Alternative Dispute Resolution (ADR)
Alternative dispute resolution (ADR) is a process or method of resolving arguments or disagreements between disputing parties without going to court. It involves an unbiased person or a neutral party who will help mitigate a settlement agreeable to the disputing parties (www.nycourts.gov). The impartial party can either be an expert in the disputed field or a panel of specially selected personnel. ADR is usually the preferred avenue sought after by parties to settle disputes as it is inexpensive and faster than normal court proceedings. Court litigations can take months or even years to settle and thus would be a costly undertaking for both parties. An ADR process is also confidential and less procedural, unlike court proceedings. Unlike in a court proceeding, opposing parties deal directly with each other in a less formal and intimidating manner, and thus would help to preserve relations between the parties. ADR is usually used in conflicts or disagreements involving commercial contracts, labour disputes, divorce actions and personal injury claims. There are three forms of ADR: arbitration, mediation and conciliation.
In arbitration, a neutral “arbitrator” is selected by disputing parties to hear arguments and evidence from both sides and decide on the outcome. The arbitrator conducts the arbitration proceeding much like a normal court hearing, but less formal and concluded much faster than a court proceeding. Arbitration is presided over an arbitrator panel who is either a retired judge or an expert in the field, or comprising of a panel of three arbitrators selected by and agreed upon by both parties. Arbitration is usually voluntary but sometimes it is required by law. It usually lasts a few days to a few weeks and the panel then deliberates and issues a written decision, usually an award, called an orbital award. An arbitration decision is non-binding unless both parties have, on the onset of the arbitration process, agreed to be bound by the arbitrator’s decision, then it is a binding arbitration. In a non-binding arbitration, both parties are not bound by the arbitrator’s decision and may seek a trial. A party that does not accept the arbitrator’s decision can reject the award and get a trial by filing a court notice called a “demand for a trial de novo” and serve it to all parties within 30 days of the filing of the arbitrator’s award. If the “demand for a trial de novo” is not filed within the specified 30-day period, then the arbitrator’s award can be converted into a judgment. Arbitration has long been used in labour, construction, and securities regulation, but is now gaining popularity in other business disputes. Arbitration offers a number of advantages to those seeking a speedy and less costly remedy: Arbitrators are knowledgeable and experienced legal experts
Arbitration process is less formal and faster as it skips much of the procedural court processes It is relatively inexpensive as time spent in arbitration is much less than in litigation which can take months or even years Arbitration awards, when confirmed by the court, can be legally binding and enforceable In cases involving intellectual properties, for example, arbitration is perhaps a preferred avenue for settlement if parties do want details of their disputes to go public.
Mediation is another alternative to litigation. A “mediator” is a neutral person who facilitates negotiations between disputing parties to help them reach a mutually acceptable resolution of the dispute. A mediator is skilled in negotiations and acts as an intermediary between the opposing sides. The goal of mediation is not to find faults but rather to clear up misunderstandings and find areas of agreement and common interests that would benefit both parties. Unlike an arbitrator, a mediator does not decide a case but rather helps parties communicate so that they can resolve the dispute themselves. Mediation is particularly useful when family members, neighbours, and business partners are in a dispute. It is useful when parties want to preserve existing business or personal relationship as mediation sessions are conducted in a more amicable and non-confrontational manner, unlike in court litigations. Mediation offers confidentiality for those wanting a private forum to settle a dispute, unlike a court proceeding where one’s “dirty laundry” may be made public which can be a source of embarrassment and psychological agitation to litigants. In mediation,
parties have more control over the resolution outcome which may present a win-win solution for both parties.
Conciliation is another form of ADR to settle disputes without going through a court proceeding. Opposing parties select a neutral party who oversees the negotiations of a compromise that is agreeable to both parties. Mediation and conciliation differs in the level of involvement of the impartial third party in the negotiations. Mediators facilitate the communication between disputing parties and do not involve themselves in the issuing of formal recommendations and settlement proposals. Conciliators advise parties on matters that they feel would be a fair disposition of the matter in dispute. A very good example is the family disputes. ADR allow both parties to have harmonious settlement on equal footing and maintain family relationships.
The Scott v Avery Clause
Scott v Avery clause refers to a contract between two parties that defers any disputes to arbitration first before any court action is taken. The clause refers to the 1856 British case between Alexander Scott and George Avery where at issue was a contract which provided that any disputes had to be referred to arbitration first before going to litigation. A Scott v Avery clause makes arbitration a “condition precedent” to any court action. The English Reports summary of the decision (www.thelawteacher.com): “It is a principle of law that parties cannot by contract oust the courts of their jurisdiction; but any person may covenant that no right of action shall accurse till a third person has decided on any difference that may arise between himself and the other party to the covenant.” In Russell on Arbitration, Scott v Avery clause was explained as: “While parties cannot by contract oust the jurisdiction of the courts, they can agree that no right of action shall accrue in respect of any differences which may arise between them until such differences have been adjudicated upon by an arbitrator. Such a provision is often termed a Scott v. Avery clause.” (www.thelawteacher.com) Arbitration clauses can be included in contracts or agreements as long as they are not stated as the only course of action that
can be taken by either party that may infringe the parties’ right for a judicial hearing. Arbitration clauses must also be expressed clearly and the processes are stipulated as clear as possible. Arbitrations are now common in contracts, particularly in consumer contracts. In the UK, disputing parties can go to the Chartered Institute of Arbitrators to arbitrate any contractual disputes. Others include trade organisations; for example in a home removal contract dispute, parties can refer their case to the British Association of Removers.
Advantages and disadvantages of ADR
Some of the benefits of ADR include (www.lawreform.vic.gov.au): Access to justice. ADR can be inexpensive and time saving and thus can be more accessible to those of limited financial means. Faster resolution settlement. A dispute can be resolved in weeks or months; litigations may take years to settle. Cost effective and time-saving. Parties can save on lawyers’ fees and other legal charges and save the courts money and time too Permit more participation. Parties are more involved in the negotiation and may have more control over the outcome. Flexibility and more creative resolution. The parties can choose the ADR process that is best for them to resolve their dispute and that can offer the best possible outcome for all parties. Can preserve relationship. In any ADR processes, parties communicate, cooperate and work together to find a resolution to their dispute, thus helping to preserve relationship. Less stressful process. ADR processes are conducted in a less adversarial manner and are therefore less stressful and taxing to parties. Confidential. Unlike court proceedings where everything is public information, ADR sessions are confidential. Higher settlement and more satisfaction. Settlement rates for ADR processes are often very high, generally between 50% and 85%, therefore more satisfying to parties. Some disadvantages of ADR include:
Suitability. ADR may not be suitable for every dispute, for example, if the case is of public interest, the court system is a better option. Lack of court protections. Parties normally waive their rights to most court, such as the right to a decision by a judge or jury. Lack of enforceability. For example, in arbitration, the settlement is unbinding unless mandated by the
courts. Disclosure of information. Opposing parties are not legally bound to disclose any information to the other party, unlike in litigation. Cost and delay. ADR practitioners may charge a hefty fee for their services and if a dispute is not solved then, parties may have to go to court and incur more costs and more time delay. Fairness. ADR processes may not be fair as court proceedings as negotiations are based on faith that the other party would play fair. Delaying tactics. ADR processes can be used as a delaying tactic or to obtain useful intelligence on an opponent before proceeding with litigation. Inequality. ADR can be ineffective where there is unequal power relationship between parties.