What is ADR
Everybody knows that getting involved in litigation is costly and time consuming and, more often than not, there are no winners (don't say "except the lawyers!"). Quite apart from the costs of litigation (you are still out of pocket even if you win) the amount of executive time and corporate energy expended on litigation cannot be over estimated.
It is for these reasons that the commercial world has been seeking alternative forms of resolving disputes, resulting in what has been become known as Alternative Dispute Resolution ("ADR").
The best way, of course, of resolving a dispute is to make sure it does not happen in the first place. Carefully thought out commercial deals and well drafted legal documentation as well as good working commercial relationships can minimize the risk of disputes. However, not all circumstances can be foreseen and, in any event, many disputes arise more out of commercial necessity (delay, cash flow problems, confusion) rather than out of real matters of legal disagreement.
If an ADR process is desired, tying the parties down to it at the time they enter into their commercial relationship is the best way forward. For example, make sure you have an arbitration, mediation or expert determination clause in your contract so that it is binding on all parties from the very beginning. It is often too late, once the relationship has broken down, to try to get parties to agree to find a way to resolve a dispute without going to court.
Such clauses can be mandatory or optional, bearing in mind that mandatory really does mean mandatory and like it or not you can be stuck with it. The courts have time and time again upheld arbitration clauses in contracts, refusing to deal with court proceedings when one party has opted for an arbitration.
Types of ADR
The main types of ADR include:
(a) Arbitration - an arbitration is very much like a private court case where, instead of a judge, you have an arbitrator eg. the procedure is very similar and the rules of evidence apply with arbitrations just as much as with litigation;
(b) Mediation - this is a more informal process where a mediator tries to bring the warring parties together. Mediations are usually non-binding but can be binding if that is what the parties desire.
(c) Expert Determination - this is a process where the parties agree that an independent person who is an expert in the area in dispute investigates, reports and determine a dispute usually in a way binding upon the parties, with limited rights of appeal.
The advantages of ADR
One of the great advantages of ADR is that the parties have control over the process, - no more court waiting lists, no more long drawn out formal processes; instead, an informal, quicker and cheaper process designed to get to a solution so that the parties can get on with business.
Another great advantage of ADR is that, unlike the court system where everything is on the public record, ADR can remain confidential. This is particularly useful for disputes in, for example, the IT industry where disputes over intellectual property are in great need of confidentiality.
The disadvantages of ADR
Although many procedures are indeed quicker and easier, arbitrations, for example, can often be as long and arduous as the most difficult litigation. What is more, the parties must pay for the arbitrator, the arbitration rooms, the transcript if necessary and all similar matters rather than being able to rely upon the court system funded by the taxpayer.
ADR processes can also be used as a delaying tactic or as an attempt by a disputing party to gain useful intelligence on its opponent before going down the litigation route in any event. This problem is largely resolved if the ADR process is binding, thus preventing a second bite of the cherry in court.
ADR is also limited in the way it cannot, without consensus, involve multiple parties. The court system enables disputing parties to bring in third and fourth parties involved in the same dispute, to apportion the ultimate responsibility all on one occasion. This can often save much time and delay.
This is a very brief introduction to ADR and is not intended to be legal advice. This publication cannot be relied on as a substitute for appropriate legal advice suited to your circumstances. Given that this is the case, you should seek and retain the advice of a solicitor if you require a comprehensive and up to date analysis of the law pertaining to your circumstances.
2000
March, 2001
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