ADR - The Common Sense Alternative

Alternatives to adversarial litigation

Traditional dispute resolution procedures often impose a "solution" handed down by a third party (e.g., a judge), where neither party walks away satisfied, while the conflict continues. Alternative dispute resolution (ADR) consists of a variety of approaches to dispute resolution, many of which include the use of a neutral individual such as a mediator who can assist disputing parties in resolving their disagreements. ADR increases the parties' opportunities to resolve disputes prior to or during the use of formal administrative procedures and litigation (which can be very costly and time-consuming).

ADR has gained widespread acceptance among both the general public and the legal profession in recent years. In fact, some courts now require some parties to resort to ADR of some type, usually mediation, before permitting the parties' cases to be tried. The rising popularity of ADR can be explained by the increasing caseload of traditional courts, the perception that ADR imposes fewer costs than litigation, a preference for confidentiality, and the desire of some parties to have greater control over the selection of the individual or individuals who will decide their dispute.

ADR is generally classified into at least three subtypes: negotiation, mediation, and arbitration. The salient features of each type are as follows:

• In negotiation, participation is voluntary and there is no third party who facilitates the resolution process or imposes a resolution.
  
  
• In mediation, there is a third party, a mediator, who facilitates the resolution process (and may even suggest a resolution, typically known as a "mediator's proposal"), but does not impose a resolution on the parties.
  
  
• In arbitration, participation is typically voluntary, and there is a third party who, as a private judge, imposes a resolution. Arbitrations often occur because parties to contracts agree that any future dispute concerning the agreement will be resolved by arbitration. In recent years, the enforceability of arbitration clauses, particularly in the context of consumer agreements (e.g., credit card agreements), has drawn scrutiny from courts. Although parties may appeal arbitration outcomes to courts, such appeals face an exacting standard of review.

What is arbitration?

Arbitration is a process of dispute resolution in which a neutral third party (called the arbitrator) renders a decision after a hearing at which both parties have an opportunity to be heard. Thus, a dispute is settled through the intervention of a third person, but without going through a court of law. An arbitrator is basically a private judge appointed with consent of both the parties.

What advantages does arbitration have over the normal judicial process?

• Final, binding decisions - While several ADR mechanisms can help parties reach an amicable settlement, all of them depend ultimately, on the goodwill and mutual collaboration of the parties. However, a final and enforceable decision may be obtained by recourse to arbitration.
  
  
• Limited right of appeal - Although arbitral awards may be subject to being challenged, the grounds of challenge available against arbitral awards have been limited by the new Arbitration and Conciliation Act, 1996.
  
  
• Speed and economy - Arbitration is faster and less costly than litigation. The restricted scope for challenge against arbitral awards, as compared with court judgments, provides the edge. Arbitration ensures that the parties will not subsequently be tangled up in a protracted and expensive sequence of appeals.
  
  
• Flexibility of procedure - Further, arbitration also offers the parties the freedom and flexibility to decide on the number of hearings, selection of arbitrators, the venue of arbitration, procedure that may be conducted within an agreed time frame expeditiously and as economically as the circumstances allow.
  
  
• Confidentiality - Unlike trials, arbitration hearings do not take place in public and only the parties themselves receive copies of the awards.
  
  
• Neutrality - As per the arbitration agreement signed by the parties, arbitration may take place in any country, under any law in any language and with arbitrators of any nationality. With this flexibility, it is generally possible to structure a neutral procedure offering no unwarranted advantage to any party.
  
  
• Specialized competence of arbitrators - The Judicial system of any country will not permit the parties to a dispute to select their own judges. On the other hand, arbitration presents the parties an opportunity to nominate persons of their choice as arbitrators, provided they are independent. This enables the parties to have their disputes resolved by people who have specialized competence in the relevant field.
  
  
• International recognition of arbitral awards - Arbitral awards enjoy much larger global recognition than judgments of national courts. Over 160 countries have pledged adherence to the "1958 New York Convention" and its provisions have been incorporated into the domestic laws of the contracting States. The Convention facilitates enforcement