The fact is that disagreements are a natural part of life. Whether it is over a fence line with a neighbor, about gaining custody of a child or some business contract gone wrong, conflict can be very stressful and expensive to resolve. 

Traditionally, you would want to set up the motion for a courtroom showdown, where unfortunately the outcome may or may not be favorable. Beyond the uncertainty in litigation, you may find out in the end that even a favorable outcome could just be a pyrrhic victory. 

Having been drained of financial resources and precious time that could have been channeled to more productive ventures, you are left to wonder if the hassle was worth it. This has a more grave consequence for businesses, as funds and time are critical for their sustainability and profitability.

The question then is, are there cheaper and less time-consuming alternatives to lawsuits? If there are, what are they and how effective are they in quelling disputes? This article will provide answers to these questions in detail, so you can make an objective analysis of your dispute resolution choice, when next your business is faced with disagreements or conflicts. 

What is Alternative Dispute Resolution (ADR)

Alternative Dispute Resolution refers to the different ways people can resolve disputes without courtroom trials. ADR provides a cheaper, less stressful and less confrontational means of settling disputes. The two main ADR approaches are: Mediation and Arbitration. We shall now discuss each in detail.

What is Mediation? 

Mediation is an ADR process where a neutral third party, called a mediator, helps parties in dispute find a win-win situation. The mediator does not make decisions for the disputing parties but only facilitates dialogue and tries to enhance understanding in order to help the parties negotiate a settlement. This process is flexible and allows the parties to retain control of the outcome, reaching creative solutions that the court may not be in a position to offer. 

Features of mediation

• Voluntary Process: Mediation is a process that has to be agreed to by the parties. The outcome is left to the will of the parties by deciding whether to accept any settlement proposed to them.
• Neutral Mediator: A mediator is appointed either by mutual agreement or through a mediation service. The mediator must be unbiased and should remain neutral in the proceedings.
• Confidentiality: Matters discussed during mediation are confidential. This frees up the disputing parties to have profound engagements without the fear of their statement being used against them should the case eventually end up in the courtroom.
• Setting: The setting for mediation is relatively informal as compared to the formalities of a court of law. This relaxes the parties involved, making them willing to explore possible solutions.
• Structured Process: Although mediation is a very flexible process, it does call for structured proceedings from the opening statements, joint sessions, private sessions, to the resolution engagements.

Benefits of Mediation:

• Cost-Effectiveness: It is usually less expensive than litigation.
• Timely Resolution: It usually takes less time to resolve disputes through mediation than litigation.
• Confidentiality: Sensitive information are protected since mediation involves confidentiality
• Voluntary and Flexible: The parties involved can withdraw from the process at any time.
• Relationship Preservation: Since it is a less confrontational approach, business relationships can be sustained after the dispute is satisfactorily resolved.

Limitations of Mediation:

• Non-binding Outcome: The final resolution is not binding on the parties involved. Anyone of the parties may decide not to abide by the agreements reached.
• Limited Control: The mediator cannot impose a solution, and the final conclusion depends on the readiness of both parties to compromise.

What is Arbitration?

Just as in mediation, a third party known as an arbitrator intervenes between the disputing parties. But unlike mediation, the arbitrator has power to make a binding decision that both parties must obey. This decision can be legally enforced if one of the parties fails to comply. Arbitration can be seen as a less formal court process.

Features of Arbitration

• Consensual Process: Arbitration can only take place if both parties agree to it. However, unlike mediation, a party cannot unilaterally withdraw from arbitration.

• Neutrality: The arbitrator or panel of arbitrators must be neutral

• Confidentiality: The discussions and sensitive information shared during the process must be treated with a high sense of confidentiality.

• Binding and Legally Enforceable Decision: The decision reached is binding on all parties and can be legally enforced.

Benefits of Arbitration:

• Faster and More Predictable than Litigation: Arbitration is quicker and less unpredictable than court proceedings.
• Enforceable Decision: The decision of the arbitrator is binding and can be enforced through the courts.
• Confidentiality: Like mediation, arbitration proceedings are confidential.

  Limitations of Arbitration:

• Less Control than in Mediation: The parties have less control over the timeline and procedures.
• More Expensive than Mediation: Arbitration is usually costlier than mediation.
• Less Opportunity for Creative Solutions : Since it is like a mini court trial, creative solutions are less likely.

Role of A Business Attorney in ADR

It would be a misconception to think that since you intend to opt for ADR options instead of litigation, the services of a business attorney is not necessary. Although business attorneys play important roles in representing businesses under investigation in the law court, working out the legal framework for creating an LLC and sundry other functions, their wealth of experience might provide a guide in having successful ADR. Consult with your attorney before proceeding with any ADR mechanism.

Final Thoughts

ADR offers a cheaper and less time-wasting alternative to courtroom trials. Despite the attempt made in this article to exhaustively explain each ADR approach, stating their features, advantages and disadvantages, you will still need the professional guidance of a business attorney in deciding which is appropriate for resolving your business dispute.

Disclaimer: The information provided in this article is for general informational purposes only and should not be construed as legal advice. Alternative dispute resolution (ADR) processes such as mediation and arbitration can vary widely based on the specifics of each case, and legal outcomes can depend on multiple factors. Readers are encouraged to seek the advice of a qualified legal professional before making any decisions regarding ADR or any other legal matters. The author and publisher disclaim any liability for any actions taken based on the content of this article.

Published by: Martin De Juan