Alternative Dispute Resolution: What is it and How Does it Work?

Oftentimes, those involved in a dispute agree to a proceeding where a neutral party can assist them in reaching an agreement. This proceeding, which helps avoid further litigation, is called an alternative dispute resolution, or ADR.

Whether it takes the form of arbitration, mediation, or a minitrial, an ADR serves as a forum where disputing parties can work toward a voluntary, consensual agreement, instead of having a judge or other authority preside over the case. Here is a closer look at what an ADR is and what it involves.

What Is Alternative Dispute Resolution?

As stated, an alternative dispute resolution is a proceeding where those involved in a disagreement turn to a neutral party who can help resolve the issue. This proceeding is held to avoid further litigation and a trial process. This litigation alternative allows the parties to settle a legal dispute out of court. Some types of ADR are voluntary, while others are obligatory.

Common Types of Alternative Dispute Resolution (ADR)

The most common alternative dispute resolution types are:

  • arbitration
  • mediation
  • negotiation
  • conciliation
  • early neutral evaluation
  • ombudsperson

Those looking to resolve issues surrounding high-value, intricate contracts or international agreements generally use arbitration. Early impartial evaluations and ombudsperson arrangements are similar in that they both involve the appointment of a neutral party to evaluate a legal dispute.

For early neutral evaluations, a neutral party is appointed to assess and determine the likely outcome of the conflict to encourage settlement negotiations. An ombudsperson — also known as a neutral— is typically appointed to evaluate claims against public organizations or private services.

Negotiation and How It Works

Negotiation is the foremost type of ADR. Typically attempted at the onset of a dispute, negotiation facilitates the meeting of the parties and carries out settlement negotiations. The main benefit of negotiation is that it grants autonomy to parties concerning the process and solution. It is a discussion between the parties with the intention of reaching a consensus regarding the dispute.

Negotiations generally begin with one litigant presenting their case while the other either accepts the position or provides their conditions. This process is repeated until an agreeable solution is found. If a settlement is reached, the agreed-upon terms are typically written down to make them legally binding.

Conciliation and How It Works

The conciliation process involves hiring an independent party — or conciliator — who can facilitate communication between the disputing parties. The conciliator reviews, analyzes, and discusses the claims made by each party and offers their own opinions. These opinions are meant to assist the parties in resolving their dispute. Similar to a negotiation, decisions reached through conciliation — as well as the suggestions or opinions of a conciliator — cannot be enforced in court unless they are set in writing. 

Mediation and How It Works

Mediation is, by far, the leading form of ADR. It is an informal, confidential process that the parties must voluntarily enter. A neutral mediator is appointed by mutual consent or selected from a panel.

Disputing parties can opt for mediation any time before or during the litigation process. This usually involves a meeting at a neutral location where the mediator attempts to find common ground between them, attempting to reach a settlement that is acceptable to all. In most cases, the expenses of appointing a mediator are jointly paid by the disputing parties.

Mediators and Their Part in Alternative Dispute Resolution

Mediators do not adjudicate a case the way a judge or arbitrator does, but they do evaluate the merits of a claim. They do play a crucial part in the ADR process by facilitating communication between the disputing parties, helping them reach a consensus themselves. Once consensus is reached, a settlement agreement is typically signed by all parties involved. 

Attorney at Mediation: Should You Have One?

Mediation is a process initiated to assist disputing parties with their conflicts to avoid the need for court involvement. In order to effectively present your position in a mediation, you should be represented by counsel. A mediation lawyer with a firm like King & Jones can guide you in this process and help you understand the different consequences of possible decisions.

Arbitration and How It Works?

A contract may specify that each party involved must resolve any disputes through arbitration in the event of a dispute. Similar to litigation, arbitration is a formal process, and the final decision is typically binding on all parties and is enforceable in court. Once parties agree to arbitrate, either a single arbitrator or panel of arbitrators are appointed. This arbitrator could be a lawyer or a professional in other fields (such as a contractor in a construction case).

The rigorous rules of evidence in litigation do not apply in arbitration. Instead, each party provides written submissions and produces relevant documents. After considering all the facts and circumstances, the arbitrator reaches a final decision, which is called an "award." An arbitration award is usually legally binding and can be enforced in courts.

Title 9 of the U.S. Code establishes federal law in support of arbitration. In circumstances where Title 9 is applicable, it prevails over any state laws. The 1956 version of the Uniform Arbitration Act was adopted by 49 states. Twelve states have also adopted the revised 2000 version.

In 1958, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards was promulgated to assist the enforcement of foreign arbitral awards. The U.S. joined the New York Convention in 1970.

When To Seek Out Alternative Dispute Resolution Services

Resolve Personal Disputes

ADR is generally a more cost-efficient, faster method of resolving disputes than litigation. If there is some level of communication between the parties, it should be considered as an approach to reach an amicable settlement of the conflict. In personal disputes, it is better to use ADR to maintain a degree of privacy that would otherwise not be available in court proceedings.

Resolve Business Disputes

Parties involved in high-value, intricate contracts and international commercial agreements tend to opt for arbitration as an ADR method. It is an attractive option for business disputes as it enables a business to keep its matters confidential and preserve both parties' reputations. Disputing parties should consider opting for ADR solutions to avoid the cumbersome process of litigation and the hefty expenses that come with it.

Potential Advantages of Avoiding Litigation and ADR Approaches

Cost-Effective Process

As stated, ADR is generally more cost-effective than litigation. Litigation is expensive — attorney fees and court fees alone are pretty steep. Opting for ADR helps disputing parties reach a consensus through a cost-effective process.

Neutral Evaluation Process

Most forms of ADR involve the appointment of a neutral party to evaluate the dispute. The neutral third party ensures that the outcome of the decision will not be tainted with bias and an agreeable solution for both parties is reached.

Time-Efficient Process

It is safe to say that court procedures are not time efficient. Opting for ADR helps avoid the numerous years that could otherwise be wasted in litigation.  

What ADR Offers That Traditional Methods Don't

Finding Win-Win Solutions

Instead of being forced to comply with an unknown third-party's decision, parties that opt for alternative dispute resolution solutions have the benefit of reaching a decision that could be beneficial for both sides.

Finding Creative Solutions

Settlements reached through ADR can be creative and are not bound by the court's limited powers. Parties may agree, for example, to stay in business together while adjusting the division of profits instead of going their separate ways.

Who Is Involved in the Dispute Resolution Process and When?

There are essentially two forms of ADR:

  1. Adjudicative processes such as arbitration, which require the official appointment of a neutral third party or arbitrator. The process involves the parties themselves, lawyers, and the arbitrator.
  2. Consensual processes such as mediation and conciliation, which usually involve the parties (without legal representation) and a neutral evaluator. 

There are typically no third parties involved in negotiations, and only the parties themselves take part in them.

Is the Alternative Dispute Resolution Approach Right For You?

Determining whether ADR is the right approach for you depends on the nature of your dispute, the parties involved, and the monetary value of the claim itself. King & Jones handles significant cases in Chicago relating to business, trusts, and estates. Our team of lawyers has vast experience in dealing with substantial commercial disputes through arbitration in a cost-effective manner. Contact us today to better understand whether ADR is the correct avenue for your business dispute.

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