As the number of litigants and costs of litigation continue to increase, alternative dispute resolution is taking on greater importance. Alternative dispute resolution, or ADR, refers to means of settling disputes outside the courtroom. The most common forms of ADR are mediation and arbitration. All forms of ADR have their pros and cons and it important to know which one best suits the needs of the parties involved.
Alternative Dispute Resolution
Arbitration is the closest of the three forms to civil litigation and is most widely used in business disputes. Similar to litigation, arbitration too involves discovery and the application of the rules of evidence but in a more simplified form. The “judge” in arbitration is a panel. A panel can either consist of one arbitrator agreed upon by both parties or of three arbitrators where each side selects one arbitrator and then the two selected arbitrators select a third. After an arbitration hearing that may last anywhere from a few days to a week, the panel deliberates. The panel may then issue a written decision or damage award that is binding upon all parties. Unlike court opinions, decisions issued by arbitration panels are not public record.
Mediation is a more formal form of negotiation. In mediation, a third individual, trained in negotiation, attempts to bring both parties to a resolution. The parties may either accept or reject the settlement or agreement proposed by the mediator. If the settlement agreement is signed, it becomes binding. Today, mediation is commonly applied in disputes between investors and stockbrokers.
Negotiation is simply a meeting of parties to attempt to settle a dispute. It is the least costly form of alternative dispute resolution and is attempted in almost all disputes. Relative to arbitration and mediation, the parties in negotiation retain the most control over the dispute resolution process and the resolution itself.
Although alternative dispute resolution has many advantages, problems can arise and it may even be abused to limit access to the courts. Companies often insert clauses mandating arbitration in the event of a dispute into all sorts of consumer agreements to protect the company’s interest in circumventing the courtroom and avoiding class actions. Even when a consumer does choose to arbitrate, the presiding “judge” is often a person familiar to and on good terms with the company. The arbitrator has a lot of power, determining how much and what evidence each side can present. As arbitration proceedings are confidential, impartiality in such cases is further called into question, and unlike in court, arbitration is almost impossible to appeal.
Other disadvantages of ADR in general include the lack of enforcement of judgments and/or parties’ use of ADR as a delaying tactic. Concerns are also growing about the increasing costs of ADR. However, despite these concerns, the use of alternative dispute resolution techniques continues to grow as people seek less expensive and time-consuming ways to resolve disputes. Contact KPPB LAW for more information.