What is alternative dispute resolution?
Faced with a argument, businesses and individuals often think that a court hearing is the only way that their dispute will be resolved. In reality court proceedings are often a last resort with many other options being available to parties to achieve an early and economic result, as Ian Dawes explains.
Alternative dispute resolution, or ADR, is an umbrella term used for the various ways disputes can be resolved outside of formal court proceedings. There are various options open to parties.
Parties to disputes often have an established relationship, which led them to do business together in the first place. When a dispute arises it can often be resolved with honest plain speaking and common sense without the need for expensive proceedings to be issued. Negotiated settlements can be achieved in respect of any dispute.
This is a form of facilitated negotiation. An independent mediator will work with the parties to develop their own solution to a dispute, allowing more flexibility regarding the settlement options available to the parties. A solution cannot be imposed and will only be binding when all parties are in agreement. Mediation can be used at any stage of a dispute, before or during the court process, and is often useful in commercial disputes where the parties want to maintain an ongoing relationship.
Arbitration is a form of private, binding, determination of a dispute by an independent third party. The agreement to arbitrate if a dispute arises is often included in commercial or construction contracts. Parties can opt for arbitration once a dispute has arisen. All parties must, however, agree to refer the dispute to arbitration.
Adjudication is a procedure introduced specifically for construction contracts. Any party to a construction contract has a right to have a dispute decided by an Adjudicator and adjudication is intended to be quicker and more cost effective than litigation or arbitration. It is normally used to ensure payment, although most types of dispute can be adjudicated, and should produce a decision in less than 42 days.
Due to the cost of litigation, especially in light of the recent increase in court fees, we are seeing ADR becoming more popular and think that an even greater emphasis will be placed on ADR in the future. The courts already actively encourage parties to try and resolve disputes through the use of pre-action protocols and ADR, considering litigation as the last resort.
Whilst the majority of cases do not end in a trial, the increase in court fees places an even greater emphasis on all parties to consider ADR before they get to the stage where proceedings are issued.
Even if one method of ADR is unsuccessful, for example when the parties have failed to negotiate a settlement, there is nothing to stop the parties trying another form of ADR – such as mediation or arbitration – which may result in a resolution.
Indeed, in most of the corporate disputes that we handle, we do consider that arbitration, which traditionally has been considered as an expensive option, is likely to become more prevalent for corporate disputes where confidential speedy conclusions are paramount.
Court proceedings are not the only option!