What is ADR?
ADR stands for ‘alternative dispute resolution’. This is a broad term that incorporates a wide range of processes – indeed almost any process except for traditional arbitration or litigation. ADR originated in the United States in the mid–1970s in response to dissatisfaction with traditional litigation as a means of dispute resolution. As the volume of litigation increased dramatically, the cost, delay and uncertainty of outcome were the principal motivating factors in the development of alternative methods. ADR, and in particular mediation, is now widely embraced and encouraged across the world.
The advantages of ADR (depending on the process selected)
- Substantial savings in legal fees and associated litigation/arbitration expenses
- Much speedier resolution of the dispute – days or weeks as opposed to months or years
- The ability to focus on the parties’ commercial objectives and preserve business relationships
- Privacy and confidentiality
- A lack of formality in the process
- Voluntary/consensual (parties can leave at any time and the objective is often a settlement agreeable to both parties rather than a decision adverse to one or more of the parties or to all of the parties)
- The preservation of legal rights and processes
- Greater flexibility as to process and to structure a settlement – parties can agree to settlements beyond the court’s traditional remedies of money damages, an injunction or specific performance
- It can be used at any stage of a dispute
When is ADR inappropriate?
There are certain types of dispute when ADR may be less suitable. Where parties require a definitive statement of the meaning of a particular contractual provision which will set a binding precedent in future contracts, a consensual or agreed outcome may not assist. Traditionally, disputes involving serious fraud have been regarded as potentially unsuitable for ADR (where there is a concern that the parties will not engage in good faith), but many fraud cases are resolved successfully through ADR. In short, there is no fixed rule and therefore thought should be given to attempting ADR in all disputes.
Forms of ADR
There are binding and non-binding ADR processes (i.e. those which impose a result and those which may culminate in no result or decision at all). The majority of ADR processes involve the third party acting as a facilitator rather than a decision maker. Some forms of ADR (ie expert determination, adjudication) do involve a third party in the decision making process. In such cases a third party will be requested to hand down a binding decision/award.
For more details click here to read our ADR practical guide “Common ADR processes – an overview”.