What Is Alternative Dispute Resolution (ADR)?
Alternative dispute resolution (ADR) is a means of settling a dispute, conflict, or claim without courtroom litigation. Instead, the parties involved agree to use an ADR process such as mediation or arbitration.
ADR has gained broad acceptance by the public and the legal profession. In the United Kingdom, anyone who doesn’t want to go to court over a civil (non-criminal) matter is free to choose ADR so long as all parties agree to it. When a lawsuit is pending, in some cases courts encourage or require the litigants to use ADR to help settle disputes more amicably and reduce the court system’s heavy caseload.
Is ADR compulsory?
There is no general rule in law that says that ADR must be used to resolve a dispute. However, there are cases where ADR is compulsory on at least one of the parties (in consumer disputes this is the trader). Even where ADR is voluntary, there are often strong incentives to use it and penalties if you do not (such as being penalised on costs by the Court).
In consumer disputes ADR is compulsory in a number of business sectors. For example, for most financial services consumers can insist that their complaint be decided by the Financial Ombudsman Service.
In some sectors, the law requires traders to belong to an ADR scheme, but it gives them some choice about which scheme to join. This is the case, for example, for estate agents and telecommunications businesses.
In sectors where ADR is not compulsory by law, traders may nevertheless be members of a trade association or a ‘trusted trader’ scheme that requires its members to use ADR. Such schemes often provide or arrange the ADR scheme for their members.
A trader can also use their own contractual terms to require the parties to use ADR, although they cannot insist that a consumer does so. Even where there is no rule of law, no rule of a membership scheme and no contract term requiring the use of ADR, parties to a dispute must consider whether they should use ADR. If they fail to do so, without good reason, then a court may ultimately penalise them (even the party who ‘wins’ the court case) when deciding who is to pay the legal costs of the case.
What Are the Benefits of ADR?
Depending on the particulars of the dispute and the type of alternative dispute resolution used, ADR may offer a number of potential benefits compared to lawsuits:
- Less costly
- Less time-consuming and fewer delays
- Less formal and more flexible than court proceedings
- Less need for an attorney in some simple disputes
- Less adversarial, helping to preserve relationships between opposing parties
- Greater privacy than court records allow
- Greater control over the outcome and the ability to create “win-win” solutions that satisfy both parties
Which Types of ADR Are Most Common?
There are several types of ADR. The rules also vary in different countries around the world. Here are five of the most common ADR types:
Negotiation is perhaps the simplest and most straightforward type of ADR. The disputing parties meet with one another to identify concerns, explore options, and seek a solution they can agree on. No one else acts as a neutral third party to help them negotiate.
In mediation, the parties still work to settle the dispute themselves, but an impartial person called a mediator hears both parties out, helps them discuss the dispute, and then helps them decide what to do. The mediator does not control the outcome. Mediation is often recommended when there is a relationship that both parties want to preserve, such as between family members or business partners.
Arbitration is used when disputing parties agree to have someone else decide the outcome. A neutral person called an arbitrator listens to arguments from both sides, considers evidence, and then issues their decision. There are two kinds of arbitration. In binding arbitration, the arbitrator’s decision is final. In nonbinding arbitration, the parties can pursue a court trial if they do not agree with the arbitrator’s decision.
Think of neutral evaluation as seeking an expert’s opinion. In this form of ADR, each party makes their case to a neutral evaluator who is usually an authority on the topic of the dispute. The evaluator then provides an opinion about the merits of the arguments and evidence and different ways the dispute might be resolved. The evaluator’s opinion isn’t binding. The opinion is used by the parties to help them negotiate a satisfactory agreement.
In settlement conferences, the disagreeing parties and their lawyers meet with an impartial person who is either a judge or a settlement officer to discuss settlement options. The judge or settlement officer doesn’t decide the outcome but helps both parties evaluate the case and negotiate a settlement. A settlement conference may either be voluntarily chosen by disagreeing parties who are not in litigation, or it may sometimes be mandated by a court before a trial begins.
How Madison Legal Can Assist
Our commercial litigation team has considerable experience conducting in advising on and conducting different types of ADR. If you have a potential claim or are facing a potential dispute matter, please do not hesitate to contact us for advice, send us an e-mail. Alternatively, contact us via LinkedIn.