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( 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.
a. Arbitration
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
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:
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:
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.
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