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Alternative Dispute Resolution

( ADR )
Alternative dispute resolution (ADR) is a process designed to
resolve disputes without going to court. The two most common types of
ADR are mediation and arbitration.
Alternative dispute resolution (ADR) is an umbrella term embracing
various processes principally designed to overcome some of the alleged
weaknesses in litigation. For instance, ADR is generally cheaper, less
adversarial, and simpler than litigation, and ADR techniques offer a
greater range of remedies than the courts. Contracts can be renegotiated
and settlements can include nonlegal concessions such as providing a
reference where there is an employment dispute. Moreover, ADR is
generally speedier than litigation.
First used extensively in the United States in the 1970s, ADR then
spread to other common law countries and is used in many situations; for
instance, where there are commercial, accounting, construction,
employment, and family disputes. It ranges from morally (and sometimes
legally) binding decision making by a third party, such as arbitration, to
nonbinding processes such as mediation and conciliation. These
processes, which are court annexed in some jurisdictions in some
countries, are described below. Arbitration is probably the oldest of ADR
processes and can best be described as noncourt adjudication.
Procedurally, an arbitration hearing is less formal than a court hearing; for
example, the former normally has no formal rules of evidence. Further
more, arbitration is private unlike a court, and there is finality. Appeals
from an arbitrator’s decision are severely limited, essentially to questions
of procedural fairness and the arbitrator’s conduct. Also, arbitration is
generally speedier than litigation, and normally the parties choose the
arbitrator as well as the time and place.
Arbitration can take various forms. In the most common variant,
the arbitrator chooses anywhere between the limits (offers) set by the
parties. Alternatively, the arbitrator is restricted to opting for either one
party’s final offer or the other party’s final offer, but nothing in between.
This final offer arbitration is sometimes called flip flop arbitration. A third
variant is where the arbitrator makes a decision and then the offer of the
party closest to the arbitrator’s decision is the formal arbitration award.
Mediation and conciliation and the terms are often used interchangeably
are becoming increasingly popular. Both mediation and conciliation are
voluntary, nonbinding, confidential, without prejudice, and without
precedent processes. Their aim is to assist people to talk to each other in
a rational and problem-solving way and to bring realism and objectivity to
a dispute. Whereas lawyers focus on rights, mediators/conciliators focus
on interests and the needs of the parties and act as a catalyst to enable
the parties to communicate with each other and identify common ground,
essentially assisting negotiation. Mediators and conciliators, however, vary
in the extent to which their main aim is therapeutic or their main aim is to
obtain a settlement and how interventionist they are. Some are mainly
messengers, shuttling back and forth with offers. Others not only seek to
persuade the parties to settle by giving opinions on facts, law, and
evidence but also make recommendations.
Although arbitration, mediation, and conciliation are the most
common ADR processes, there are others including med-arb, ombudsmen,
and mini trials. In the United States and South Africa, med-arb is
practiced: with the consent of the parties, the same person mediates and,
if that is unsuccessful, then arbitrates. Ombudsmen, increasingly available
in the United Kingdom, deal with complaints from individuals about public
bodies and private sector services such as insurance, banking, and
rentals. Once the organization has had an opportunity to deal with the
complaint, the complainant can then go to the relevant ombudsman who
will investigate the matter and suggest a resolution. As with mediation,
the ombudsman procedure does not prevent complainants from entering
another ADR process or embarking on litigation. Mini trials are formalized
settlement conferences where representatives of the disputants make
short presentations and adjudicator(s) give a decision that, however, is
not binding on any party, unless or until they agree to settle.
Although ADR has advantages compared with litigation, it also has
disadvantages. First, because there are no precedents, the parties may
not be able to weigh accurately the strength of their case. Second,
because ADR processes are private, there is no wider message, for
instance, about what practices can be viewed as discriminatory on
grounds of race or sex or the extent of the duty of care owed by the
employer to the worker. Third, a party might embark on conciliation or
mediation to buy time, as a party can walk away without reaching a
settlement at any time. Nevertheless, ADR is an attractive option for
people who are unwilling to risk the complexity and financial reefs of
litigation.
Alternative dispute resolution (ADR) is a term that refers to several
different methods of resolving disputes outside traditional legal and
administrative forums. These philosophically similar methodologies, which
include various types of arbitration and mediation, have surged in
popularity in recent years because companies and courts became
extremely frustrated over the expense, time, and emotional toll involved
in resolving disputes through the usual legal avenues. "The adversarial
system is expensive, disruptive, and protracted. More significantly, by its
very nature, it tends to drive the parties further apart, weakening their
relationship, often irreparably" pointed out Whayne Hoagland in Business
Insurance. ADR programs emerged as an alternative, litigation-free
method of resolving business disputes.
Analysts also trace the rise of ADR methods to changing attitudes
within the American judicial system. Business Horizons contributor
Stephen L. Hayford observed that until the 1980s, "attempts by business
firms to avoid litigation … were frustrated by a longstanding hostility on
the part of the courts toward any devices that infringed on their
jurisdiction." But during the 1980s, Hayford noted that a new body of case
law emerged that sanctioned the use of binding arbitration provisions in
commercial contracts between companies, business partners, employees
and employers, etc. This body of law continued to evolve in the late
1990s. For example, the Alternative Dispute Resolution Act of 1998
extended ADR mechanisms throughout the federal district court system.
As Simeon Baum stated in CPA Journal, "the act recognizes that ADR,
when properly accepted, practiced, and administered, can not only save
time and money and reduce court burdens, but also 'provide a variety of
benefits, including greater satisfaction of the parties, innovative methods
of resolving disputes, and greater efficiency in achieving settlements.'"
Today, legal and corporate acceptance of alternative dispute
resolution as a legitimate remedy for addressing business disagreements
is reflected in the language of business contracts. ADR contingencies have
become a standard element in many contracts between companies and
their employees, partners, customers, and suppliers. As U.S. News &
World Report noted, "virtually every state has experimented with some
form of ADR." With the growth of ADR has come a growing number of
organizations and associations designed to assist commercial entities in
the use of these alternative dispute resolution methods.

Problems happen, even to the most well-meaning of non-profits. Problems


with vendors, contractors, employees, clients, board members, donors…
you get the idea. Sometimes an intermediary is necessary to help solve
issues. A lawyer or court is not always necessary. Here are two popular
alternatives: Arbitration.mediation,ombuds, neutral evaluation and
utilizing ADR.

PRIMARY FORMS OF ADR

a. Arbitration

Arbitration is a type of Alternative Dispute Resolution in which a


neutral person (called the arbitrator) listens to all sides of a dispute and
then becomes the judge and jury. The decision of an arbitrator is usually
final.
The typical traits of arbitration are:

• It’s fast. Arbitration is a process that is generally much quicker than


going to court. This is due to the fact that courts are usually
congested and it can often take months, if not years, before the
parties get to present their case to a judge. An arbitrator can hear
the parties’ arguments much quicker and with fewer bureaucratic
hoops. And, unlike with mediation, an arbiter will reach a decision.
• It’s binding. Not only is the ultimate decision of an arbitrator final,
but testimony given to an arbitrator is usually under oath and can
be used against a person or organization later.
• It’s specific. Arbitrators often know more about the issues in
dispute than a judge would because they have specialized in certain
types of disputes. This could lead to better informed decisions.

Mandatory Arbitration
Many types of contracts contain what are usually called “mandatory
arbitration clauses”. These clauses state that if either party to the
agreement has a complaint, then that dispute be resolved through
arbitration.
Mandatory arbitration clauses often also include provisions:
• allowing the party that wrote the contract to choose the arbitrator
and the rules that will govern the arbitration process
• gagging either party from talking to the press about the dispute
• making the arbitrator’s decision binding, meaning it is final and
cannot be overturned by a court

There is little a person can do about a mandatory arbitration clause –


short of refusing to sign a contract. Courts generally refuse to overturn a
mandatory arbitration clause, but exceptions are sometimes made if the
clause seems to be “unconscionable”. A judge might find a clause
unconscionable if:
it appears that the parties did not have equal bargaining power. For
example, a company might not be able to enforce a mandatory arbitration
clause against an employee that lacks the ability to advocate for him or
herself, perhaps because of insufficient education.
the clause was written in fine print instead of being prominently displayed
in the contract.
the losing party must pay arbitration costs that exceed what they would
have had to pay to file the same claim in court.

Arbitration Associations and Organizations


There are several U.S. organizations and agencies that are directly
involved in arbitration and arbitration issues. These include the National
Academy of Arbitrators (NAA), the American Arbitration Association (AAA),
and the Federal Mediation Conciliation Service (FMCS). The NAA was
founded in 1947 as a non-profit organization to foster high standards for
arbitration and arbitrators and to promote the process. The NAA works to
attain these objectives through seminars, annual conferences, and
educational programs. The non-profit AAA offers its services for voluntary
arbitration as part of its mandate to promote the use of arbitration in all
fields. The FMCS, meanwhile, maintains a roster from which arbitrators
can be selected and champions procedures and guidelines designed to
enhance the arbitration process.

Arbitration is the procedure by which parties agree to submit their


disputes to an independent neutral third party, known as an arbitrator,
who considers arguments and evidence from both sides, then hands down
a final and binding decision. This alternative, which can be used to
adjudicate business-to-business, business-to-employee, or business-to-
customer disputes, can utilize a permanent arbitrator, an independent
arbitrator selected by the two parties to resolve a particular grievance, or
an arbitrator selected through the procedures of the AAA or FMCS. A
board of arbitrators can also be used in a hearing.
After the arbitrator is selected, both sides are given the opportunity
to present their perspectives on the issue or issues in dispute. These
presentations include testimony and evidence that are provided in much
the same way as a court proceeding, although formal rules of evidence do
not apply. Upon completion of the arbitration hearing, the arbitrator
reviews the evidence, testimony, and the collective bargaining agreement,
considers principles of arbitration, and makes a decision. The arbitrator's
decision is generally rendered within 60 days. Hayford noted that
"[binding arbitration] minimizes pre-hearing machinations with regard to
discovery, motion practice, and the other preliminary skirmishes that
extend the time, expense, and consternation of court litigation. In
exchange, the parties to a contractual binding arbitration provision agree
to accept the risk of being stuck with an unacceptable decision."
Other forms of arbitration include the following:
Expedited arbitration is a process intended to speed up the arbitration
process with an informal hearing. Under this process, decisions are
generally rendered within five days. It was first used in 1971 in settling
disputes in the steel industry.
Interest arbitration is the use of an arbitrator or board of arbitrators to
render a binding decision in resolving a dispute over new contract terms.
Final offer selection arbitration is an interest arbitration process in which
the arbitrator or board of arbitrators selects either the union or
management proposal to the solution. There can be no compromised
decisions. This process is also termed either-or arbitration.
Tripartite arbitration is a process wherein a three-member panel of
arbitrators is used to reach a decision. Both labor and management select
an arbitrator and the third is selected by the other two arbitrators or the
parties to the dispute as a neutral participant.

b. Mediation
Mediation is a type of Alternative Dispute Resolution in which a neutral
person (called the mediator) helps the people who have a dispute talk to
each other. The mediator makes no binding decisions and the individuals
themselves ultimately determine whether the process results in a
resolution of the dispute. The mediator is only there to help the disputing
parties communicate with each other in the hope that they can find a way
to work out their disagreements.
Mediation generally has the following traits:

• Confidentiality. Not only is mediation generally a confidential


process, but unless the parties agree otherwise, information
disclosed in mediation is not admissible in court.
• Nothing to Lose but Time. Nobody is penalized in mediation if the
process fails to result in an agreement. Unlike in arbitration, the
parties may then choose to make any agreement reached binding.

In contrast to arbitration, mediation is a process whereby the parties


involved utilize an outside party to help them reach a mutually agreeable
settlement. Rather than dictate a solution to the dispute between labor
and management, the mediator—who maintains scrupulous neutrality
throughout—suggests various proposals to help the two parties reach a
mutually agreeable solution. In mediation, the various needs of the
conflicting sides of an issue are identified, and ideas and concepts are
exchanged until a viable solution is proposed by either of the parties or
the mediator. Rarely does the mediator exert pressure on either party to
accept a solution. Instead, the mediator's role is to encourage clear
communication and compromise in order to resolve the dispute. The terms
"arbitration" and "mediation" are sometimes used interchangeably, but
this mixing of terminology is careless and inaccurate. While the
mediator suggests possible solutions to the disputing parties, the
arbitrator makes a final decision on the labor dispute which is binding on
the parties.
Mediation can be a tremendously effective tool in resolving disputes
without destroying business relationships. It allows parties to work toward
a resolution out of the public eye (the courts) without spending large
sums on legal expenses. Its precepts also ensure that a company will not
become trapped in a settlement that it finds unacceptable (unlike an
arbitration decision that goes against the company). But Hayford
commented that "mediation only works when the parties employing it are
willing to go all out in the attempt to achieve settlement," and he warned
that "the mediator must be selected carefully, with an eye toward the
critical attributes of neutrality, subject matter and process expertise, and
previous track record." Finally, he noted that with mediation, there is a
"lack of finality inherent in a voluntary, conciliation-based procedure."
Other forms of mediation often employed in labor disputes include
"grievance mediation" and "preventive mediation." Grievance mediation is
an attempt to ward off arbitration through a course of fact-finding that is
ultimately aimed at promoting dialogue between the two parties.
Preventive mediation dates to the Taft-Hartley Act (1947) and is an FMCS
program intended to avoid deeper divisions between labor and
management over labor issues. Also termed technical assistance, the
program encompasses training, education, consultation, and analysis of
union-management disputes.

Mediation is adaptable to anticipate problems, grievances and


difficulties between parties before the conflict may arise. This has
potential applications in large and private sector organisations, particularly
where they are subject to excessive change, competition and economic
pressure. A key way mediation is used to prevent these conflicts is
complaint handling and management. This is a conflict prevention
mechanism designed to handle a complaint effectively at first contact and
to minimise the possibility of it developing into a dispute. According to
Charlton (2000, p. 4) a person who undertakes this role is commonly
known as a “dispute preventer”.

While the corporate sector may provide one area in which to use the
mediation process for preventing conflicts, dealing with everyday life’s
disputes provides another. This is no more evident in neighbourhood
conflict. One's behaviour affects one's neighbours, just as what they do
affects you. The key way to prevent conflicts with neighbours is to behave
as a good neighbour oneself. Spencer and Altobelli (2005, p. 17) believe
simple consideration and conversation with neighbours helps achieve a
peaceful coexistence, making it easier for you to live as privately or as
sociably as you wish. Ideal suggestions for consideration in preventing
conflicts between neighbours include:

 meeting one's neighbors


 keeping one's neighbors informed
 awareness of differences
 appreciation
 consideration of one's neighbors' points of view
 showing candidness
 communicating
 demonstrating respect

c. Ombuds
An ombudsman is a high-ranking company manager or executive whose
reputation throughout the company enables him/her to facilitate internal
dispute resolutions between the company and employees. Hayford points
to several benefits of ombud-based ADR: "It provides a confidential,
typically low-key approach to dispute resolution that keeps conflicts 'in the
family.'…. Properly effected, the ombuds mechanism can do much to
enhance the perception that the company is concerned and eager to
address the problems of its employees by providing them with an
accessible, nonthreatening avenue for seeking redress when they believe
they have been wronged." The primary drawback of ADR by the ombud
process, however, is that many companies—whether large or small—do
not have an individual equipped with the reputation, skills, or training to
take on such a task.
d. Neutral Evaluation
In neutral evaluations, a neutral individual, with a background in ADR,
listens to each party lay out its version of events. After their perspectives
have been considered, the neutral evaluator offers his/her opinion on the
disagreement. This opinion is not binding in any way, but if the neutral
party is respected and trusted by both sides, it can help the parties
reassess their negotiating positions with an eye toward finding common
ground.

e. Utilizing ADR
The popularity of alternative dispute resolution has increased dramatically
in recent years. Small- and medium-sized businesses have contributed to
this surge in use, drawn by the promise of cost and time savings. But ADR
provisions need to be weighed carefully before they are incorporated into
any business agreement with partners, employees, vendors, or clients.
The questions to ask are: when is an ADR resolution method preferable to
litigation; when is it to be avoided; and, if ADR is preferred, what form of
ADR should be pursued? Legal assistance is particularly vital for small
business owners who wish to fully answer these questions and incorporate
ADR provisions into their contracts and agreements.
HUKUM BISNIS

Disusun oleh :

Anjar Putri Utami

Akuntansi A

UNIVERSITAS SERANG RAYA

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