the resolution process. Therefore, the control of the outcome of the proceeding rests within the arbitrator’s hands, which means the need for traditional negotiation of settlement options is removed. Note that an attorney sometimes controls arbitration proceedings.
Parties who intend to get help from arbitration for their issues must schedule the hearing a few months before the proceeding is to take place. While there isn’t as much time flexibility as there is with mediation, arbitration still manages to be a better option than Litigation. Traditional hearings for similar matters often require two years or more for scheduling.
Costs sit at the mid-range for arbitration proceedings. The cost is greater than that of mediation but cost-effective and is less than that of Litigation. While arbitration usually guarantees that parties can settle their issues privately, there are incidents where proceedings don’t end in settlement conferences in that manner.
Since the arbitrator controls the conversation and makes the eventual binding decision, parties using arbitration usually have an antagonistic relationship. Each party may not necessarily see the case from the perspective of the neutral arbitrator’s decision, which means the potential for a feeling of unfairness is great. Therefore, parties are less likely to agree with an arbitration decision and often display resistance.
Those who decide to use arbitration are more likely to appeal the result of disputes between business partners that went through the arbitration process in a court of law.
Arbitration tends to be used to handle past incidents resolving disputes resolved.
The History of Alternative Dispute Resolution (ADR) in the USA
Alternative dispute resolution was only sometimes a formal construct in the United States. However, during the early British and Dutch colonial times in New York, an arbitration clause was present in several commercial applications. This resulted from pilgrim colonists’ beliefs where the law was concerned. Though there was an established law system, the said colonists did not support using it.
To them, lawyers represented a threat to Christian harmony. Therefore, they avoided the use of the court system and relied on their mediation process whenever community conflicts or evidence discovery issues arose that may have required legal intervention.
Such trial-necessitating issues occurred often enough for a system to help deal with them to have been established. Instead of legal counsel and a judge, a body of male family members was used. But, of course, women still needed to have the status they would eventually attain, so not even one of them sat on this committee.
These men acted as a neutral evaluation single third party and listened to different parties communicate the types of disputes that required solutions. The way they operated was more akin to an arbitrator than it was to a mediator. They had full decision-making autonomy in all cases they heard. Therefore, though the conflicting parties may have differing views with every arbitration clause or requirement, there was no choice.
It wasn’t a non-binding context, meaning there were many civil disputes without amicable endings. Informal, binding arbitration was the norm in the colonial period and held up in the same bane as the law.
The Federal Government
Independence would eventually occur, which led to the creation of a new federal governing body that had binding jurisdiction over different types of legal matters where impartial decision-making by an impartial and neutral person was a requirement.
The federal government would use alternative dispute resolution in various applications. The Patent Act of 1970 is one of the earliest examples. Disagreeing parties could resolve issues surrounding patent claims while not needing the help of lawyers. Instead of trial alone, an adjunctive board was formed.
For the sake of situational familiarity and balancing the interests of the neutral party and each patent applicant, each patent applicant appointed one member of this board, which would guide the case to resolution. Alternative dispute resolution was not only present here, but it was legally binding as well. The board is also comprised of a single member appointed by the secretary of state.
Since the proceedings did not have a full nonbinding arbitration or binding nature, it meant any party opting out of the nonbinding arbitration almost guaranteed that the other would have the patent summarily approved.
Alternative dispute resolution would be formally instituted in foreign countries in the late 19th century.
At this time, federal initiatives allowed for mediation using bodies, such as the Board of Mediation, to foster certain negotiations.
In this state, alternative dispute resolution was not considered a true settlement or litigation alternative. Instead, it was meant to foster agreement and avoid the economic disruption synonymous with strikes or unrest.
Advantages of ADR processes over Litigation
Choosing to forego the help of the legal system of court and using ADR processes for dispute resolution is advantageous for various reasons. These potential benefits are as follows:
- There is no need for an attorney, though one may be used in arbitration. While this doesn’t render disputes cost-free, it does mean the financial implication is lower. In the case of mediation, it also usually means there’s more control in the hands of the disagreeing parties.
- ADR process focuses on creating more practical solutions in a balanced manner than the legal system.
- Parties that wish to resolve a dispute with alternative dispute resolution guarantee themselves greater flexibility than they could enjoy with a court of law. While there is an overall structure synonymous with the use of ADR, it remains flexible at its core.
- Not all ADR proceedings end with an amicable contract or mutual agreement. However, such a scenario is more likely when disputes don’t go through the legal system. The possibility becomes even greater when a mediator is used instead of an arbitrator. Therefore, parties can protect any shared future interests they may have.
- If alternative dispute resolution is used, more issues that don’t have a legal precedent may be considered, which leads to a more wholesome and likely more satisfying outcome for all involved.
- Though it is not non-binding, ADR manages not to be as confrontational as the legal system is. There are exceptions, however, which are primarily the result of arbitration.
- Parties can resolve disputes without concern for confidentiality issues since ADR does not follow the public nature that a court of law does.
- It’s often possible to reach an agreement surrounding a dispute quicker with ADR, based on the scheduling requirement and the hearing flow.
- The traditional system is best suited for disputes with two parties involved. ADR can be used to resolve a dispute with more significant numbers. If arbitration is used, an arbitrator or attorney can oversee the proceeding and bring elements of the legal system that may be beneficial to settling disputes with this alternative means.